NPDC In 800% Profit Surge Despite Lower Crude Oil Sales, Weaker Operating Performance

With revenue from its core business relatively unimpressive year to year, how did NPDC manage to achieve such spectacular rise in Profit after Tax?

By Macson Obojemuinmoin

NPDC’s 800% increase in profit after tax, literally made all the difference in the “spectacular profit” that that the NNPC Group reported that it made in 2021.

There are 28 subsidiaries in the NNPC Group, but NPDC (Nigerian Petroleum Development Company), the upstream operating subsidiary, is the jewel in the group’s crown.

NPDC’s net profit after tax of ₦747Billion, a 792% jump in 2021, was more than a dramatic recovery from a 21% loss in revenue in 2020. (NPDC’s Profit after tax in 2020 was ₦ 84Billion. Far down from ₦478.5Billion in 2019).

Curiously, the difference in NPDC’s “overall revenue” year on year was only 32%, from ₦1.029Trillion in 2020, to ₦1.362Trillion in 2021.

As NNPC Group ‘s Profit after tax was ₦674Billion, it goes without saying that the contribution was largely from NPDC’s significant profit surge.

But how much of this runaway financial success was derived from the income from the actual work-related performance in the year of review?

As NPDC is primarily in the business of oil prospecting and production (as well as gas and power production and sales), it is logical to assume that its profit surge was significantly underpinned by the sharp increase in the price of crude oil in 2021. Average 2021: $70.54 (2020: $39.95).

But this surge in profit didn’t essentially come from crude oil sales.

Take a look at the numbers. NPDC’s crude oil revenues relate to liftings of the company’s equity interest in its various oil assets. However, in terms of direct lifting, the company lifted 26Million barrels of crude from a total of 16 oil mining leases (OMLs) in 2021, a sharp drop of almost half of the 47Million barrels it lifted from the same properties in 2020.

Its indirect liftings were higher; some 348,000 barrels from the ENI operated OMLs 60-63 in 2021, compared with 150,000Barrels in 2020. This is a minuscule fraction of the overall liftings.

In sum, this is weak operating performance; for a company to sell, in a year of soaring prices, half of what it sold in a year of depressed prices.  The company thus increased its income only slightly, from ₦683Billion in 2020 to ₦749Billion in 2021.

The volume of marketed natural gas also fell, from 530Billion standard cubic feet in 2020 to 248Billion standard cubic feet in 2021, largely as a result of diminished supplies to the Nigerian Liquefied Natural Gas Limited from 256Billion standard cubic feet to 78Billionstandard ubic feet.  Revenue from natural gas was, however, almost flat: from ₦211Billion in 2020 to ₦223Billion in 2021.

With revenue from its core business relatively unimpressive year to year, how did NPDC manage to achieve such spectacular rise in Profit after Tax?

The answer lies in some of the small print.

NPDC obtained a Presidential waiver, it says in the report, of ₦173Billion on its outstanding tax liabilities. It also raised income by reducing the cost of sales: from ₦837Billion in 2020 to ₦445Billion in 2021. The details of the so called reduction in the cost of sales show that the reduction in royalties and rental charges to the Nigerian government was around ₦200Billion year on year. This is an evolving story.





  1. Kayode Ayeni says:

    The headline is too good to be true. However, reading through, one can see where the numbers are coming from. I am unimpressed. The cut in the cist of sales sounds like an in house arrangement by government and one can only hope that the same measure is applied to other Operators.

  2. Oluwafemi Adeleke says:

    I agree with you Sir @Engr Ayeni. It looks to me like making your staff take a “salary cut” and declaring it as profit. The NNPC needs to do better, identify ways it can sustain and successfully grow to a status comparable to government owned companies like Saudi Aramco, the now privatized oil and gas business, or should I say “energy” business it operates.

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