In the first nine months of the year, the Oil and Gas Index helped the stock market of the NGX maintain a bullish run, gaining N4.15 trillion. The market capitalisation had closed at N26.451 trillion on September 30, 2022, having started the year at N22.297 trillion, a gain of N4.15 trillion or 18%.
Also, the NGXASI moved up by 13.89% year-to-date to close at 49,024.6 basis points from 43,046.78 points it opened in 2022 for trading, majorly on the back of the Oil and Gas Index 48.06% year-to-date gain.
However, the Russian-Ukraine war, the CBN hike in the MPR rate to fight inflation rates, scarcity of foreign exchange, uncertainty in global economies, etc., seen in the nine months of the year under review contributed to the dip in performance in Q3 2022, and it is expected to continue for the rest of the year. For instance, the increase in MPR will continue to influence the direction of the market as institutional and retail investors are likely to continue to move towards a fixed-income market that comes with low-risk investment and modest yield. Also, the upcoming elections are fraught with uncertainty and likely to play a role in investor sentiments across all markets.
But in the midst of all these, the Oil and Gas Index has remained stronger than the other indices. The Index, which provides an investable benchmark that captures the performance of the oil and gas sector, comprises seven well-capitalized and liquid companies in oil and gas marketing, which are ARDOVA, CONOIL, ETERNA, MRS, OANDO, SEPLAT and TOTAL.
Why the NGX Oil and Gas Index outperformed other indices.
The spike in global oil prices (above $100 per barrel) between March and June 2022 led to an increase in the earnings of these companies. This spurred investors’ sentiment and interest in the shares of these companies on the expectation of taking a share of the growing earnings, which contributed to the increase in their share prices, especially in Q1 and Q2 of the year.
However, as investors’ sentiment deteriorated in reaction to the macroeconomic headwinds, the share prices of the companies dipped in Q3 2022 compared to Q2 2022.
SEPLAT PDC – +92.13%
For instance, due to the impressive growth in revenue from oil and gas sales, Seplat’s earnings increased by as much as 238% in H1 2022 compared to corresponding period in 2021. The growth in earnings in Q1 and Q2 of the year, boosted investors’ confidence and thus increased the share price. In the first nine months of the year, Seplat share price increased by 92.13%, having started the year with a share price of N650 and closed trading on September 30, 2022 at N1.250 per share. However, between June and September, the share price dipped by about 4% or lost N50 per share as the market quickly reacted to the hike in MPR and consequent rise in fixed income rates of securities. Since then, the market has continued to exert on the share price. As at last trading day, Thursday, October 20, 2022, it closed lower at N1,200 per share, losing further 4% of its value and printing a lower 84.6% year-to-date gain.
ETERNA PLC – +25.15%
Eterna Plc is into manufacturing and marketing of lubricating oils and petrochemicals and sale of fuels. The company came second behind Septlat in the first nine months of the year. Just like Seplat, the first two quarters of the year, saw a better share price appreciation. It started the year with a share price of N5.05 and closed the Q1’ 22 at N5.48 per share and Q2’ 22 at 7.10 but dropped to N6.30 per share in Q3’ 22.
CONOIL PLC- +20.45%
Conoil Plc recorded 20.45% gain in the first nine months of the year ranking it 3rd on the NGX Oil and Gas Index
The N18.4 billion market cap Oil Company started the year with a share price of N22 and closed on Friday, October 14, 2022 at N26.50 per share.
ARDOVA PLC – +17.52%
Ardova Plc, formerly Forte Oil Plc, have also enjoyed positive growth this year. It started the year with a share price of N11.70 and has gained 17.52% or N2.05 per share in the first nine months of the year, having closed trading on September 30, 2022 at N13.75 per share on the NGX, ranking it 4th on the NGX Oil and Gas Index. Its market capitalization moved from N15.239 billion it opened with this year to N17.909 billion as at September 30, 2022.
The rising cost of fuel occasioned by inflation and the Russia and Ukraine war drove up the company’s revenue in the first half of the year to N126.65 billion from N86.770 billion in 2021.
Heading into the earnings announcement period, it is likely that the company will attract investors’ interest after its Board approves its Q3 unaudited financial statements at the upcoming Board meeting on Thursday, Octobre 27, 2022.
MRS – 16.19%
MRS Oil, though not heavily traded over the past three months has a better outing in terms of year-to-date return at 16.19%, which ranks it 5th on the NGX Oil and Gas Index. MRS Oil Nigeria Plc started the year with a share price of N12.35 per share on the NGX and closed at N14.35 per share on September 30, 2022 and has lost 9.75% between September 30, 2022 and October 19, 2022, pushing down its total market capitalization to N4.440 billion.
OANDO PLC – +8.59%
Oando, formerly Unipetrol Nigeria Plc is engaged in the exploration, production, marketing, supply and general energy services.
The Oil Exploration Company closed trading on September 30, 2022 at N4.80 and having started the year with a share price of N4.42, has gained 8.59% ranking it 6th on the NGX Oil and Gas Index. The company enjoyed buy-interests in the first half of the year, gaining about 28%. Total market capitalization moved up toN70.486 billion as of June 30, 2022.
TOTAL- -4.87%
Total Nigeria is the worst performing stock on the NGX Oil and Gas Index, having posted a 9-month YtD negative growth. It started the year with a share price of N221.90 and closed trading on September 30, 2022 at N211.10 per share and has since lost 4.87% of its value to close at market capitalization of N71.67 billion from N75.34 billion it started with this year.
The stock has witnessed low interest, the share price has just traded a total volume of 1.86 million shares over the past three months; from July 22 to October 20, 2022 and thus rated the 98th most traded stock on the NGX. This has pushed further the share price down to N197 per share as of October 20, 2022, ranking it the 29th most valuable stock on the NGX with a market capitalization of N66.9 billion. Although in H1 2022, it grew earnings by 6% year-on-year to N8.529 billion from N8.066 billion in H1 2021.
The irony is that all those gains would be frittered during Q4. To the extent that we will take the losses till year end. Investors shine your eyes. Those looking for capital gains, look elsewhere. Those for dividends, bona petit