Despite the challenging operating environment which pushed up distribution and administrative expenses, the performance of most of the oil and gas companies in Nigeria has been impressive in the nine months to September 2022. The combined earnings of the oil and gas marketing companies listed on the stock exchange increased by more than 38%.
Here are our thoughts on the financial performance of the sector and the outlook for the rest of 2022.
What caused the spike in the sector’s performance?
The oil sector witnessed an improved performance, mainly due to growth in key revenue lines (the sale of petroleum products and lubricants). The major revenue growth driver was higher oil prices in 2022 compared to previous years. The geopolitical tensions between Russia and Ukraine also provided a boost to crude oil prices this year, as oil prices reached a peak of $127/barrel.
Looking ahead, what should we expect from the sector?
The expectation is that oil and gas companies will do way better than what they did in 2021 as some of them have already generated higher revenues and achieved over 90% of the 2021 full-year revenue in the nine months to September 2022. Nonetheless, the declining international crude oil price remains a downside risk and would be determined by OPEC+ output cuts in their November 2022 meeting and the crude oil demand from China.
Why you should invest in Oil & Gas Stocks
Oil and gas stocks can produce significant capital gains through share price appreciation and attractive dividend income when crude oil prices rise. In times like this, oil companies tend to generate gushes of cash which provides them with more funds to increase oil and gas production, repay debt, repurchase stock, and pay dividends, all of which can increase shareholder value.
How to invest in Oil & Gas Stocks
If you’re looking to add oil and gas stocks to your portfolio, here are the nine oil marketing and production companies listed on the NGX (Nigerian Exchange): Ardova Plc, Conoil, Eterna, Japaul Gold and Venture, MRS Oil Nigeria, Oando, Seplat Energy, Total Nigeria, and Capital Oil.
You can invest in any of these companies directly on the i-invest app or contact us via info@parthiansecuritiesng.com
Source: Parthian Securities Research.
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