Creditor banks to Seven energy may have to take provisions on a $445 million to the company, despite a potential sale to Savannah petroleum. Seven energy, had taken the loan from a consortium of banks led by Ecobank, FCMB, and Union Bank in 2015 to provide working capital for Accugas, one of its subsidiaries.
The company, currently has a negative cash flow and is such is unable to service its loans. Savannah petroleum, which intends to purchase Seven energy, is also in a tight spot as it made an $8 million loss in 2016. Taking provisions on the loan will leave the banks in a tight spot as other sectors of the Nigerian economy are struggling from the recession.
Seven Energy is not alone
A massive drop in crude oil prices, and in some cases crude oi production volumes have left many players in the oil industry struggling. Oando Plc, for example bought upstream oil assets at the peak. Oil prices sank to a low of $28 in 2016 from a peak of $114 in mid 2014. The subsequent drop in oil prices led to a drop in the valuation of the assets and a fall in production.
Oando was forced to sell off non-essential assets and a stake in its downstream arm. Seplat another player in the oil industry declared a $28 million loss for the half-year July 2017 due to the shut down of the Forcados export terminal for repairs after a militant attack.
The advent of shale oil has also worsened matters as they are able to produce oil at a much cheaper cost. Consumers are also increasingly focusing on renewable energy which is more environmentally friendly
Seven energy, founded in January 2004 is an integrated oil and gas company with assets located in the South Eastern region of Nigeria. Savannah petroleum is a UK based petroleum company with operational assets in the Niger region.
