Nigeria loses as Afren, Lekoil, CAMAC, Heritage, list offshore

Last Monday, officials of South Africa’s Public Investment Corporation (PIC) - the Government owned fund manager - were in a celebratory mood in Johannesburg, after their $270 million investment in Camac Energy Inc, became profitable as the oil explorer with mostly Nigerian operations began trading on the Johannesburg Stock Exchange (JSE).

“We are in the money already,” Dan Matjila, chief investment officer (CIO) for the PIC which has $137 billion in assets under management, told reporters.

A lack of strategic thinking by Nigerian officials from regulators, legislators and the finance ministry has led to foreigners becoming the major beneficiaries of Nigeria’s wealth as oil companies with major operations in the country mostly list their shares offshore, depriving Nigerians of the ability to participate in wealth creation through capital gains.

The PIC which invests on the behalf of South African citizens bought a 30 percent stake in Camac, which issued 376.8 million shares to the PIC at 7.77 rand per share. The first trade in the stock was made at 10.95 rand, equivalent to a 41 percent gain for shareholders.

An analysis of available public data shows that 96 companies are currently active in Nigeria’s upstream oil and gas sector in the form of exploration and production.

Twenty three of them (24 percent) are listed in foreign stock exchanges, Oando Plc, through its stake in Toronto listed Oando Energy Resources (OER) is the only company trading on the Nigerian Stock Exchange (NSE), while the rest remain unlisted.

The 23 foreign listed companies include London Stock Exchange (LSE) listed Afren Plc, Centrica, Eland Oil and Gas, Essar Energy, Heritage Oil, Lekoil and Royal Dutch Shell; Johannesburg Stock Exchange (JSE) listed Camac Energy and Sasol; TSK- Toronto listed; Mart resources Inc, Mira resources and OER; New York Stock Exchange (NYSE) listed Chevron and Exxon Mobil; Euronext-Paris listed Maurel & Prom Nigeria and Total; Hong Kong (HKE) listed; Cnooc and Sinopec; NSE-India listed Indian Oil and ONGC; Borsa Italiana listed ENI-Saipem; Oslo listed Statoil; and Bovespa Brazil listed Petro bras.

The 23 companies collectively own Nigerian oil assets (OMLs) with average asset value of $89.4 billion, according to data compiled from a November 2013 report by investment and research firm CBO Capital partners and Rystad Energy.

This compares with the NSE, whose total equity market capitalisation was equivalent to $77 billion last Friday.

As the Indigenous and independent oil companies in Nigeria increasingly list on foreign bourses, analysts say that companies are acting like mercenaries and getting away with anything in Nigeria, because none of the legislators or economic planners are fighting for or thinking about Nigeria’s economic interest.

“Contrasting Nigeria and South Africa (Transformation Agenda versus National Development Plan), it is obvious SA has a plan and a cluster of brains thinking of the country’s economic strategy,” said an economist speaking on condition of anonymity.

Africa accounted for 12 percent of dividend inflows into South Africa in 2012, up from 2 percent in 2002.

In his February 26, 2014 budget speech, South African Finance Minister Pravin Gordhan said unlisted South African technology, media, telecommunications and other research and development companies would be allowed to list offshore provided they remain incorporated, managed and controlled from South Africa.

The companies will be required to have a secondary listing in South Africa within two years of listing offshore, Gordhan said.

“Getting oil independents and majors to list on the NSE will clearly help deepen and diversify the local market, avail local investors to gain exposure to the sector and help reduce the quantum of funds being repatriated outside of Nigeria in form of dividends,” said Abiodun Keripe, head of research at Investment-One financial services, Limited, with N8 billion in assets under management.

One way to get them listed may include the use of tax incentives says Tairat Tijani, head of debt capital markets at FBN Capital.

“What we need is an enabling environment and incentives which are a more appropriate means of influencing their listing locally,” Tijani said.

The Government may however be dropping the ball on using tax incentives to encourage listings. The shares of Heritage Oil Plc an independent oil and gas company with major Nigerian operations (OML 30) but listed in London, climbed 14 percent last week after saying its Nigerian venture “ successfully concluded” tax rebate negotiations with Nigerian tax authorities.

The announcement may reduce Heritage’s 2013 tax liability “that would have eroded year-end cash of about $190 million,” Al Stanton, an Edinburgh-based analyst at RBC Capital Markets wrote in a note.

The authorities could have used the tax negotiations to get a commitment from Heritage to list in Nigeria, notes the economist.

Andrew Elueni, executive vice chairman, Quantum Securities Limited says that for oil companies operating in Nigeria legislation may be the only way to get them listed on the NSE.

“Imagine if 20 percent of the assets of the likes of Shell, Chevron are listed, the capitalization of Nigeria’s capital market will shoot up. Legislation should be applied.”