Market Intelligence

Oil marketers’ cash pile shrinks on delayed subsidy payments


September 11, 2017 | 1:13 am
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Major oil marketers are in need of replenishing their cash holdings to pay dividend and finance future expansion plans as the once towering pile of money in the sector has started to fall.

The good news is that prompt payment of subsidy monies owed to firms by the federal government will go a long way in assuaging their pains.

Cash and cash equivalents of six major oil marketers quoted on the exchange dipped by 53.09 percent to N43.30 billion in June 2017 from N92.32 billion the previous year touching levels not seen in 3 years, according tom data compiled by BusinessDay.

Perhaps more worrying is the fact that the cumulative net operating cash generated from activities of Total Nigeria Plc, 11 Plc, Conoil Plc, Forte Oil Plc, MRS Plc, and Eterna Plc, fell by 92.24 percent to N4.82 billion as at June 2017.

Total, Conoil, and MRS recorded negative net cash from operating activities of N6.91 billion, N35.48 million and N5.53 billion respectively.

The Federal Government owes major petroleum marketers arrears of subsidy claims of over $2 billion, and the prolonged delay has hindered these firms from paying interest on loans borrowed from banks for the importation of the product.

With no allocation for subsidy payment in the 2017 budget, analysts say Oil majors such as Oando, Forte, Mobil, Total may be forced to cut back on dividend payment while the possibility of a downsize may not be ruled out as these firms slim work force in a bid to cut cost.

“These firms used to make money when they import petroleum product directly and sell to other smaller marketers at a profit but such money reduced when Nigeria National Petroleum Corporation (NNPC) started doing the importation,” said Dolapo Oni, head of Energy Desk at Ecobank Plc.

“Unlike before, when you don’t sell, your money is stuck in form of delayed subsidy payment but now when you don’t sell, you don’t get money,” said Oni.

Rising costs per unit of products and spiralling interest expense have also contributed to a slump at the bottom line (Profit).

The cumulative net income of the six major marketers dipped by 27.78 percent to N13.36 billion from N18.51 billion as at June 2016, according data compiled by BusinessDay. However, Forte Oil, and Eterna Oil were able to grow profit.

There is light at the end of the tunnel for operators in downstream oil and gas sector as the Federal Government has said it is awaiting approval of the National Assembly to settle its liabilities to fuel marketers for subsidy claims.

The National Assembly is billed to resume on September 19.

Except, Eterna-oil that gained 15.53 percent since start of the year, other firms in the sector under-performed the Nigerian Stock Exchange All Share Index.

Total Oil share price has dipped 22.08 percent since the start of the year while Mobil shed 39.02 percent. Conoil’s year to date (YTD) performance was -22.63 percent, Forte Oil; (-41.13 percent), MRS; (-22.16 percent), all underperforming the NSE ASI Index which has gained 33.78 percent this year.




September 11, 2017 | 1:13 am
  |     |     |   Start Conversation

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