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Investors Besiege Oil Companies’ Shares Over Rising Crude Prices

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    With the upward trend in global oil prices, investors are building positive sentiments around oil, thereby ensuring that the oil and gas sector on the Nigerian Exchange (NGX) Limited grew by N145.734 billion in the first nine months of the year. The gain was triggered by the gains in the share prices of Seplat Energy, Eterna and Oando Plc.

Market observers said the current global oil trend suggests that the increase in the average Brent prices would translate to an increase in revenue for oil companies which should also reflect in the earnings per share. Also, as of September 30, 2021, the Oil & Gas Index had the largest positive movement, with a year-to-date (YTD) rise of 62.37 percent. The NGX Premium index gained 117.27 percent, while the NGX Pension index gained 11.79 percent.

Ardova Plc, Conoil Plc, Eterna, Japaul Gold and Ventures, MRS Oil Nigeria, Oando, Seplat Energy, Total Nigeria, and Capital Oil are among the nine listed Oil and Gas Marketing businesses in the NGX Oil & Gas Index. According to them, Seplat Energy, being one of the major players in the Nigerian upstream sector, has seen an impressive share price gain of 76.49 per cent from N402.3 in January to N710.00 as of September 30, 2021.

Gains in the share prices of Seplat Energy, Eterna, and Oando, according to capital market observers, fueled the growth of the NGX Oil & Gas Index. The chief operating officer of Invest Data Consulting Limited, Mr Ambrose Omordion said despite local equities benchmark index closing in negative zone of 0.12 per cent in the first nine months of the year, the Oil & Gas closed on a strong positive performance of 62.37 per cent at the end of period under review as investors were bullish on stocks in the sub-sector.

He noted that Seplat Energy shares gained 71.51 percent amid the rising crude oil prices at the international market; spot Bonny light crude oil price increased to $74.16 per barrel on June 30, 2021 from $50.59 per barrel it closed on in December 31, 2020.

The managing director/chief executive officer of Enterprise Stockbrokers Plc, Rotimi Fakayejo attributed the oil and gas performance to higher margin in crude oil products, stressing that the ease of movement also contributed to revenue and profit.

The passing of the Petroleum Industry Bill (PIB) is anticipated to be one of the main drivers of investment in Nigeria’s upstream oil and gas area in the medium-to-long term, according to Cardinal stone analysts.

“Exogenous factors affecting oil demand and supply are anticipated to remain important determinants of ROI, rig counts, and related CAPEX in the immediate future.” Due to the COVID-induced low base effect from last year and growing air travel in 2021, profitability in the downstream industry could improve. We do, however, see a likelihood of continued low PMS margins in the industry, with the presence of subsidies in the MTEF plan for 2022-2024 casting doubt on the prospect of immediate deregulation. “Instead of outright deregulation, we believe the authorities are more likely to favor an adjustment of PMS pump price in H2, 2021 to reduce subsidy burden and keep the risk of potential public backlash contained ahead of the pre-election year 2022,” they pointed out.

These recent developments alter the oil and gas industry’s recurring negative trends locally, but their impact on the prices of petroleum products (AGO MGO PMS) is limited to non-existent. This is purely due to the fact that nothing has changed in that regard; the market forces and factors that influence prices remain in full effect. For individuals active in the industry, more investment is a welcome development.

Source:, Reuters.

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