The Nigerian oil and gas sector emerged as the best-performing index in 2024, delivering a 160% YtD gain and outpacing its impressive 125% rise in 2023.
This remarkable performance boosted the broader market index (ASI), which gained 37.65% YtD to close at 102,926.46 points.
Unlike the ASI, which dipped mid-year before recovering, the oil and gas index maintained steady growth from 24.09% in Q1 to 91% by Q3, and an impressive 160% by year-end.
Data from the NGX attributes this stellar performance to key players like Conoil, Eterna, Japaul Gold, Total Energies, and Seplat Energy.
This growth was fueled by a combination of policy shifts under President Bola Tinubu’s administration, including:
- Fuel subsidy removal and downstream deregulation, fostering competitiveness and profit margin improvements.
- Naira devaluation, boosting foreign exchange earnings for companies generating revenue in foreign currencies.
These factors not only bolstered profitability but also strengthened market sentiment, driving a share price rally that attracted both domestic and foreign investors.
With this backdrop, a closer examination of the performance of individual companies offers further insights.
Japaul Gold Plc: +31.21% YtD
Japaul Gold & Ventures Plc recorded a 31.21% YtD gain in 2024, significantly lower than its extraordinary 461% YtD gain in 2023, but still managed to grow its market capitalization by N3.064 billion to N12.881 billion.
While its fundamentals show promise, the negative cash flow per share of N0.05 highlights concern about core operational sustainability.
This could limit the company’s ability to capitalize on growth opportunities or sustain shareholder returns.
Though replicating its 2023 performance seems unlikely, steady gains are possible. In 2025, Japaul Gold’s outlook will depend on addressing its cash flow challenges and improving efficiency.
Investors should approach cautiously, focusing on quarterly performance updates and broader sector dynamics before making decisions.
Eterna Plc: +75.5% YtD gain
Eterna Plc recorded a 75.5% YtD gain in 2024, closing at N24.30, following an impressive 107.03% YtD gain in 2023.
This consecutive double-digit growth highlights the company’s potential, buoyed by the oil and gas sector’s bullish performance.
Despite strong revenue growth, rising finance costs and foreign exchange losses constrained profitability, with pre-tax and net profit margins shrinking to 0.72% and 0.06%, respectively. These tight margins indicate limited value creation for shareholders.
While momentum-driven investors may find Eterna attractive for short-term gains, its long-term outlook hinges on Eterna’s ability to balance growth with improved profitability.
However, sector trends and government policies, particularly around foreign exchange and interest rates, will also be key factors.
Total Energies +81.30% YtD gain
Total Energies posted an 81.30% YtD gain in 2024 after a 99.48% gain in 2023, reflecting strong investor confidence.
Revenue grew by 88% YoY to N793.9 billion, with pre-tax profit up 152% to N41.85 billion in the first nine months of 2024.
Despite a 3.7% dividend yield and a P/E ratio of 7.7x, rising costs squeezed margins, and negative cash flow per share (-N21.67) raises liquidity concerns and ability to sustain dividends an integral part of total returns.
While Total Energies has strong fundamentals, matching the past two years’ stellar returns may be tough.
Moderate gains are likely in 2025, but investors should watch for improved margins and cash flow sustainability.
Seplat Energy Plc: +147.75% YtD gain
Seplat Energy Plc achieved a remarkable 147% YtD share price gain in 2024, building on its 110% gain in 2023.
Robust fundamentals, consistent quarterly dividends, and strong growth prospects underpin investor confidence.
With a 3.71% dividend yield and a 5-year dividend growth rate of 40.29%, Seplat is attractive for income-focused investors.
However, the elevated P/E ratio – 17.98x raises concerns about potential overvaluation, emphasizing the need for sustained growth and careful monitoring.
Seplat remains a compelling option for long-term growth and income, given its consistent quarterly dividend payouts, but investors should approach with cautious optimism at its current valuation.
Conoil Plc: +361.50% YtD gain
Conoil Plc recorded the highest year-to-date (YtD) share price gain of 362% in 2024.
This follows an impressive 217% YtD gain in 2023, highlighting the company’s ability to sustain positive momentum over consecutive years.
These gains are likely driven by favorable market conditions, and increased profitability.
With a cash flow per share of N34.56, Conoil demonstrates strong cash-generating capacity.
This positions the company well to fund dividend payments, reinvest in business operations, or reduce debt, which is good for investor confidence.
Given its low dividend yield of 0.90%, Conoil needs to increase its payouts, which would make its stock even more attractive to income-focused investors.
Such a move could strengthen investor sentiment and sustain the upward trend in its share price.
Overall, the oil and gas sector has enjoyed a strong rally, reflecting investor confidence.
However, investors should closely monitor the individual company dynamics when making investment decisions in the sector.
