Capital Market

The uncertainty in the oil and gas industry is negatively impacting on quoted oil and gas shares on the Nigerian Stock Exchange (NSE). Currently, most of them are on profit-taking over uncertainty in the petroleum sector. For a better part of the half-year of 2015, the petroleum market companies had witnessed petroleum product scarcity that is expected to have negative effect on companies’ profits.

The NSE oil and gas  index closed last week with a decline of 4.63 percent behind the NSE banking index of 6.88 percent in June as investors embarked on cautious trading on the backdrop of global and domestic challenges that might certainly depress earnings.

Most of the country’s oil marketers are struggling to grow revenue due to the sharp drop in petroleum product supply following the rise in importation cost as a result of the depreciation of the naira.

The various payment disputes surrounding the subsidy allocation highlight the continuous product importation by players in the industry. The players include Forte Oil, Total Nigeria Plc and Mobil Oil Nigeria Plc.

The share price of Total Nigeria Plc lost 5.2 percent from the N174 it opened this month to close at N165 last week while Eterna Plc fell by 12.4 percent to close last week at N2.41 from the N2.75 it opened in June.

Other shares that recorded price decline include Seplat Petroleum Development Company Ltd, which slipped from N338 to N331.25 and Conoil Plc, which dropped, by 0.4 per cent to N40.85 from the N41 it opened this month. Forte Oil Plc, the leading oil and gas company with the highest market capitalisation recorded N2.02 price appreciation last week to close at N182 from the N176 it opened this month.

The share price of Forte Oil gained 3.4 per cent in June, followed by Mobil Oil Nigeria Plc that gained 8.2 per cent from N146.8 to N158.85. MRS Oil Nigeria’s share price remained flat at N50.54.

Commenting on the oil and gas performance in recent weeks, the doyen of brokers, Sam Ndata, said the crisis in the oil and gas sector has signaled investors’ divestment into the bond market.

“Investors are interested in where their investments are safe. The oil and gas sector is facing huge challenges ranging from the oil subsidy scam, the scarcity of premium motor spirit (PMS), the global dwindling oil prices yet to be stabilised, among others.

“All these have contributed to listed companies’ poor performance in the first three-month results. As expected, investors will dump oil and gas shares and play safe. Once there is stability in that sector, that market index will witness growth,” he said.

Last week, President Muhammadu Buhari ordered the immediate dissolution of the board of the Nigerian National Petroleum Corporation (NNPC), an indication that there might be restructuring in the sector.

By Pita Ochai


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