Oil, Gas Index Shines In 2024 With 160% Year-to-Date Gain

The Nigerian oil and gas sector emerged as the standout performer in 2024, recording an impressive 160 percent year-to-date (YtD) gain, surpassing its already remarkable 125 percent growth in 2023.

This outstanding performance significantly boosted the All-Share Index (ASI), which climbed 37.65 percent YtD to close at 102,926.46 points.

Unlike the broader market, which experienced mid-year volatility before recovering, the oil and gas index maintained a steady upward trajectory throughout the year. It grew from 24.09 percent in the first quarter to 91 percent by the third quarter and ultimately peaked at 160 percent by year-end.

According to data from the Nigerian Exchange (NGX), key players such as Conoil, Eterna, Japaul Gold, Total Energies, and Seplat Energy were instrumental in driving this growth. The sector’s remarkable rally was largely fuelled by policy reforms introduced under President Bola Tinubu’s administration, including the removal of fuel subsidies and downstream deregulation, which enhanced competitiveness and significantly improved profit margins across the industry. Additionally, the naira’s devaluation increased foreign exchange earnings for companies generating revenue in foreign currencies, further boosting profitability and strengthening investor sentiment.

Japaul Gold & Ventures Plc delivered a 31.21 percent YtD gain in 2024. Although this growth was modest compared to its extraordinary 461 percent rise in 2023, it still managed to grow its market capitalisation by N3.064 billion to N12.881 billion. However, concerns linger over its operational sustainability, as evidenced by a negative cash flow per share of -N0.05, which could limit its ability to capitalise on growth opportunities and sustain shareholder returns.

Eterna Plc also recorded notable growth, achieving a 75.5 percent YtD gain to close at N24.30. This performance followed an impressive 107.03 percent YtD gain in 2023, highlighting the company’s continued potential. Despite strong revenue growth, rising finance costs and foreign exchange losses constrained profitability, with pre-tax and net profit margins shrinking to 0.72 percent and 0.06 percent, respectively. The company’s long-term outlook remains dependent on its ability to balance growth with improved profitability, while external factors such as foreign exchange policies and interest rates will also play critical roles.

Total Energies recorded an 81.30 percent YtD gain in 2024, following a 99.48 percent rise in 2023. Revenue grew by 88 percent year-on-year to N793.9 billion, while pre-tax profit surged by 152 percent to N41.85 billion in the first nine months of the year. Despite these strong fundamentals, rising costs squeezed margins, and negative cash flow per share at -N21.67 raised concerns about liquidity and the sustainability of dividend payouts. While Total Energies remains fundamentally strong, replicating the stellar gains of the past two years might prove challenging. Investors will need to monitor improvements in margins and cash flow sustainability moving forward.

Seplat Energy Plc continued its impressive streak with a 147.75 percent YtD gain, building on a 110 percent rise in 2023. Investor confidence in Seplat remains high, driven by robust fundamentals, consistent quarterly dividend payouts, and strong growth prospects. The company also maintains an attractive dividend yield of 3.71 percent and a five-year dividend growth rate of 40.29 percent. However, an elevated price-to-earnings (P/E) ratio of 17.98x raises concerns about potential overvaluation, underscoring the need for sustained growth and careful monitoring of its valuation.

Conoil Plc emerged as the top performer in the sector, posting a staggering 361.50 percent YtD gain in 2024, building on its impressive 217 percent rise in 2023. These gains were supported by favourable market conditions and improved profitability. Conoil’s cash flow per share of N34.56 reflects strong cash-generating capacity, positioning the company to fund dividend payments, reinvest in business operations, and reduce debt. However, with a dividend yield of just 0.90 percent, there is room for Conoil to increase its payouts to make its stock even more appealing to income-focused investors.

Overall, the oil and gas sector’s remarkable performance in 2024 underscores the sector’s resilience and investor confidence. As the industry looks ahead to 2025, sustained policy stability, improved operational efficiency, and strategic cost management will be critical for continued growth. Investors are encouraged to pay close attention to company-specific fundamentals, including cash flow, profit margins, and dividend sustainability, to make informed investment decisions in the sector.