Kayode Tokede
Following price increase in Premium Motor Spirit (PMS)/petrol, among other petroleum products at local and international markets, five listed petroleum marketing companies on the Nigerian Exchange Limited (NGX), generated N384.2 billion revenue in first quarter (Q1) ended March 31, 2023, representing an increase of 41per cent from N273.06 billion reported in corresponding first quarter of 2022.
The five companies, according to THISDAY investigations are Seplat Energy Plc, Conoil Plc, Eterna Plc, Totalenergies Marketing Nigeria Plc and MRS Oil Nigeria Plc.
The companies reported a total of N52.87 billion in profit before tax in Q1 2023 as against N43.03 billion reported in Q1 2022.
The breakdown of revenue revealed that Seplat Energy generated N151.99 billion in Q1 2023, an increase of 51.06 per cent from N100.62 billion in Q1 2022, while Totalenergies Marketing Nigeria declared N135.3 billion revenue in Q1 2023, a growth of about 39 per cent from N97.61 billion reported in Q1 2022.
Conoil in the period under review, announced N34.97 billion revenue in Q1 2023, a growth of 34 per cent from N26.15 billion in Q1 2022, as MRS Oil Nigeria’s revenue grew by 72.04 per cent to N30.79 billion in Q1 2023 from N17.04billion generated in Q1 2022.
Eterna closed Q1 2023 with N31.18 billion revenue, a growth of 74.24 per cent from N17.9billion reported in Q1 2022.
The companies benefited from a steady increase in prices of petrol, among others in the period amid demand from consumers, domestic and international markets.
According to the National Bureau of Statistics (NBS), the average retail price paid by consumers for petrol rose by 42.63 per cent in March 2023 to N264.29, relative to N185.30 value recorded in March 2022.
In its Automotive Gas Oil (diesel) Price Watch report for March 2023, the NBS said the average retail price of diesel paid by consumers increased by 55.90 per cent on a year-on-year basis as the price, moved from a lower cost of N539.32 per litre recorded in the corresponding month of last year to a higher cost of N836.81 per litre in March 2023.
However, the price of crude oil has dropped from $/ 107.74 as of March 31, 2022 to $78.12 per barrel as of March 31, 2023, according to the Organization of the Petroleum Exporting Countries (OPEC).
Speaking with THISDAY, the vice President, Highcap Securities Limited, Mr. David Adnori, stated that the growth in the period under review was driven by increase in petroleum price, stressing that increasing business activities, also a driving factor.
According to him, “The crude oil price per barrel in the global commodity market was low in 2020 and it affected the price of petrol. The federal government was reliant to increase the price of petrol at some time. Investors also compensated these companies considering their stock price appreciating in Q1 2023.
“In Q1 2022, business activities were improving post-covid and there was movement restriction that people were not travelling. In 2023, we saw the ease of movement improved activities in the transport, commercial and manufacturing sectors.
“The growth recorded in revenue by these companies has a lot to do with improvement in business activities than the hike in price of petroleum products.”
Further investigations revealed that these companies’ revenue growth was driven by sales in PMS also known as petrol and Automotive Gas Oil (AGO) popularly called diesel and lubricants and greases.
Take for instance, Totalenergies Marketing Nigeria grew its petroleum products revenue by 54.5 per cent to N104.96billion in Q1 2023 from N67.96illion in Q1 2022, while its lubricants & others revenue dropped by 0.98 per cent to N40.322billion in Q1 2023 from N30.62billion in Q1 2022.
Seplat petroleum recorded N136.8billion crude oil sales in Q1 2023 from N89.96billion in Q1 2022, as Gas sales 43rose by per cent to N15.2billion in Q1 2023 from N10.66billion in Q1 2022.”
Analysts at Cordros research said: “In our view, Nigeria’s oil and gas marketers will maintain another year of positive revenue growth, driven specifically by; possible increase in PMS prices, following our expectations of a partial stoppage of PMS subsidy in June and a sustained heavy local consumption of petroleum products.”
According to them, “FG unable to fully deregulate the downstream oil and gas sector following protests by labour unions, it has continued to incur expensive subsidy payments through NNPC under-recovery costs.
“Overall, the under-recovery in 2022 amounted to c. N4.39 trillion – 3.0x higher than the 2021FY total (N1.45 trillion). Notably, the current divergence between deregulated (Cordros estimate: N363.00 per litre) and regulated (N185.00 per litre) prices is a key contributing factor to the supply crisis currently being experienced in the domestic market.
“This is because the steep difference in prices (coupled with FX illiquidity issues) makes it impossible for marketers to source products individually amid the drop in supply from the NNPC.
“For 2023FY, we estimate the subsidy cost will settle at c. N3.69 trillion – H1-23: N2.88 trillion; H2-23: N810.00 billion.”
Capital market analyst, Mr. Rotimi Fakayejo, attributed the increase in revenue of these companies to higher-margin in crude oil products, stressing that the ease of movement also contributed to revenue and profit.
According to him, “These companies reported an increase in revenue due to higher margin in products the sale this year. The restriction of movement eroded their revenue last year but with the ease on COVID-19 lockdown, they were able to grow revenue that translates into profit.”
He maintained that investors can always consider buying Total Nigeria shares over its intrinsic fundamentals on the NGX.
