Wednesday, November 11, 2015 09:50AM / FBNQuest Research
The NNPC has now produced its second Financial and Operations Report, and the financial picture for September has not improved. The group financial performance shows operating losses for the month of N59bn, and ytd of N438bn (US$2.2bn).
The corporation’s budget projects an operating profit for the nine months of N350bn. The losses are again concentrated in the Pipelines and Product Marketing Company (PPMC), which has reported a ytd deficit of N337bn excluding estimated claims of N249bn for fuel subsidy payments, N74bn for pipeline repairs and N49bn for losses due to vandalism.
The table also notes that the expenses of N139bn ytd of the Nigerian Petroleum Development Company exclude its royalty obligations.
We are confused by the ytd revenues and expenses of just N580m and N61bn respectively from the three refinery companies, compared with budget projections of N891bn and N868bn. We would be curious to see the assumptions for capacity utilisation.
The table for US dollar export proceeds confirms the impact of the slide in the oil price. Proceeds ytd amount to US$3.69bn, of which US$3.09bn has been paid out for joint venture (jv) cash calls. These payments fell short of the monthly obligations of US$620m appropriated by the National Assembly.
Since the cash calls constitute a first line charge, there have been no transfers to the federation account since March. FAAC remittances ytd total just US$610m.
These new reports are a welcome step forwards by the corporation. The monthly accounts are naturally unaudited and drill down no further than the operating level, which leaves us in the dark about financing costs.
They do not cover the unincorporated joint ventures although the corporation has proposed a pilot experiment for such ventures to be run on a self-financing basis with their own balance sheets on the model of Nigeria LNG.
The reports highlight a programme of internal reforms, which it terms the “20 fixes”. Among the proposed changes are the unbundling of the PPMC and the Nigerian Gas Company. a dramatic reduction in the contracting cycle from 18 to six days, and the adoption of new security arrangements to protect pipelines.
The latest report cites savings of US$207m over six months from the cancellation of contracts for offshore processing arrangements as an example of work in progress.