It’s meant to be a cash cow, but the state oil company of Africa’s biggest producer is bleeding money.
Nigerian National Petroleum Corp (NNPC), the Abuja-based behemoth that dominates the Opec member’s energy industry, has made losses for at least the last three years, statements on its website show. It will probably register another in 2018, according to Ecobank Transnational, as its refineries and fuel-retailing arm fail to generate profit.
The pain for NNPC, which produces oil and natural gas in partnership with Royal Dutch Shell, ExxonMobil. and Chevron, comes even as national energy firms from Norway to Saudi Arabia thrive with crude prices recovering from their crash in 2014. And it lays bare President Muhammadu Buhari’s difficulty in fulfilling his pledge to modernise a company that’s been a byword for inefficiency and opacity since its creation in the 1970s.
With oil accounting for more than half of government revenue and 90 per cent of export income, the company is a primary target of those seeking access to state funds and is vulnerable to political interference.
Tensions erupted last year between Emmanuel Kachikwu, the chairman of NNPC, and Maikanti Baru, the managing director, over how more than $20 billion of contracts were agreed.
“The very public power tussle shows the difficulties in reforming the organisation,” Malte Liewerscheidt, an analyst at Teneo Intelligence, said in Abuja. Until a pending but long-delayed law designed to overhaul the petroleum sector and split up parts of NNPC comes into effect, “political considerations will continue to interfere with vital business needs”, he said.
The state oil company doesn’t publish full financial results, although it releases limited numbers on its operating performance. These include earnings for core units, but exclude items such as taxes and dividends from a 49 per cent shareholding in Nigeria LNG, one of the world’s biggest exporters of liquefied natural gas.
Those numbers show that NNPC made an 82 billion naira (Dh903.4m) operating loss in 2017. That was an improvement from 2015 and 2016, but still far from the operating income it budgeted for of 600bn naira. In each of the past three years, NNPC forecast a profit and finished in the red.
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Higher oil prices have boosted exploration and production, the most profitable part of NNPC and which made an operating income of almost $600m in 2017. But its ill-maintained refineries, which operate at a fraction of their combined capacity of 445,000 barrels a day, lost about $100m. Even bigger shortfalls came in the fuel-retailing business, which has to contend with the government’s price cap on petrol prices, and the corporate headquarters unit, which lost almost $400m, more than any other part of the company.
While NNPC’s extraction business will probably improve this year, the refineries and retailing subsidiaries will continue to be a drag, especially if the government maintains the ceiling of $0.40 a litre for petrol, according to Ecobank. The bank predicts that NNPC will make an operating loss of as much as 80bn naira in 2018.
Ndu Ughamadu, a spokesman for NNPC, said that while its refineries are struggling to make money, the company’s overall performance will probably be better this year.
The problems at NNPC offset the benefits to Nigeria’s struggling economy of Brent crude’s more than 50 per cent rise in the past year to almost $80 a barrel. Still, there have been improvements within the company and the country’s overall oil sector, according to Moody’s Investors Service.
NNPC’s reduction of debts owed to joint-venture partners may help increase Nigeria’s oil production to around 2.5 million barrels a day by 2020 from 2 million today, said Aurelien Mali, an analyst at Moody’s Investors Service.
“The clearing of arrears is a huge step forward that will unleash extra investment from international oil companies,” Mr Mali said in Lagos, the commercial capital, on May 9. “NNPC is key for the government. It’s going in the right direction.”
It has some catching up to do. Its financial position contrasts with those of state oil firms in other major producers. Saudi Aramco is gushing cash, making net income of $34bn in the first half of 2017 alone, according to numbers seen by Bloomberg. Brazil’s Petrobras, Mexico’s Pemex and Norway’s Statoil all improved their results in 2017 and made operating profits. So did Angola’s Sonangol in 2016, when it last published data on its performance.
Company%20profile
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
Bharatanatyam
A ancient classical dance from the southern Indian state of Tamil Nadu. Intricate footwork and expressions are used to denote spiritual stories and ideas.
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Company%20Profile
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Specs%3A%202024%20McLaren%20Artura%20Spider
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COMPANY%20PROFILE
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BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
RESULTS
5pm Maiden (PA) Dh70,000 (Dirt) 1,400m
Winner AF Nashrah, Tadhg O’Shea (jockey), Ernst Oertel (trainer)
5.30pm Maiden (PA) Dh70,000 (D) 1,400m
Winner Mutaqadim, Riccardo Iacopini, Ibrahim Al Hadhrami.
6pm Maiden (PA) Dh70,000 (D) 1,600m
Winner Hameem, Jose Santiago, Abdallah Al Hammadi.
6.30pm Maiden (PA) Dh70,000 (D) 1,600m
Winner AF Almomayaz, Sandro Paiva, Ali Rashid Al Raihe.
7pm Handicap (PA) Dh70,000 (D) 1,800m
Winner Dalil Al Carrere, Fernando Jara, Mohamed Daggash.
7.30pm Handicap (TB) Dh70,000 (D) 1,000m
Winner Lahmoom, Royston Ffrench, Salem bin Ghadayer.
