Economy
Fitch Upgrades Nigeria’s Seven Energy to ‘CC’
By Dipo Olowookere
Fitch Ratings has upgraded Nigeria-based Seven Energy International Limited’s Long-Term Issuer Default Rating to ‘CC’ from ‘RD’ (Restricted Default) following completion of the consent solicitation for the company’s 10.25% USD300 million senior secured notes due 2021.
Simultaneously, Fitch has affirmed wholly owned subsidiary Seven Energy Finance Limited’s $300 million senior secured notes at ‘C’ with a ‘RR6’ Recovery Rating.
Following the completion of Distressed Debt Exchange (DDE) in December 2016, Seven Energy may choose to pay interest on the notes in kind for up to four coupon payments between 11 October 2016 and 11 April 2018, subject to certain conditions.
However, its short-term liquidity remains extremely weak due to accumulated accounts receivables for sold natural gas, a limited ability to convert naira into dollars, and the ongoing Forcados export pipeline closure since February 2016.
Management has taken steps to improve the company’s liquidity, but we believe the current debt structure may be unsustainable and a default of some kind is probable.
All Seven Energy’s oil liftings from OMLs 4, 38 and 41 under the strategic alliance agreement (SAA) with the state-owned NPDC have stopped since February 2016, as the Forcados oil pipeline and terminal remain shut due to the threat of militant attacks. Management has given no estimate on when Forcados will be restarted.
As an alternative option, the company is considering barging oil via the inland Warri refinery. This option has not yet been tested by Seven Energy and we believe projected barging volumes would not compensate for the loss of the Forcados pipeline volumes.
On February 7, 2017, Seven Energy announced that Nigerian Petroleum Development Company Limited (NPDC) may terminate the SAA after 17 March 2017 unless the company meets outstanding cash calls.
Fitch said it understands from Seven Energy that it plans to challenge this potential action to preserve its contractual rights under the SAA. This may further worsen the company’s liquidity position and affect its operational profile; however, these risks are captured in the ‘CC’ rating.
Developing Natural Gas Business: The natural gas business in Nigeria’s southeast is an important growth driver for the company. It is now on track to ramp up gas sales to 150MMcfpd and more. The construction of the power grid to allow local power stations to run at full capacity has been completed and the Calabar power station (NIPP), one of the major off-takers, is able to generate additional electricity.
Uncertain Cash Flows from Gas: Near-term cash flows from the gas business are uncertain as sale volumes remain volatile and the company’s major gas off-takers, state-owned power stations, delay payments for consumed gas.
In November 2016, Seven Energy agreed a $112 million partial payment guarantee with Nigeria’s federal government for gas supply to the Calabar power plant and other customers; however, the guarantee is still unavailable pending finalisation of ancillary documentation.
Seven Energy’s midstream gas infrastructure assets are fully ring-fenced and serve as security for the company’s Accugas IV loan. There is a risk that the Accugas IV lenders may decide to enforce the security, stripping the company of its main cash-generating asset and effectively forcing it into liquidation.
Naira Convertibility Issues: Seven Energy’s natural gas revenues are US-dollar pegged but are received in naira. Nigerian companies are facing difficulties exchanging naira into US dollars, which Seven Energy needs to service its US-dollar debt, at the official exchange rate. To alleviate the problem, the company is working to convert the Accugas IV facility into naira. The foreign currency conversion issue negatively affects the company’s liquidity as long as Forcados remains shut, as the company receives little US dollar revenues from other operations.
By Dipo Olowookere
The local stock market firmed up by 1.13 per cent on Friday as appetite for Nigerian stocks remained strong.
Investors reacted well to the 2026 budget presentation of President Bola Tinubu to the National Assembly yesterday, especially because of the more realistic crude oil benchmark of $64 per barrel compared with the ambitious $75 per barrel for 2025. This year, prices have been between $60 and $65 per barrel.
Business Post observed profit-taking in the commodity and energy sectors as they respectively shed 0.14 per cent and 0.03 per cent.
But, bargain-hunting in the others sustained the positive run, with the consumer goods index up by 3.82 per cent.
Further, the industrial goods space appreciated by 1.46 per cent, the banking counter improved by 0.08 per cent, and the insurance industry gained 0.04 per cent.
As a result, the All-Share Index (ASI) increased by 1,694.33 points to 152,057.38 points from 150,363.05 points and the market capitalisation chalked up N1.080 trillion to finish at N96.937 trillion compared with Thursday’s closing value of N95.857 trillion.
A total of 34 shares ended on the advancers’ chart, while 24 were on the laggards’ log, representing a positive market breadth index and bullish investor sentiment.
Austin Laz gained 10.00 per cent to close at N2.42, Union Dicon also jumped 10.00 per cent to N6.60, Tantalizers increased by 9.80 per cent to N2.69, Aluminium Extrusion improved by 9.78 per cent to N12.35, and Champion Breweries grew by 9.71 per cent to N16.95.
