Shares of Nigerian petroleum products marketer and power generating company, Forte Oil, are surging on chatter about a possible stake purchase by Mercuria Energy Group Limited.
BusinessDay sources say Mercuria, one of the largest integrated energy and commodity trading companies in the world, is in advanced talks to buy a 17 percent stake, worth over $200 million in Forte Oil.
Forte Oil stock price, which has bucked by the recent selloff in Nigerian equities, is up 25 percent in the past month, with its market capitalisation rising by N76 billion to N323.6 billion.
The Nigerian Stock Exchange (NSE) All Share Index (ASI) is down -0.07 percent over the same period to September 1.
“Forte Oil has a small float so any positive chatter usually makes the stock fly,” Abiodun Keripe, head of research at Elixir Investment Partners Limited, said.
Commodity traders including, Mercuria, Vitol and Trafigura Beheer BV are targeting fuel storage and retail businesses in Africa, Europe and Australia to complement their crude and oil product-trading operations.
Vitol Group and private-equity firm Helios Investment Partners in June 2015, agreed to buy a majority stake in Oando plc’s service station, fuel storage and supply business in West Africa for $276 million.
The Forte Oil’s transaction would further Mercuria’s goal of becoming a more vertically integrated business model amid increasing competition.
Marco Dunand, Mercuria CEO, said in a recent interview that the company was seeking a private-equity partner to invest as much as $1 billion in oil and gas production.
For Forte Oil, the deal if consummated, will see it diversify away from marketing refined petroleum products and towards being a purer energy and power player.
Forte Oil said in July 2015 it had signed an $83 million contract with Siemens to upgrade its 414 megawatt gas-fired power plant and that the work would be completed next year.
The company, which also has interests in fuel retailing was one of several firms to buy government power assets two years ago, sold as part of a privatisation meant to end decades of blackouts in Africa’s biggest economy.
Forte Oil currently has c.450 retail distribution outlets for petroleum products and controls approximately 8 percent market share in the downstream oil and gas sector in Nigeria and eight retail outlets in Ghana.
The firm reported in July its first-half pre-tax profit dropped 22.3 percent to N3.25 billion ($16.3m). Revenue fell 23.16 percent to N61.17 billion during the six-month period to June 30.
Mercuria and other commodity traders are enjoying the best trading conditions in more than four years amid increased volatility and as a slump in crude cuts financing costs. Companies are generating higher returns by storing cheap oil today to sell it at higher prices later, a market structure known as contango.
Mercuria was founded 11 years ago by former Goldman Sachs Group Inc. traders Marco Dunand and Daniel Jaeggi.
