The share price of Forte Oil, formerly AP Oil, stood at about N299 per share on the Nigerian Stock Exchange (NSE) in the 2008 boom.
After the market crashed that year and dispute with the Dangote Group, a raft of dealings under the radar of some brokerage firms brought the price value to its lowest.
But four years after trading far below intrinsic value, a three-year transformation programme initiated by its new leadership improved earnings following diversification into power generation.
Now, it has disclosed further plans to diversify into the upstream petroleum sector to raise profit as well as shareholders’ value.
Going upstream
Akin Akinfenwa
Forte Chief Executive Officer, Akin Akinfenwa, attributed the impressive financial performance in 2013 and first half of 2014 to the transformation programme.
He told a meeting of shareholders in Lagos that the aim is to reposition the business on the bedrock of corporate governance and ethics, safety of health and environment practices, effective controls, as well as superior service delivery.
“Upstream diversification is to be managed properly, considering the level of investment required. We are into petroleum retailing and marketing but if we are going into the upstream, we would form strategic alliances so that we can share the risk together because there is no technical expertise for it now,” he said.
“We have identified potential partners that will go into it with us and we are going into it as producing assets not as a prospecting one. Two options are before us; to acquire a set of moribund fields and bring them back to production or buy an existing international oil company as done by others.
“We were in this exercise a few years ago. It is a producing bloc but entry into it, we must manage it carefully in identifying the risk and getting parties to share and manage the risk.”
152% profit Q2 2014
Forte reported 152 per cent rise in half year profit in 2014 after returning to profitability following its venture into the power sector. Pre tax profit hit N4.19 billion, up from N1.66 billion in the corresponding period last year. Top line sales rose 33 per cent to N79.60 billion.
For a company that made a N19 billion loss in 2011, a 125 per cent rise in net profit to N3.13 billion (against N1.39 billion in the first half of 2013), posted it as one of the best performers among firms in downstream oil and gas.
In the first half of this year alone, the share price galloped 151.86 per cent to over N207 at the close of business on Monday, August 18.
Forte started operating the 414-megawatt (mw) Geregu power station in Kogi Sate in November last year with a promise to ensure gas supply to run it at full capacity, from 60 per cent. Geregu contributed 29 per cent to its profit in half year 2014.
Akinfenwa said the company is keen on transforming itself into an investment choice and is now on an aggressive and strategic acquisition haul.
Expansion scope
Forte plans to site its branch network in three-kilometre distances apart, especially in densely populated cities where demand is high.
It hopes to match retail petroleum expansion with acquisition of 100 trucks and tankers to give transporters the confidence to invest in the business, funded through equity and debt.
The vision has raised profit, capital reorganisation, dividend payment, efficiency, improved corporate governance, and made Forte a consistent early filer of reports as required by the NSE.
Akinfenwa expressed confidence that as the company enters the final phase of transformation, it will grow into a long term successful business.
NSE Chief Executive Officer, Oscar Onyema, commended Forte’s performance, which shows “good leadership” in information disclosure and governance.
