SBM intelligence got it wrong on NNPCL 2023 financial performance

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A few days ago, SBM Intelligence, in a report titled “NNPC Profit: Murky Waters” struggled hard to paint a mischievous narrative that there is nothing to celebrate about the N3.3tn Profit After Tax which the Nigerian National Petroleum Company Ltd (NNPCL) declared in its audited financial statement for 2023.

The consulting firm, in its report, drew a comparison between the $3.66bn profit that was declared by the NNPC Ltd and its other global peers such as Aramco of Saudi Arabia, Petrobas of Brazil, Petronas of Malaysia, Gazprom of Russia and Sonatrach of Algeria.

According to the report, while NNPC made a profit of $3.3bn in dollar terms as of its Audited Financial Statement of 2023, other national oil companies such as Aramco of Saudi Arabia posted $100bn, Petrobas of Brazil $25bn, Petronas of Malaysia $19bn, Gazprom of Russia $14bn and Sonatrach of Algeria $5.5bn.

But in their report, what analysts as SBM Intelligence failed to mention is that, unlike the NNPC Ltd which saw an increase of 28 per cent in its profit during the period under review, most of its global peers referenced in the SBM analysis saw a sharp decline in profitability.

At a time when there is low investment arising from the onslaught in energy transition, the management of the NNPC Ltd is sharply transforming the firm into a superpower with an eye-popping rise in assets by 322 per cent to N246.8tn or an equivalent of $155.4bn by the end of 2023 a feat major state-owned oil companies could not achieve in 2023.

The NNPCL also silenced naysayers when it released its 2022 and 2023 Audited Financial Accounts and declared a record pre-tax profit of N5.98tn ($ 3.77band a net profit of N3.29tn ($2.07bn).

The state-owned oil firm also paid a tax valued at N2.69tn ($1.69bn) and declared a dividend of N2.1tn ($1.35bn).

Last year, Saudi Aramco declared a 15.4 per cent rise in its assets from $576bn in 2022 to $664.7bn in 2023 which is far below the percentage growth of over 300 per cent recorded by the NNPC Ltd year-on-year.

Unlike NNPC Ltd, which saw a 28 percent increase in profit, Aramco could not raise its profit margin as the company experienced a 24.7 percent decline in profit. Checks showed that Aramco’s net income dropped from $161.07bn in 2022 to $121.25bn in 2023.

“The decrease mainly reflects the impact of lower crude oil prices and lower volumes sold, and weakening refining and chemicals margins,” Aramco had said.

Meanwhile, another oil giant, PetroChina Co. Ltd. saw a dip in its assets from $392.6bn in 2022 to $384.6bn in 2023 due to economic headwinds.

Similarly, the net profit posted by Petronas of Malaysia dropped by 21 percent to $17.2bn in 2023, down from $21.65bn in 2022 when oil prices hit a record high. Also, the revenue posted by the company during the period fell by eight per cent to $73.23bn in 2023, while operating cash flow dropped by 16 per cent to $24.34bn compared to $28.83bn in 2023.

Petronas’ President and Chief Executive Office, Tengku Muhammad Taufik, said the 2023 financial period was a year defined by market volatility.

“Petronas delivered resilient performance in 2023 amid a volatile operating environment,” he added.

Another national oil company that the SBM Report compared its financial performance to that of NNPC Ltd is Brazilian state-run oil firm Petrobras. But what the analysts at the Intelligence firm failed to highlight is that unlike the NNPC Ltd that posted a rise in profit of 28 percent, Petrobas reported a net income of $24.88bn in 2023.

On its face value, while the profit of $24.88bn declared by Petrobas looks high, the amount is indeed a decrease compared to the previous year, when the Brazilian state-owned entity reported $36.6bn in net income due to decade-high oil and gas prices.

At a time when NNPC Ltd surpassed expectations by declaring a dividend payout of 80 per cent out of its net profit to shareholders, Petrobas investors were reported to have been disappointed as the company did not declare extraordinary dividend relating to the fourth quarter 2023 financial period.

While it is convenient for analysts to dissect NNPC’s Annual Financial Statements and debate the company’s performance, the real question is how many of the state-owned peers are facing the same operational challenges as NNPC Ltd. No major oil company in the world, whether private or state-owned, deals with the level of oil theft that NNPC faces. None of them also have to contend with oil thieves and willful vandalism of oil assets.

Additionally, none of these state-owned oil companies pay non-state actors to protect their assets from vandals. Given that these huge billions of dollars are not spent on securing oil assets in Nigeria, the profit that NNPC Ltd would have declared could have more than tripled what was posted in 2023.

Furthermore, in its report, the analysts at SBM Intelligence did not take into account the fact that none of these state-owned oil companies paid billions of dollars to the operating communities under the guise of trust funds to be shared among residents. This is in addition to the usual Corporate Social Responsibility initiatives for host communities, which the NNPC is also shouldering.

It is instructive to state further that none of these countries mentioned by SBM Intelligence during its comparison with NNPC spend trillions from their earnings to subsidize fuel prices to enable their citizens pay less than the global average for petroleum products. In other countries, people pay the actual price of products as there are no subsidies.

If all these challenges are taken away from the operating environment of the NNPC Ltd, it is obvious that the National Oil Company will post far more impressive financial results than it did in 2023 as it would confidently achieve a production of 2.5 to 3 million barrels per day without any issues.

Despite the multiple campaigns of calumny to undermine the successes recorded by the NNPC Ltd under the visionary leadership of the Group Chief Executive Officer Mele Kyari, the Company has continued to show professionalism and excellence with visible and outstanding results in the Nigerian oil and gas sector.

With his TAPE Agenda (Transparency, Accountability and Performance Excellence), Kyari has turned around the oil company, making it competitive at the global market and thereby increasing the nation’s prosper

Kyari’s efforts have also rekindled investors’ confidence in the oil and gas sector, and Nigeria is beginning to harness the potentials of the industry. This is evident by the fact that the Executive Order signed by President Bola Tinubu on February 28 this year has unlocked two Foreign Direct Investments worth over $500m.

Through reforms and initiatives spearheaded by Kyari at the NNPC Ltd, Nigeria has seen a reduction in pipeline vandalization and crude oil thefts in the Niger Delta areas.

As of today, Nigeria’s crude oil production has increased to approximately 1.78 million barrels per day (inclusive of condensate).

Rather than painting a sad picture of the NNPC financial report through false and mischievous narratives, analysts and all Nigerians should applaud the management team of NNPC Ltd led by Kyari for turning the fortunes of the former loss-making company around and repositioning it to the path of profitability.

From a loss position of N1.7bn in 2019, the management of the NNPC reversed the trend by posting profits of N287bn in 2020, N674.1bn in 2021, N2.54tn in 2022 before hitting the current figure of N3.29tn in 2023.

Under the leadership of Kyari, Nigeria’s oil and gas sector has seen tremendous progress and with the latest record-breaking performance, the NNPC Ltd has shown that it has the potential to lead Nigeria towards a future of energy sufficiency.

– Onuba, a Chartered Accountant, wrote from Abuja

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