Out of the 5 major indices of the Nigerian Exchange Group (NGX), the NGX Oil and Gas Index recorded the highest positive movement to reflect a growth of 38.28% in Half Year 2021.
Albeit slight, the NGX Consumer Goods and NGX Insurance Indices recorded growth of 5.12% and 3.04% respectively, However, the NGX Banking Index and NGX Industrial Goods Index recorded declines of 10.06% and 44.17% respectively over the same period.
The NGX Oil and Gas Index comprises ten listed Oil and Gas Marketing companies which are ARDOVA, CONOIL, ETERNA, JAPAUL, MRS, OANDO, SEPLAT and TOTAL Plc while CAPOIL and RAKUNITY Plc have both suspended trading.
Amongst the 8 actively trading companies in the sector, OANDO, CONOIL, JAPAUL and MRS Plc saw their share prices decline by 11.08%, 4.08%, 19.35% and 8.36% respectively. Meanwhile, ARDOVA, ETERNA and TOTAL Plc grew their share prices by 14.39%, 47.06% and 11.54% with SEPLAT recording an impressive year to date growth of 71.51%.
Why the NGX Oil and Gas Index outperformed other indices
The growth in the NGX Oil and Gas Index was spurred by gains in the share prices of Seplat Plc and Eterna Plc.
Seplat Petroleum Development Company Plc, a leading Independent Nigerian energy company, is principally engaged in oil and gas exploration and production. In the first quarter of 2021, given the 20.5% increase in the average price of Brent crude from Q1 2020 to Q1 2021, Seplat Petroleum Development Company recorded a 36.60% increase in total revenue.
Being one of the major players in the Nigerian upstream sector, the company’s share price has seen an impressive gain of 71.51% from N402.3 in January to N690.00 at the time of writing this report, considering that global Brent prices have gained 49.14% from $50.37 at the start of the year, to $75.13 at the time of writing this report.
Eterna Plc began the year with a share price of N5.10 and has since gained 47.06% to close the trading day on June 30, 2021 at N7.50. The company deals in the manufacture, marketing and distribution of chemicals and lubricants and in Q1 2021, recorded a 171.02% growth in Net Profit from negative N358.28 million to N254.45 million which contributed to the positive sentiment around the stock.
Unlike Seplat, the increase in the Eterna Plc share price can be linked to investors’ reaction over their 2020 Annual Result which showed the company increased its profit notably by 752.19% from N144.29 million in 2019 to N941.06 million in 2020 after taxes dropped by over 250% as well as other cost items. There was a 10% increase in share price a day after the result was announced.
What to expect
Due to the upward trend in global oil prices, investors are building positive sentiments around the stock as the trend suggests that the increase in the average Brent prices would translate to an increase in revenue for oil companies which should also reflect in the Earnings Per Share.
In the coming months, investors can expect to see a boost in the price of Seplat shares and consequently, in the NGX Oil and Gas Index if the upward trend in global Brent prices continues.