Oil, Gas Stocks Gain N355.8bn In Four Months

The unprecedented bull run recorded in the country’s stock market that resulted in over an N5 trillion increase in market capitalisation, coupled with the surge in global crude oil prices, impacted positively the oil and gas stocks listed on the Nigerian Exchange Limited (NGX) as the sector grew by N355.84 billion in the first four months of the year.

The NGX oil and gas index comprises nine listed oil marketing and production companies – Ardova Plc, Conoil, Eterna, Japaul Gold and Venture, MRS Oil Nigeria, Oando, Seplat Energy, Total Nigeria and Capital Oil.

The sub-sector’s capitalisation closed at N714.8 billion on April 29, 2022, which was far higher than the N558.9 billion declared on December 31, 2021.

Also, the index recorded the highest positive movement to reflect a growth of 61.24 per cent year-to-date (YTD) as of May 20, 2022. NGX premium index followed with a gain of 24.11 per cent while NGX pension index was up by 20.01 per cent.

Specifically, a review of some of the companies’ performance YTD at May 20, 2022, showed that Seplat Energy recorded the highest gain of 100 per cent while Conoil followed with a YTD growth of 41.6 per cent while Eterna gained 40.6 per cent as of May 20, 2022.

The first four months of 2022 were eventful for the global oil and gas industry. With oil prices reaching their highest in a while, as the industry had recovered from the COVID-19 pandemic lull.

Contributing to the increased oil prices is the fact that many countries are now opening their borders and dropping the COVID-19 protocols they had put in place.

This action encouraged movement both domestically and internationally, increasing the demand for petroleum and related products. Russia’s war in Ukraine has also significantly impacted the price of crude oil.

As a result of the invasion, many western countries imposed a ban on Russian oil and gas. The ban together with the attack on Saudi Aramco’s Jeddah depot caused a further spike in the price of crude to over $120 per barrel in the first quarter.

On a domestic level, however, Nigeria is witnessing asset divestments by International Oil Companies (IOCs), the inconclusive 2020 marginal fields bidding rounds and the operationalisation of the Petroleum Industry Act (PIA).

Capital market analysts stated the growth in the segment was spurred by gains in the share prices of Seplat Energy, Eterna, Conoil and Oando.

According to United Capital Plc, “our outlook for the sector remains moderate. In 2022, we expect a moderation in oil prices globally. Firstly, the oil and gas quota expected discontinuation will see production caps removed potentially or at least returned to pre-pandemic levels.

United Capital projected that listed upstream oil and gas firms will continue to be profitable due to increased cost reduction initiatives.

Also reacting to the performance, the Chief Operating Officer of InvestData Consulting Limited, Ambrose Omordion, said the sector outperformed the average growth with a strong positive performance of 61.24 per cent as of May 20, 2022, as investors were bullish on stocks.

He noted that stocks experienced a rally amid the rising crude oil prices at the international market.

Speaking on Seplat Energy’s first quarter (Q1) results, the Chief Executive Officer of the company, Roger Brown, said: “Seplat Energy delivered a good quarter that benefited from higher oil pricing, which offset lower production owing to continuing problems with the Trans Forcados Pipeline.

However, the alternative Amukpe-Escravos Pipeline is mechanically complete and once we have signed the commercial agreements, we expect Chevron to be lifting our oil through the Escravos Terminal in the third quarter.

“Our proposed acquisition of Mobil Producing Nigeria Unlimited (MPNU) remains on course. We are awaiting the necessary approvals from the government and regulators and expect the transaction to complete in the second half of this year. The effective date of January 1, 2021 means we will benefit from higher recent oil prices and as we have previously reported, the addition of MPNU will nearly treble our production and double our reserves on a pro forma 2020 basis,” he said.

Meanwhile, following sell pressure across major sectors, the equities recorded losses in four trading sessions of last week’s event as funds continue to flow into the fixed income space.

Specifically, losses were witnessed in the shares of Okomu oil (-10 per cent), Presco (-10 per cent), Nigerian Breweries (NB) (-8.1 per cent), and Lafarge WAPCO (-4.1 per cent) and MTNN (-3 per cent) drove the weekly loss.

Consequently, the Nigerian Exchange Limited (NGX) all-share index (ASI) and market capitalisation depreciated by 2.2 per cent to close the week at 52,908.24 and N28.523 trillion respectively. YTD return also moderated to 23.9 per cent from 26.6 per cent achieved the previous week.

All indices finished lower except the NGX-insurance, NGX AFr Div Yield and NGX growth index, which appreciated at 0.83 per cent, 0.58 per cent and 0.74 per cent respectively. The NGX Asem index and NGX Sovereign bond closed flat.