THE THREE LEGS OF FORTE OIL PLC

According to the first quarter unaudited results released by Forte Oil PLC last week, the company is now balanced on three strong legs in the face of what year 2017 has to offer.

These are more efficient of costs; relative liquidity and gains from selling foreign exchange.

Of the three, forex gain seems to be more manifest because amidst an almost total dry up other income sources of yore, it held sway by closing the quarter at N499.9m compared to N16.3m same time 2015.

The 2017 shock for Forte Oil was that most of 2015 source of support virtually dried up: Nothing was earned from crude oil lifting contract; throughput income dived by 82.1% to N26.7m; freight income came to N61.7m, down 63.3% leaving 10.6% growth in rental income to N41.6m the lone support by forex gain feat of finally keeping resultant drop in other income to only 16.4% or to N647.9m.

But take a closer look at the figures, ready manifestation does not displace a more fundamental leg which FO now stands: Cost control.

That's because it manifest through various cost heads. Its first won battle was as core revenue dropped by 7.3% within the quarter, the accompanying cost of sale decreased faster by 11.7% resulting in increased, not decreased gross profit.

Then, even though 4.65% rise in administration cost to N2322.8m occurred, a 45% decrease in distribution expenses to N501.5m helped to stabilise or absorb inflationary pressures.

The third leg was more subtle but it was far more effective: FO was far more liquid within the quarter and so, was able to grow finance income by 50.3% to N563.6m mainly as interest income on deposits with banks rose from N15.9m to N327.5m accompanied by 40.9% increase in finance cost.

The net result was that FO ended the quarter with 57.5% rise in profit before tax to N2049.8m despite all the income stream dry ups and shrinkage that led to 6% decline in total income to N34,215.5m.

Can the three legs remain strong till year end? Can they be joined by say, core revenue growth? Will ..
Oh well, lets hold the qiestions back and wait.

FORTE OIL PLC.Nm 1st quarter.
                               2017.        2016
Total income. 34215.5.  36748.7
Core income.  33004.0.  35602.1
Cost of sale.    27200.7. 30796.9
Gross profit.      5803.3.   4805.2
Other income     647.9.     771.7
Distribution         501.5     911.5
Administration 2322.8.  2219.6
Finance income. 563.6.   374.9
      " cost.           2140.7. 1519.3
Profit b4 tax      2049.8.  1301.5
Profit margin%     5.75.     3.54
Working capital 2031.2. (145.8)

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