Shareholders of Forte Oil Plc have approved the company’s plan to restructure its business operations.
At the 39th Annual General Meeting (AGM) in Lagos, shareholders gave their nod to the board of the company to sell its stakes in Forte Upstream Services Limited, Amperion Power Distribution Limited, and AP Oil & Gas Ghana Limited.
The shareholders, however, mandated the board of directors to invest the net proceeds from the divestments in the downstream marketing business.
Recall that Nairametrics had earlier reported plans by the oil company to strategically focus more on its core operations in Nigeria which is fuel distribution.
Akin Akinfemiwa Group Chief Executive Officer, Forte Oil, noted that 2017 was a tough business year also added that the company took the decision to prioritize its shareholders’ value.
Akin Akinfemiwa on the future:
“We had a board meeting to deliberate on the future of the company in a deregulated market. We concluded on focusing our resources on our core competence, and streams of uninterrupted dividends for our shareholders.”
— Forte Oil Plc (@ForteOilNg) May 23, 2018
Reasons for divestment plan
- Akinfemiwa noted that the power business is profitable, but has huge receivables due from the Nigeria Bulk Electricity Trading Plc (NBET) and a significant portion of its distributed earnings is also used in servicing the acquisition debt finance.
- He said despite the significant resources deployed, the upstream services business has consistently contributed less than seven percent to the Group earnings in the last three financial years.
- Similarly, its downstream subsidiary in Ghana has consistently declared losses after tax in the last three years and has substantial bad and uncollectable trade debts in the business as a result of negative economic conditions and currency devaluation in prior years.
What this means for Forte
With this approval by its shareholders, the proceeds will be used to expand and strengthen its fuel distribution operations across the country including the construction of storage infrastructure.
The company has two storage depots, five aviation fuel depots, and a lubricant blending plant. It also has 100 trucks for distribution of products across its more than 500 retail outlets which would require a lot of capital to expand.
In its Q1 2018 for the quarter ended 31st March 2018, the company recorded a 20% increase in revenue from 33.0 billion in Q1 2017 as against 39.81 billion in Q1 2018.
A breakdown of the revenue from its operating segments show that the fuel segment which is responsible for the sale of petroleum products and Aviation Turbine Kerosine recorded the highest revenue of ₦25 billion during Q1 2018 against ₦22 billion in Q1 2018 while the power generation segment recorded ₦10 billion in Q1 2018 as against ₦6 billion recorded in Q1 2017.
The Lubricant and greases segment also saw an increase in revenue from ₦3.23 billion in Q1 2017 compared to ₦3.45 billion in Q1 2018. While in FY 2017 the lubricant section which accounts for 9% of the revenue grew by 6% YoY ₦12.1 billion in FY 2017 as against ₦11.4 billion in FY 2016.
Its shares are currently trading at 40.70 on the floor of the Nigerian Stock Exchange. Its one year return is down by 11.52%.
The company has a 100% equity in Forte Upstream Services Limited, AP Oil and Gas Ghana Limited, and a 57% stake in Amperion Power Distribution Company Limited, while Amperion Power Distribution Company Limited owns 51% of Geregu Power Plc.
Forte Oil Plc was incorporated on 11 December 1964 as British Petroleum. It became African Petroleum through the nationalization policy of the Federal Government of Nigeria in 1979. The Company changed its name to Forte Oil Plc in December 2010 upon restructuring and rebranding.