In a notice sent to the Nigerian Stock Exchange (NSE) on Wednesday, 11 Plc (formerly known as Mobil Oil Nigeria Plc) announced the reopening of its Liquefied Petroleum Gas (LPG) business. The company last operated in this segment 20 years ago.
Reasons behind the move
11 Plc attributed the volte-face to the need to tap Nigeria’s abundant gas reserves.
“We are returning to this line of business we exited 20 years ago to take advantage of the huge natural gas reserves in Nigeria.”
The company also stated that the move was part of the synergies it had obtained from its takeover by NIPCO. NIPCO acquired a 60% stake in Mobil Oil Plc from its parent company Exxon Mobil Plc in a deal valued at $301 million. The company was then renamed to 11 (pronounced double one) Plc
NIPCO then opened a Mandatory Takeover (MTO) bid in April 2017. It currently holds a 74% stake in the firm, while the rest is held by retail investors.
Details of the plan
The firm will begin sales in 14 of its outlets and then expand subsequently. In addition to investing in LPG equipment, Mobil has also expressed its willingness to train its personnel and maintain product standards.
Diversification is key
Downstream oil and gas firms have sought ways to diversify their revenue base, in the midst of slim margins on petrol. A devaluation of the Naira in the last two years and increase in global crude oil prices mean the landing cost of petrol is way higher than the current price of N145.
The government is unwilling to increase petrol prices to avoid backlash in a pre-election year. The Nigerian National Petroleum Corporation (NNPC) is thus, left as the sole importer and under-recovery (a diplomatic term for subsidy) running into trillions of Naira.
11 Plc is not alone
The expansion into other areas isn’t limited to just 11, but the downstream sector as a whole.
Forte Oil Plc in April this year, obtained the licence to distribute the Havoline line of engine oil. The company in December last year introduced its brand of solar energy solutions.
MRS Oil also appears to have begun operations in the LPG space going by its Q1 2018 results. They show the company made N5.5 million from Liquefied Petroleum Gas (LPG) sales in March 2018. There were no sales in the corresponding period of 2017 nor its full-year results.
Conoil Plc also had a trace of LPG sales in its revenue for the 12 months ended December, 2017, even though they were minuscule.
Recently released National Bureau of Statistics (NBS) LPG Price watch shows an increase in the price of filling an LPG cylinder both 5kg and 12.5kg.
11 Plc shares closed flat at N183.00 in today’s trading session on the Nigerian Stock Exchange (NSE). Year to date the stock is down 5.96%.
Q1 2018 results for 11 Plc, show revenue increased from N25.1 billion in 2017 to N45 billion in 2018. Profit before tax jumped massively from N43 million in 2017 to N4.3 billion in 2018 (due to the absence of exceptional items from last year).
Profit after tax also surged from N13 million in 2017 to N2.3 billion in 2018.