Petroleum Africa
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Friday, February 13, 2015
We all know what large firms do when oil prices drop, we have seen it in recent weeks; cut spending and cut employees. But what do you do when you are a small indigenous firm running on a shoestring to begin with and staff cuts really are not possible? According to one Nigerian firm, “combine.”
CEO of Shoreline Natural Resources, Kola Karim, told Bloomberg in a recent interview that for Shoreline and many other firms, there just wasn’t that much leverage, when the bottom fell out of the crude market.
“We don’t have that much leverage, the rapid drop is unprecedented” for the country’s small producers, Karim said. “The reality is there have to be mergers in the industry because it’s difficult in a down market when you’re a small producer trying to weather the storm alone.”
As far as small producers go, Shoreline is at the upper end pumping out around 60,000 bpd and should be in a much better position than some of Nigeria’s smaller producers given how the company came about. Shoreline is a Nigerian company formed between a subsidiary of Heritage Oil Plc and Shoreline Power Company which in turn is a subsidiary of Shoreline Energy International Ltd.
Seplat, the leading Nigerian producer, pumping about 70,000 barrels daily, is in talks to take over London-based Afren Plc, which operates fields in Nigeria and at one time was a large independent by market cap however, due to a number of issues the firm’s stock has tanked in recent months making it ripe for takeover.
“I foresee a huge combination of mergers in the local market, we’re also looking for opportunities,” said Karim in the interview. “You’re better being part of a bigger player, so you can save on your cost and make good margins.”
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