Small oil-producing companies in Nigeria, facing slumping prices and rising debt, may need to combine to survive, the chief executive officer of one of the companies said.

“We don’t have that much leverage, the rapid drop is unprecedented” for the country’s small producers, Kola Karim, chief executive officer of Shoreline Natural Resources Ltd., said in a phone interview Wednesday from London. “The reality is there have to be mergers in the industry because it’s difficult in a down market when you’re a small producer trying to weather the storm alone.”

Karim’s Shoreline Natural Resources, with output of about 60,000 barrels per day, is one of more than a dozen small producers owned by Nigerians, pumping between 5,000 and 100,000 barrels daily and accounting for about 20 percent of Nigeria’s production. Others include Seplat Petroleum Development Co., Neconde Energy Ltd., Conoil Producing Ltd. and First Hydrocarbon Ltd. The West African nation produced an average of 2.04 million barrels per day in January, according to data compiled by Bloomberg.

Royal Dutch Shell Plc, ExxonMobil Corp., Chevron Corp., Total SA and Eni SpA run joint ventures with state-owned Nigerian National Petroleum Corp. that pump the rest of the country’s crude.
Most of the smaller companies obtained financing based on a price of $70 a barrel, compounding difficulties from the fall in the price of crude while they struggle to keep production steady in the face of pipeline attacks and oil theft, according to Karim.

Oil Theft
“Already at $50 a barrel, we’re under water,” Karim said. The financial pressure is compounded by the security threat, he said. “You face the devil on all sides.”
Armed groups led by the Movement for the Emancipation of the Niger Delta are fighting for control control of the region’s oil resources. Attacks cut Nigeria’s oil output by 28 percent, mainly from the delta’s swamps and shallow waters, from 2006 to 2009, according to figures compiled by Bloomberg. Though the violence subsided after thousands of fighters accepted a government amnesty offer in 2009 to disarm, a surge in oil theft in recent years by gangs tapping crude from pipelines has left output hovering close to four-year lows.

Protect Installations
Oil prices of less than $50 per barrel makes production unprofitable for smaller companies that pump at a cost of $30 per barrel. Taxes and extra security costs to protect installations cut into profits, according to analysts including Pabina Yinkere of Vetiva Capital Management Ltd. Oil majors, such as Shell and Exxon Mobil, with larger economies of scale, pump at lower costs of about $15 for a barrel, Yinkere said.
Brent crude, which compares with West African crude grades, rose 2.3 percent to $55.95 per barrel as of 8:43 a.m. in London, down 53 percent from last year’s highest point on June 19.
As Shell, Chevron, Total and Eni sold some of their onshore assets in Nigeria over the last two years, they were acquired by smaller Nigerian-owned companies that funded their acquisitions with debt, banking on high crude prices to repay the loans, Yinkere said in a Jan. 30 phone interview from Lagos.

‘Sufficient Margins’
Falling oil prices have also had an impact on the country’s banking sector, where about 25 percent of loans are made to oil companies. At First Bank Plc loans these firms account for about 40 percent of its loans and at Access Bank Plc the figure is 35 percent, according to data compiled by Bloomberg. The two banks are the most reliant on lending to the oil industry, the data show.
The lenders are also hurting from the 27 percent plunge of the naira this year under pressure from declining crude prices, the source of more than 95 percent of the country’s export income. Adding to Nigeria’s currency woes is uncertainty about general elections initially scheduled to be held this month and now postponed by six weeks.
Some of the banks have started negotiations on how to reorganize the debts, Dolapo Oni, energy analyst at Lagos-based Ecobank Research, said in a Feb. 2 phone interview. “The banks are already starting to see that their revenues are now so low that they can no longer meet their payments,” he said.

Seplat, the leading Nigerian producer, pumping about 70,000 barrels daily, is in talks to take over London-based Afren Plc, which operates fields in Nigeria.
“I foresee a huge combination of mergers in the local market, we’re also looking for opportunities,” said Karim. “You’re better being part of a bigger player, so you can save on your cost and make good margins.”
Companies including Shoreline are now looking to boost gas output after the government raised prices to $2.50 per thousand cubic meters, with demand to Nigerian power plants set to more than double to 5 billion cubic feet a day from the current 2 billion cubic feet, according to NNPC estimates. Nigeria holds Africa’s largest gas reserves of more than 180 trillion cubic feet.
Shoreline is in talks with companies including the Nigerian Gas Co. and Ughelli Power Plc ahead of plans to increase production from its 3.5 trillion cubic feet reserves, Karim said. His company’s focus would be on the domestic gas market as the higher prices makes it more attractive, he said.

Source: http://www.bloomberg.com/news/articles/2015-02-12/small-nigerian-oil-producers-may-merge-to-survive-price-slump

Not unexpected

The destiny of a great nation rests upon the shoulders of a man. His name, Buhari

Sai Buhari/Osinbajo.

Its expected and will turn out to be a good thing





See Photos Of Captured Boko Haram Members
SOURCE: http://www.e reporter.com.ng/index.php/national-news/item/3586-see-photos-of-captured-boko-haram-members

Odi easy o....it is well with us. Just like bank merger. I think the guy is smart to start thinking of domestic gas supply to power plants. I hope this can improve the power supply in Nigeria. I'm seeing the glass cup half full though

*unrelated *

There are some topics that made fp on nl that was done with little or no research and or is totally made up, here are 2 I've seen so far.

Firstly is about Nigerians marching for our army, the OP did little or no research on that and send u guys crappy pics, the pic below (1st pic) is that of Nigerian marching for our army in abuja.

Secondly the other topic about the acquisition of these weapons (2nd to 4th pic) is a total fallacy, the Nigerian army got loads of military hardware but didn't get any Anti aircraft guns (3rd pic) or any bomber (2nd pic) we didn't get the BTR (4th pic), we got better once that.

Just trying to point this out as nl is becoming a forum where shïtty stuffs are posted and taken seriously

Posted this the second time so more will people see and not be misinformed.

Here we come.....





Real Nigeria story.

ok

Nigeria has been destroyed by the saTANist.
A country deserve people like Jacob in the bible.
he saved for the raining days.
but GEJ doesn't care about tomorrow but today.

God rid us of Nebuchadnezzar.

GMB for better Nigeria

Wahala dey oOo

That's business. Uncertainties abound in every business. You ought to be prepared. As volatile as oil prices, every investor and producing country should always prepare for it and stop giving excuses cos when they were gaining it, no body heard them.


Abegi!!!!!

Halliburton is already buying Baker Hughes for $35 billion. I hope they are not going to throw some people into the already saturated labour market

My belove country Nigeria always making a way when there seems to be no way..
God Bless Nigeria.

k

That would be welcomed

I guess challenges are what bring out the best in us.

Hmmmmmmmmmmm ;DHmmmmmmmmmmm

i think merger is key here....but it's gonna have a negative effect in terms of the lose of jobs and other things. I pray we get out of this mess soon.

might not be a bad idea.

Funniest video ever...

some children are funny...
We know when we were young,we use to pray For our parents to get money and buy us all that we want like toys,chips etc but this little child went to the extent of praying in tongues..
Lol...
I haven't seen this before..
You can watch the video @ http://cuteloaded..com/2015/02/young-boy-praying-in-tongues-for-his.html?m=1

datz gud

Here in kaduna they sell one litre of fuel. @ N110, if u lyk buy if u no lyk leave it,abeg govt should do some thing about it

my deepest fear is fear

OK

I will still study geology

I see....