Downstream Oil Firms Lose 24% Profits To FX Losses, Operating Costs

Nigeria downstream firm’s total operating expenses(OPEX) rose 24 per cent to N73.68 billion in 2022 from N59.51 billion in 2021, available data from Nigerian Exchange Group show.

Further analysis shows that the downstream firms which include Total Energies, Ardova, Conoil, Eterna and MRS collectively recorded an increase in operating expenses during the period.

Total Energies, Ardova and Conoil recorded operating expenses of N35.66 billion, N18.57 billion, and N7.31 billion respectively while Eterna (N6.15 billion) and MRS (N5.99 billion) in 2022.

“Key challenges on high logistics costs are inflation, exchange rates, vessel costs, crude-oil market volatility which are putting huge pressure on the operating costs of major downstream firms in Nigeria,” Etulan Adu, an oil and gas production engineer said.

Ayodele Oni, partner energy practice group at Bloomfield LP said the key reason for the surge in operating expenses for these companies is the increasing consumer price index/ inflationary trends World-over.

“The devaluation of the Naira is another factor, as some of their expenses are dollar-denominated. To meet those costs, they need more Naira to buy United States Dollars,” Oni said.

TotalEnergies operating expenses grew 6.8 percent to N35.66 billion in 2022 from N33.39 billion in 2021 while Ardova rose to N18.57 billion, up 87 percent from N9.93 billion in the period reviewed.

Similarly, Conoil’s operating expenses grew 6.5 percent to N7.31 billion in 2022 from N6.86 billion in 2021. Eterna operating expenses grew 37.6 percent to N6.15 billion from N4.47 billion in the comparable period.

MRS operating expenses climbed 23 percent to N5.99 billion in 2022 from N4.86 billion in 2021.

Consequently, TotalEnergies selling & distribution costs dropped to N3.7 billion in 2022, up 14.6 percent from N3.23 billion in 2021. Administrative expenses increased to N31.96 billion, up 6 percent from N30.16 billion in the comparable period.

Ardova’s distribution expenses jumped 236 percent to N6.39 billion in December 2022 from N1.9 billion in December 2021. Administrative expenses to N12.18 billion, up 51.7 percent from N8.03 billion in the period reviewed.

Eterna’s selling and distribution expenses increased by 20 percent to N283.02 million in 2022 from N235.66 million in 2021. The firm’s general and administrative expenses grew to N5.87 billion, up 38.8 percent from N4.23 billion in the comparable period.

Conoil’s distribution expenses stood at N2.29 billion in 2022, a 4.2 percent drop from N2.39 billion in a similar period in 2021. Administrative expenses grew 12.3 percent to N5.02 billion in December 2022 from N4.47 billion in December 2021.

MRS recorded an administrative expense of N5.61 billion, a 23.6 percent increase from N4.54 billion in 2021. The firm’s selling and distribution expenses rose to N378.22 million in the period which ended in December 2022, up 19 percent from N317.49 million in December 2021.