Key highlights
- Five Nigerian oil companies recorded a 4.6% decrease in post-tax profits, despite a 31.3% increase in revenue due to inflation and high operating costs.
- The companies spent N1.06 trillion on cost of sales, a 26.5% increase from the previous year, and N126.2 billion on operating expenses, a 44.9% increase from the previous year.
- Seplat Energy had the highest net profit of N44.43 billion, while TotalEnergies had a net profit of N16.12 billion, and both companies experienced declines in profitability due to increased costs.
Five publicly quoted oil companies in Nigeria posted a collective post-tax profit of N60.48 billion in 2022, a 4.6% decline compared to N63.37 billion printed in the previous year. This is despite a 31.3% increase in revenue in the same period.
Notably, the five firms gross a total of N1.36 trillion in revenue, against N1.04 trillion recorded in the previous year (31.3% YoY) This is according to data culled from the financial statements of the companies by Nairalytics – the research arm of Nairametrics.
Despite revenue growth, net profit remained down, on the back of the high cost of sales, and increase in operating cost, following increased inflationary pressure coupled with FX-related challenges in the country. The companies under consideration are Ardova, Conoil, MRS Oil, Seplat Energy, and TotalEnergies.
Inflation eroded income for oil firms
Nigeria like many other countries experienced an unprecedented level of inflation in 2022, following the spike in the price of crude oil in the global oil market, which was soon followed by escalating energy, food prices, and cost of services.
- The African giant recorded an annual inflation rate of 18.85% in 2022, galloping from 16.95% and 13.25% recorded in 2021 and 2020 respectively, largely due to a surge in food and energy prices.
- Energy prices rose to record highs, significantly impacting the operating costs of several companies across various industries in the country.
- The five oil firms spent a sum of N1.06 trillion as a cost of sales in the review year, which is 26.5% higher than the N841.04 billion incurred in the previous year. In the same vein, operating expenses gulped a sum of N126.2 billion, a 44.9% increase from the N87.1 billion that was spent in 2021.
- The increase in the operating components, including personnel cost, energy and maintenance, and other administrative costs impacted the profit, which slide by 4.6% to N60.48 billion.
Financial highlights
Analysis of the five oil companies reveals that they earned N1.36 trillion as revenue, most of which was recorded by TotalEnergies, after earning N482.5 billion in revenue, followed by Seplat Energy with N403.9 billion.
- Cost of sales gulped N1.06 trillion, which brought the aggregate gross profit to N295.77 billion. The gross profit for the period is however 52.4% higher than the N194.05 billion recorded in the previous year.
- Gross profit margin, which is calculated by dividing gross profit by revenue generated, improved to 21.76% in 2022 from 18.75% recorded in the preceding year. This indicates an improvement in the amount of revenue earned for every N1 spent on production.
- Meanwhile, aggregate operating expenses increased by 44.9% year over year from N87.12 billion recorded in 2021 to N126.25 billion in the year under review.
- Seplat led the list in terms of net profit at N44.43 billion, accounting for 73.5% of the total, while TotalEnergies followed with N16.1 billion. Of the five companies, two of them recorded a decline in their net profit, while the remaining three recorded impressive growth compared to the previous year.
How the companies performed
The list is ranked based on profit after tax
Seplat Energy – N44.43 billion
- Seplat Energy recorded a profit after tax of N44.43 billion in 2022, accounting for 73.5% of the total profit posted by the five oil firms. However, compared to the previous year, Seplat’s profit declined marginally by 5.3% from N46.93 billion.
- The decline in the company’s profitability was largely due to the surge in operating expenses and cost of raw materials, despite a 37.6% revenue growth.
- Cost of sales increased by 15.2% to N206.7 billion in the review year from N179.41 billion recorded in the previous year, while operating expenses surged by a whopping 81.8% to N58.29 billion. Personnel expenses increased by 34.3% to N23.19 billion in 2022.
- According to the company during its earning call presentation. a total of 16.1 million barrels of oil was produced in the review year, representing a 7.5% YoY decline with a total downtime of 37% due to problems with third-party export infrastructure. The firm explained that the revenue growth of 29.8% despite the decline in production was largely due to higher crude.
TotalEnergies – N16.12 billion
- TotalEnergies posted a net profit of N16.12 billion in 2022, a 4.4% decrease compared to N16.86 billion recorded in the previous year.
- Revenue increased by 41.4% to N482.47 billion, however, the surge in the cost of production and operational expenses impacted the company’s profit.
- Cost of sales rose from N286.32 billion recorded in 2021 to N422.29 billion in the review year while operating expenses increased by 7.9% to N36.04 billion.
- The company also spent a sum of N13.08 billion on personnel, which is 18.2% higher than the N11.06 billion spent in 2021.
Conoil – N6.22 billion
- Conoil posted a profit after tax of N6.22 billion in 2022, outpacing the N3.08 billion recorded in the previous year by a whopping 101.8%.
- Conoil recorded impressive profit growth on the back of a stable cost of raw materials and operating expenses, while revenue grew slightly.
- Revenue increased by 3.7% to N131.42 billion in the review year, while the cost of sales remained flat at N115.58 billion, indicating a gross profit of N15.83 billion.
- Also, operating expenses only increased slightly by 6.7% to N7.32 billion, which drove the company’s profit by 101.8% in the year under review.
A breakdown of the net profit of the other companies is given below:
- MRS Oil – N1.32 billion profit (+287.2% YoY)
- Ardova Plc – N7.61 billion loss (-97.7% YoY)