8pm Handicap (PA) Dh70,000 (D) 1,000m
Winner Jayide Al Boraq, Bernardo Pinheiro, Khalifa Al Neyadi.
Types of bank fraud
1) Phishing
Fraudsters send an unsolicited email that appears to be from a financial institution or online retailer. The hoax email requests that you provide sensitive information, often by clicking on to a link leading to a fake website.
2) Smishing
The SMS equivalent of phishing. Fraudsters falsify the telephone number through “text spoofing,” so that it appears to be a genuine text from the bank.
3) Vishing
The telephone equivalent of phishing and smishing. Fraudsters may pose as bank staff, police or government officials. They may persuade the consumer to transfer money or divulge personal information.
4) SIM swap
Fraudsters duplicate the SIM of your mobile number without your knowledge or authorisation, allowing them to conduct financial transactions with your bank.
5) Identity theft
Someone illegally obtains your confidential information, through various ways, such as theft of your wallet, bank and utility bill statements, computer intrusion and social networks.
6) Prize scams
Fraudsters claiming to be authorised representatives from well-known organisations (such as Etisalat, du, Dubai Shopping Festival, Expo2020, Lulu Hypermarket etc) contact victims to tell them they have won a cash prize and request them to share confidential banking details to transfer the prize money.
Result:
1. Cecilie Hatteland (NOR) atop Alex - 31.46 seconds
2. Anna Gorbacheva (RUS) atop Curt 13 - 31.82 seconds
3. Georgia Tame (GBR) atop Cash Up - 32.81 seconds
4. Sheikha Latifa bint Ahmed Al Maktoum (UAE) atop Peanuts de Beaufour - 35.85 seconds
5. Miriam Schneider (GER) atop Benur du Romet - 37.53 seconds
6. Annika Sande (NOR) atop For Cash 2 - 31.42 seconds (4 penalties)
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
How Tesla’s price correction has hit fund managers
Investing in disruptive technology can be a bumpy ride, as investors in Tesla were reminded on Friday, when its stock dropped 7.5 per cent in early trading to $575.
It recovered slightly but still ended the week 15 per cent lower and is down a third from its all-time high of $883 on January 26. The electric car maker’s market cap fell from $834 billion to about $567bn in that time, a drop of an astonishing $267bn, and a blow for those who bought Tesla stock late.
The collapse also hit fund managers that have gone big on Tesla, notably the UK-based Scottish Mortgage Investment Trust and Cathie Wood’s ARK Innovation ETF.
Tesla is the top holding in both funds, making up a hefty 10 per cent of total assets under management. Both funds have fallen by a quarter in the past month.
Matt Weller, global head of market research at GAIN Capital, recently warned that Tesla founder Elon Musk had “flown a bit too close to the sun”, after getting carried away by investing $1.5bn of the company’s money in Bitcoin.
He also predicted Tesla’s sales could struggle as traditional auto manufacturers ramp up electric car production, destroying its first mover advantage.
AJ Bell’s Russ Mould warns that many investors buy tech stocks when earnings forecasts are rising, almost regardless of valuation. “When it works, it really works. But when it goes wrong, elevated valuations leave little or no downside protection.”
A Tesla correction was probably baked in after last year’s astonishing share price surge, and many investors will see this as an opportunity to load up at a reduced price.
Dramatic swings are to be expected when investing in disruptive technology, as Ms Wood at ARK makes clear.
Every week, she sends subscribers a commentary listing “stocks in our strategies that have appreciated or dropped more than 15 per cent in a day” during the week.
Her latest commentary, issued on Friday, showed seven stocks displaying extreme volatility, led by ExOne, a leader in binder jetting 3D printing technology. It jumped 24 per cent, boosted by news that fellow 3D printing specialist Stratasys had beaten fourth-quarter revenues and earnings expectations, seen as good news for the sector.
By contrast, computational drug and material discovery company Schrödinger fell 27 per cent after quarterly and full-year results showed its core software sales and drug development pipeline slowing.
Despite that setback, Ms Wood remains positive, arguing that its “medicinal chemistry platform offers a powerful and unique view into chemical space”.
In her weekly video view, she remains bullish, stating that: “We are on the right side of change, and disruptive innovation is going to deliver exponential growth trajectories for many of our companies, in fact, most of them.”
Ms Wood remains committed to Tesla as she expects global electric car sales to compound at an average annual rate of 82 per cent for the next five years.
She said these are so “enormous that some people find them unbelievable”, and argues that this scepticism, especially among institutional investors, “festers” and creates a great opportunity for ARK.
Only you can decide whether you are a believer or a festering sceptic. If it’s the former, then buckle up.
Brief scores
Toss India, chose to bat
India 281-7 in 50 ov (Pandya 83, Dhoni 79; Coulter-Nile 3-44)
Australia 137-9 in 21 ov (Maxwell 39, Warner 25; Chahal 3-30)
India won by 26 runs on Duckworth-Lewis Method
COMPANY%20PROFILE
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