Analysts at Agusto & Co, a credit rating and research company have urged investors in Nigeria’s oil and gas industry to be guarded in their investments in the sector, following recent rally in oil prices and a somewhat stability in oil production in the country.
The report which was obtained by THISDAY indicated that though certain favourable conditions could continue to exist in the industry in the near term, investors should avoid excessive leveraging in their commercial commitments to the sector, adding that this could help them withstand possible shocks from price changes and other uncontrollable factors.
The experts explained that Nigeria’s oil industry sustained a healthy margin from recoveries it made in 2017. It added that the industry posted some good results in the year ended 2017 and that most industry operators grew their top lines.
“We are of the opinion that the current rally in crude oil prices as well as the relatively stable operating environment in the Niger Delta should continue in the near term.
“In addition, the regulatory uncertainty which has stalled capital investments especially in offshore exploration and development is being addressed with the eventual passage of the PIGB.
“However, industry players should be cautious in engaging in over-investing and excessive leverage, which might make it difficult for them to withstand any shocks in oil prices and other uncontrollable factors highlighted,” said the report.
It further stated: “All things considered, we are hopeful that the performance momentum in the upstream industry should be sustained in the short term to medium term.”
Detailing the performance of the industry in past year, it explained that: “After the challenging operating environment that dotted 2016, the Nigerian oil and gas (upstream) industry has rebounded, posting relatively better results in the financial year ended 31 December 2017 (FYE 2017).
“This was quite evident in the fact that most industry players grew their topline in 2017 on the heels of the depressing results of 2016. The change in the fortunes of most operators was attributed to the rally in crude oil prices in 2017 after the global oil price crash of 2014 to 2016. For instance, one of the key players in the Nigeria oil and gas (upstream) industry, Seplat Petroleum Development Company Plc grew its turnover by 106 per cent year-on-year (YoY) to $417.4 million in 2017.
“In the same vein, Oando Plc grew its exploration and production (E&P) business to N103.5 billion in 2017, representing […]
