- Shareholders Approve Forte Oil’s Assets Sales
Shareholders of Forte Oil Plc have approved the company’s plan to restructure its operations by divesting from its upstream services and power generating businesses and the sale of its downstream business in Ghana. Forte Oil plans to streamline its operations and focus on its Nigerian downstream marketing business.
At the annual general meeting in Lagos, shareholders authorised the board of the company to sell its stakes in Forte Upstream Services Limited, Amperion Power Distribution Limited and AP Oil & Gas Ghana Limited.
The meeting mandated the board of directors to invest the net proceeds from the divestments in the downstream marketing business.
AP Oil & Gas Ghana Limited and Forte Upstream Services Limited are wholly owned subsidiaries while Forte Oil owns 57 per cent equity stake in Amperion Power Distribution Company Limited.
Chairman, Forte Oil Plc, Mr Femi Otedola said the restructuring was aimed at ensuring sustainable growth and returns to shareholders.
“We concluded on focusing our resources on our core competence, and streams of uninterrupted dividends for our shareholders,” Otedola said.
Key extracts of the audited report and accounts for the year ended December 31, 2017 showed that group turnover dropped from N148.61 billion in 2016 to N129.44 billion in 2017. Gross profit increased from N20.58 billion to N24.12 billion. Operating profit rose from N9.62 billion to N14.26 billion. Profit before tax doubled from N5.34 billion in 2016 to N10.63 billion while profit after tax jumped from N2.89 billion in 2016 to N12.23 billion in 2017.
Underlining the rationales for the strategic business change, Forte Oil had said its decision to divest from upstream services and power generating businesses will boost its distributable earnings for the benefit of shareholders.
According to the company, following the significant changes in the oil and gas industry in recent years, only downstream operators with huge investments in both storage and distribution infrastructures can remain competitive and operationally efficient in the long run.
Forte Oil noted that that although the power business profitable, it has huge receivables due from the Nigeria Bulk Electricity Trading Plc (NBET) and a significant portion of its distributed earnings is also utilized in servicing the acquisition debt finance.
The company said despite the significant resources deployed the upstream services business has consistently contributed less than seven to the Group earnings in the last three financial years.
Similarly, its downstream subsidiary in Ghana has consistently declared losses after tax in the last three years and has substantial bad and uncollectable trade debts in the business as a result of negative economic conditions and currency devaluation in prior years.
“This divestment a will reduce finance cost in the Group significantly and increase distributable earnings for the benefit of the shareholders. The finance cost attributable to the businesses to be divested stood at N2.7 billion and N2.2 billion for the year ended 31st December 2016 and the year ended 31st December 2017 respectively. The proceeds of the divestment initiative will also enable your company to compete more favourably and achieve the planned expansion of the business for increased market share,” Forte Oil stated.