Conversely, Sovereign Trust Insurance dipped by 7.42 per cent to N3.87, Royal Exchange lost 6.84 per cent to trade at N1.77, Omatek slipped by 6.84 per cent to N1.09, Eunisell depreciated by 5.88 per cent to N80.00, and Eterna dropped 5.63 per cent to close at N28.50.
Yesterday, traders transacted 1.5 billion units worth N21.8 billion in 25,667 deals compared with the 839.8 million units sold for N32.8 billion in 23,211 deals in the preceding session, showing a surge in the trading volume by 76.61 per cent, an uptick in the number of deals by 10.58 per cent, and a shrink in the trading value by 33.54 per cent.
By Adedapo Adesanya
Three stocks stretched the bearish run of the NASD Over-the-Counter (OTC) Securities Exchange by 1.21 per cent on Friday, December 19, with the market capitalisation giving up N26.01 billion to close at N2.121 billion compared with the N2.147 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropping 43.47 points to 3,546.41 points from 3,589.88 points.
The trio of FrieslandCampina Wamco Nigeria Plc, Central Securities Clearing System (CSCS) Plc, and NASD Plc overpowered the gains printed by four other securities.
FrieslandCampina Wamco Nigeria Plc lost N6.00 to sell at N54.00 per unit versus N60.00 per unit, NASD Plc shrank by N3.50 to N58.50 per share from N55.00 per share, and CSCS Plc depleted by N2.91 to N33.87 per unit from N36.78 per unit.
On the flip side, Air Liquide Plc gained N1.01 to close at N13.00 per share versus N11.99 per share, Golden Capital Plc appreciated by 70 Kobo to N7.68 per unit from N6.98 per unit, Geo-Fluids Plc added 39 Kobo to sell at N5.50 per share versus N5.11 per share, and IPWA Plc rose by 8 Kobo to 85 Kobo per unit from 77 Kobo per unit.
During the trading day, market participants traded 1.9 million securities versus the previous day’s 30.5 million securities showing a decline of 49.3 per cent. The value of trades went down by 64.3 per cent to N80.3 million from N225.1 million, but the number of deals jumped by 32.1 per cent to 37 deals from 28 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc finished the session as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units traded for N4.9 billion.
The most active stock by volume on a year-to-date basis was still InfraCredit Plc with 5.8 billion units worth N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Adedapo Adesanya
It was not a good day for the Nigerian Naira at the two major foreign exchange (FX) market on Friday as it suffered a heavy loss against the United States Dollar at the close of transactions.
In the black market segment, the Naira weakened against its American counterpart yesterday by N10 to quote at N1,485/$1, in contrast to the N1,475/$1 it was traded a day earlier, and at the GTBank forex counter, it depreciated by N2 to settle at N1,467/$1 versus Thursday’s closing price of N1,465/$1.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX) window, which is also the official market, the nation’s legal tender crashed against the greenback by N6.65 or 0.46 per cent to close at N1,464.49/$1 compared with the preceding session’s rate of N1,457.84/$1.
In the same vein, the local currency tumbled against the Euro in the spot market by N2.25 to sell for N1,714.63/€1 compared with the previous day’s N1,712.38/€1, but appreciated against the Pound Sterling by 73 Kobo to finish at N1,957.30/£1 compared with the N1,958.03/£1 it was traded in the preceding session.
The market continues to face seasonal pressure even as the Central Bank of Nigeria (CBN) is still conducting FX intervention sales, which have significantly reduced but not remove pressure from the Naira. Also, there seems to be reduced supply from exporters, foreign portfolio investors and non-bank corporate inflows.
President Bola Tinubu on Friday presented the government’s N58.47 trillion budget plan aimed at consolidating economic reforms and boosting growth.
The budget is based on a projected crude oil price of $64.85 a barrel and includes a target oil output of 1.84 million barrels a day. It also projects an exchange rate of N1,400 to the Dollar.
President Tinubu said inflation had plunged to an annual rate of 14.45 per cent in November from 24.23 per cent in March, while foreign reserves had surged to a seven-year high of $47 billion.
Meanwhile, the cryptocurrency market was dominated by the bulls but it continues to face increased pressure after million in liquidations in previous session over accelerating declines, with Dogecoin (DOGE) recovering 4.2 per cent to trade at $0.1309.
Further, Ripple (XRP) appreciated by 3.9 per cent to $1.90, Cardano (ADA) rose by 3.5 per cent to $0.3728, Solana (SOL) jumped by 3.4 per cent to $126.23, Ethereum (ETH) climbed by 2.9 per cent to $2,982.42, Binance Coin (BNB) gained 2.0 per cent to sell for $853.06, Bitcoin (BTC) improved by 1.7 per cent to $88,281.21, and Litecoin (LTC) soared by 1.2 per cent to $76.50, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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