Bankruptcy and massive job losses will envelop the country’s oil field servicing companies this year on account of the lingering unfavourable crude oil prices in the global market, a report by Agusto & Co., a rating agency and research company revealed yesterday.
The agency, in its 2020 Oil & Gas servicing industry report, said despite the easing of some of these restrictions in the second half of 2020, economic activities have yet to fully recover, stressing that several key projects in Nigeria, including the Obiafu-Obrikom-Oben pipeline project and Shell’s Bonga North field development, have been suspended due to lull in the crude oil market.
‘’Delays in sanctioning of these projects will impact Nigeria’s oil and gas servicing industry’s near to medium-term performance considering the substantial contracting opportunities these projects provide. Owing to prevailing difficulties in the operating terrain, a number of operators in Nigeria including international and indigenous companies have slashed contractor rates by up to 50% while capital budgets have been reviewed downwards by an average of 20%,’’ the report added.
The agency said the regulatory and policy environment for the petroleum sector is not as supportive. Several promising exploration and incremental projects have been stalled partly due to the unfavourable regulatory stance, adding that the situation is expected to be worse-off considering the adversities created by the COVID-19 pandemic.
The agency added that it expects the crude oil market is likely to remain depressed for the rest of 2020 considering that with no antidote to the virus, the wheel of many economies is likely to remain slow and thus consumption of crude oil will also remain weak in the near term. Crude oil consumption, it said, is expected to decline by about 9 million barrels per day (mbpd) to 90.6 mbpd in 2020, further suppressing opportunities for a recovery of oil field activities in the near-term.
‘’Agusto & Co. expects a huge number of job losses, while some oil field servicing companies may eventually go bankrupt. The agency believes that a strategic option for when the market recovers might be consolidation, given the lack of strong fundamentals for a stable oil market. In addition to bolstering performance, consolidation may help regain some level of bargaining power from exploration and production operators. Barring no improvement in the dire global economic situation, cash flows are expected to remain very weak. Legacy debt obligations coupled with a likely spike in the impairment of newly acquired debt could lead to a massive deterioration in the financial condition of oil and gas servicing companies. Albeit marginal, naira denominated debt obligations will expand owing to the devaluation, which creates a worse-off situation. Potential for growth is also likely to remain muted, owing to unfavourable oil prices’’, it said
According to the report, the Nigerian Oil and Gas Servicing Industry is dominated by a few foreign servicing firms, which are estimated to be engaged on close to 60% of oil and gas projects in Nigeria.
Nevertheless, supported by the local content legislation, the Industry has recorded a substantial increase in not just the number of indigenous servicing companies but also in terms of technical contribution to oil and gas projects.
Agusto & Co confirms that local firms currently dominate less complex field support services such as security, transportation and procurement, due to relatively low scalable technology compared to foreign counterparts and that security escort services are also quite promising given the militancy in Nigeria’s oil-producing region and growing level of piracy activities in the Gulf of Guinea.
Firm secures $3m for local start-ups
A firm, FirstFounders Inc. said it has secured $3million finance deal with foreign funders to develop local tech start-ups in the country.
Its Chief Digital Strategist/CEO, Mr David Lanre Messan, who spoke during a virtual meeting to unveil two start-ups, Waste Pushers and Insights Fashion Co. Limited, in Lagos, lamented the dearth of local financiers for innovation at the bottom of the pyramid in the country.
He said the firm, which is a fundraising intermediary company dedicated to helping digital entrepreneurs raise funds across the world, will soon sign the agreement that will culminate in the release of the funds which will help raise the next generation of techpreneuers in the country.
“We are committed to helping your startup or growth-stage company speed up the process of fundraising, reduce risk, and getting you better deals while you are diligently running your business. Whether you want to raise equity-based financing, grants or debt financing, we got you and will provide the advisory support, roadmaps and contacts you need to achieve your fundraising goals.
“Our drive to democratise access to finance keeps us connected to over 2600 private investors, angel investors, Global Venture Capitalists and Debt Financing Companies spread across 20 countries,” Messan said.
He said the two start-ups got the finance from a Brazilian investor and a World Business Angels Investment Forum (WBAF) Brazil International Partner, Mr Juliano Lopes Almeida, to develop their innovations and grow them to profitability.
According to him, the firm has established relationship with about 2000 investors globally, arguing that unemployment continues to widen in the country because of the emphasis on funding the big companies. “People are not getting jobs because emphasis is on big companies.l
If government focuses on small businesses, it will solve the problem of unemployment in the country,” he said, adding that the firm was targeting investing in 100 businesses in the next one year.
He said the Innovation Fund of the United Kingdom (UK) was already working to fund businesses in the country by giving them between 5,000 and 25,000 pounds.
Also speaking, Almeida said he invests in to startups that are focused in solving social problems, stressing the need to develop end encourage more social entrepreneurs. Decided to t invest in Waste Pushers owned Mr Danyaro Ibrahim, and 2828 Insights Fashion Co. Ltd owned by Miss Lucci Nneoma Anyim, because the two are focused on tackling social problems.
He expressed love for Africa and its people and hoped that in the future he could be connected with more start-ups. He stressed the need for money to go round, adding that the outbreak of coronavirus pandemic has more than ever strengthened the need.
Almeida said Silicon Valley should not be an exclusive reserve of the United States (US), adding that more of it should established across the world to share the prosperity that the deployment of technology brings to the world
Danyaro said waste management remained a problem in developing world such as Nigeria, and urged the government to tackle the menace of double taxation and double levies. He however commended the Federal Government for signing into law, a new Companies and Allied Matters Act (CAMA) for opening a new vista of opportunity for small businesses and also stressed the need for government to remove all the obstacles that stifle business growth.
Lucy also sought funding. She recalled going to the Bank of Industry (BoI) when she saw media hype but was disappointed that they said they couldn’t fund her because of the size of the cash she asked for.
She sought transparency in the disbursement of the cash because the fundings published in the newspapers are not getting to the targets.
