Forte Oil to boost operation with N20bn fresh capital
…As share price surges by N23.84bn in a week

 

 


FORTE Oil Plc has said it proposed N20 billion capital raise is to place the company in a better position that will bring substantial return to its shareholders.
Speaking to the group of journalist in Lagos, the Group Executive Director, Finance and Risk Management, Mr. Julius Omodayo-Owotuga said Forte Oil’s diversification strategy requires additional capital.
He stated that shareholders of the company had earlier issued a mandate to raise fresh funds of up to N100 billion; out of which N9 billion has only been raised.
He explained that proceeds from the N20 billion fresh capital will be used to intensify the company’s working capital.
He disclosed that the company has approached the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) to seek approval for the proposed N20 billion fresh fund raising.
Why explaining reason for raising additional capital Owotuga said because of the margin in downstream business, the company cannot continue to use only debt, “we have to bring in additional equity”, he said.
“Because we are import dependent, we import all our products and the devaluation by the Nigeria government has increased the capital requirement of our business.
What we used to buy for N6 billion when exchange rate was N155 today that exchange rate is between N306 and N380 depend on where you are buying from, it means is about N12 to N15 billion to buy the same product, so the capital requirement of the business has increase significantly.
We responded to this as a business as we raised N9 billion capital last year, we issued five years bond at 17.5 percent”, Owotuga said.
Why explaining five strategic plans to grow the revenue of the company, Owotuga said Forte Oil Plc’s will deepen its focus on high margin products such as lubricants, Liquefied Petroleum Gas and power to drive revenue generation.
“We grew the lubricants business by 62 percent in 2016, to 21 million litres from 13 million litres recorded in 2015,” he added.
According to him, the second pillar is to strengthen the company’s balance sheet through enhancement of working capital and efficient management of inventory and trade account receivables.
“Another major pillar the company is moving its plans towards is the acquisition of the right upstream assets at the right price to increase market share,” he added.
“We would focus on mergers and acquisitions within the industry to increase its downstream business by looking at refineries.”
He said that the company would optimise distribution channels as well as partner with telecommunication firms and financial institutions for effective distribution of its services.
In a related development, Forte Oil Plc share price had last week surged by N23.835 billion as investors foreseen better return on their investment in the future.
The share price which opened the week at N46.00 kobo closed at N64.30 kobo per share on Friday which represented an increase of N18.30 kobo or 39.78 percent per share within the week.
No doubt the increase of about 40 percent in a week is a sign of investors confidence in the company.