By the Editorial Board of Africa Oil+Gas Report
NNPC Ltd, the Nigerian state hydrocarbon company, has delayed the release of its 2022 annual report for the third consecutive month.
The company was greeted with a round of cheers when it announced the 20220 audited annual report in August 2021, declaring it was its first profit making period in 44 years.
Then exactly a year later, in August 2022, the company released its 2021 audited annual report.
There was so much applause for getting two consecutive annual reports from the usually opaque organization that the scrutiny of the reports simply rolled off to the back of the burner.
NNPC’s corporate affairs, as a rule, doesn’t respond to questions from Africa Oil+Gas Report, but impeccable sources in the company attributed the delay to the creation of new subsidiaries within the organization.
It so happens that the 2022 report is expected to deliver on the first full year that NNPC supposedly operated strictly as a commercial entity, as dictated by the Petroleum Industry Act, signed into law in September 2021.
NNPC Ltd’s last audited report indicates that the company did not deliver an operationally stelar business performance in 2021, despite the large figure (in Naira, the Nigerian currency) that the company proclaimed as its Profit after Tax for the year. NNPC Ltd reported a ₦6.41Trillion revenue, a 72.5% increase from ₦3.71Trillion reportedly earned in 2020. Whereas profit before tax was lower in 2021 than in 2020, NNPC earned an income tax credit of ₦126.95Billion in 2021, contrasted with income tax expense of ₦431.88Billion in 2020. This provided part of the tail wind to zoom into a profit after tax of ₦674Billion in 2021, soaring 134% above the 2020.
The numbers are big, but the details of operations in each of the federating units indicate that most of the key, strategic subsidiaries did not deliver on operating performance, even if the finances look great on paper.
NNPC’s subsidiaries with individual annual reports on the website grew from 21, I 2020 to 28 in 2021.
A look at the performances of the company’s “jewels in the crown” in the 2021 audited report, tells why the ‘large profit after tax’ is suspect. Out of the company’s top brands in the upstream sector;
- The Integrated Data Services Limited (IDSL), couldn’t claw back victory from the jaws of defeat as it did in 2020 when, despite its large loss in revenue year on year, it reported a profit after tax. In 2021, and ended up with a massive loss of revenue from ₦7Billion in 2020 to ₦6.34Billion in 2021. From a Profit before tax of ₦1.4Billion in 2020, it went deep into the red with a loss before tax of ₦7.13Billion, and thus ended up with a ₦1.18Billion loss after tax even though the Tax was a mere ₦50Million in 2021 compared with ₦913Million in 2020. IDSL is in the business of subsurface technical service; seismic acquisition, seismic processing the seismic acquisition and processing and reservoir evaluation.
- Nigeria Petroleum Development Company NPDC, the E&P operating arm of the national company (now renamed NNPC E&P (NEP)Ltd, delivered net profit after tax of ₦747Billion, a 792% jump in 2021, which was more than a dramatic recovery from a 21% loss in revenue in 2020. The difference in NPDC’s “overall revenue” year on year was only 32%, from ₦029Trillion in 2020, to ₦1.362Trillion in 2021. Even this increase in profit didn’t essentially come from crude oil sales, despite the fact that NPDC is primarily in the business of oil prospecting and production (as well as gas and power production and sales). 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. 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.
- There Was a Midstream Slowdown –Only one of the four midstream subsidiaries turned a profit in 2021. Even then, it was a far-fetched profit by the Nigerian Gas Company (NGC), which reported a decrease of 29% in Profit after Tax in 2021, to ₦37Billion, compared with ₦52.7Million in While a higher tax take is responsible for the slump in net profit, NGC struggled in other areas. The company’s earnings from operating activities fell by 33% in 2021. The cost of sale was also ₦2.4Billion higher than in 2020. So was its general and administrative expenses of , which was ₦20Billion higher than the in 2020. The other three midstream subsidiaries: Kaduna Refining and Petrochemical Company KRPC, Port Harcourt Refining Company PHRC and Wari Refining and Petrochemical Company WRPC, all suffered significant losses, but their 2021 losses were less than 2020 losses, which were less than their 2019 losses. Considerable ink has been expended on the performance of NNPC run refineries and the effort to revamp them.
The details above are excerpted from the short interpretation of NNPC’s 2021 annual report, published in the October 2022 edition of the Africa Oil+Gas Report.
NNPC’s reports, unlike any other such report of a hydrocarbon company (Shell, Sonantrach, Aramco,E Chevron) does not provide any overview of operations. You will neither find, for example, a line narrative of where the National Gas Company delivered natural gas to; nor what oil field did what in the NPDC universe.
Now that NNPC Ltd is seeking to list on the Nigerian Stock Exchange and raise equity capital, will it publish more detailed narrative about operational success and challenges?
The pubic looks forward to what the NNPC Ltd will say its financial story was, in 2022.