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NIGERIAN OIL AND GAS SECTOR - Q3’19 Earnings Preview

Oil prices have been volatile since the start of the third quarter, driven by demand-inclined factors and unprecedented disruptions in world supply. In early August, Brent price plunged to a seven-month low of $57/bbl, after escalating trade tensions between Washington and Beijing intensified concerns over slowing oil demand.

Meanwhile, in mid-September, a short-lived surge drove Brent price to a peak of $70/bbl, after attacks on Saudi’s oil infrastructure drained about 5.7 mb/d—5% of world crude supply—from the oil market. Following subsequent news of the imminent restoration of Saudi’s damaged facilities, Brent swiftly pared gains to find stability around the $63/bbl mark towards the end of September. So far in 2019, Brent price has averaged $65/bbl, at par with our forecast for the year.

Although the Nigerian National Petroleum Corporation (NNPC) is yet to release its Monthly Performance Data for July and August, preliminary data from OPEC shows that Nigeria’s oil output (excluding condensates) averaged 1.82 mb/d in the two-month period. With the inclusion of condensates, Nigeria’s crude output is expected to average 2.12 mb/d, indicating an improvement from 1.98 mb/d published by the National Bureau of Statistics (NBS) in Q2’19.

Nonetheless, we highlight that Nigeria’s crude production remains plagued by crude theft incidence. For context, Nigeria’s average crude output in Q2’19 came in at 1.98 mb/d (almost equivalent to Q4’18 average), despite increasing output from the 200 kb/d Egina offshore field that came onstream in January 2019.