Forte Oil Plc issued a press release on its divestment intentions to support its strategic expansion by repositioning its downstream marketing business.
These divestments will affect its power generating business, upstream service business, and downstream operations activities in Ghana.
The intended action by Forte Oil To Sell Some Nigerian Assets, Exit Ghana is yet to receive all regulatory and board approval will affect some of its juicy portfolios such as its indirect stake in Geregu Power Plant through 57 percent holding in Amperion Power Distribution Company and Forte Upstream Services (FUS).
In recent times, the Geregu Plant has contributed 28.29 percent to its headline performance at the end of 2017, while the contributions from both the power generation and FUS divisions to the overall performance of the group remain unforgettable.
While the company itself experienced a 12.89 percent decline in revenue in 2017, the combined growth of the power and fuel segments (i.e. 218.04 percent growth) moderated the effect on the overall business.
On the cost side, the decline witnessed in 2017 was driven by the lower cost-to- sales from the production chemicals business (56.12%), and power generation segment (64.59%) compared to higher cost-to-sales from the fuel and lubricant.
Our long term outlook on the implication of this strategic decision on the issuer if approved by the relevant stakeholders is that provided the Petroleum Industry is fully liberalised through the enactments of the Petroleum Industry Bill (PIB) of the National Assembly to address some of the lingering issues such as price modulation, high cost of importation due to increase in oil price and currency depreciation used in the PPRA pricing template; the company’s intention will yield greater good in the long term.
However, we advise caution in the interim as this decision might create increased price volatility.
