Tuesday, January 23, 2018 7:18:56 AM- Nigerian Stock Exchange.

  Conservative oil volumes cap upstream growth


Sep 5 (Lagos) - In 2017, the upstream oil industry continues to benefit from relatively higher global oil prices and prior domestic currency depreciation. Nominal GDP expanded 144% y/y in the quarter and was only 9% short of sector GDP in Q2’14. 

Though global oil prices at that time were significantly higher (Q2’14 average: $109.76/bbl, Q2’17 average: $50.79/bbl), 46% currency depreciation over the period has supported nominal oil GDP.

The upstream oil industry grew 1.6% y/y in real terms (Q1’17: -15.4% y/y), bringing an end to the six-quarter contracting streak. However, this performance came in weaker than our expectation, mainly due to conservative revisions to NBS oil production estimates for 2017. The Bureau revised Q1’17 oil production from 1.83 mbpd to 1.69 mbpd, resulting in a weaker GDP performance of -15.4% y/y (previous: -11.5% y/y), and estimated Q2’17 oil production at 1.84 mbpd, compared to 1.81 mbpd in Q2’16. 

We are surprised by the revision to Q1’17 figures as data from the Nigerian National Petroleum Corporation (NNPC) shows a stronger oil production of 1.75 mbpd for that period. Moreover, we foresee possible upward revision to Q2’17 oil production once the NBS takes June production into account, which was estimated as high as 2.05 mbpd by the Department of Petroleum Resources (DPR). 

Furthermore, analysts at Vetiva Capital Management Limited in Victoria Island are relatively bullish about oil production in H2’17 (DPR July estimate: 2.06 mbpd) as prolonged stability in the Nigeria Delta region has allowed a gradual recovery in output. Nevertheless, we adopt a relatively cautious stance here and revise our average FY’17 oil production forecast to 1.92 mbpd (Previous: 1.97 mbpd, 2016: 1.81 mbpd) to bring FY’17 GDP growth to 5.9% y/y.

reporting for easykobo.com on Tuesday, Sep 5 2017 from Lagos, Nigeria

Source - analysts at Vetiva Capital Management Limited in Victoria Island, Lagos

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