In 2017 you revealed plans to ramp up production. Did you reach your targets?
We have achieved most of the things that we planned to do over the last year. We have concluded an alternative evacuation route for our crude in OML 42, and today are producing almost 90% of our crude through our own international terminal at Oguta. We no longer send all our crude to Forcados, and only have about 10% going there. The facility has made our production steady because when the Forcados pipeline goes down, we stop production in all the fields, and this happens every two weeks. We are now able to avoid this, resulting in steady production, and this has been our most important achievement in the last year.
What financial engineering are you strategizing in an era of high cost of capital to fund this expansion?
The oil and gas business is like a two-way street, and once the oil price is stable and going up, then funds are automatically made available. As a result of the current price of oil, we are beginning to see great business in terms of the value gained from production. For us, USD75 is a great price, as we produce in the shallow water swamp and not deep water. We now plan to continue our drilling toward the end of 2018 and throughout 2019. We are bringing oil rigs to the site to begin drilling.
Will you fund this expansion through a mix of your own equity and debt?
We will find more funds as the value we have been receiving is increasing because we have steady production. The two things that affect production in the Niger Delta is being able to evacuate and being able to produce every day, and these two things go hand in hand. Since we have steady production and are able to produce every day, we can see a cash flow that can assist our future expansion. We want to start drilling before getting more funds; however, if we need to borrow more money in the future, we will do so because we have borrowed over the years and are repaying our loans. We borrowed large sums of money when the oil price was USD30, so now it is time to repay old loans while expanding.
How are your plans for the gas power plant in the east of Nigeria going?
They are great and in progress. Construction is planned for early 2019, and we are preparing to lay the pipeline for gas. When that happens we can start getting ready for construction. The plant is fairly large; therefore, we will also sell power. It will serve the majority of the states in the southeast, and the remainder will be sold to the national grid. The first phase will have a capacity of 750MW, which will supply gas to power it from our oil field. This is one of the reasons why the project was conceived in the first place, as we were looking for a way to utilize our gas production.
Outside of oil and gas, which companies within the group are driving business?
The oil and gas business is supported by service companies such as AWT, BIQ Dredging, and HDD company. Apart from that, we still have our civil construction companies like Hammer Corp, which does road construction. Our dry docking business also provides many opportunities for revenue, though looking into the future, apart from the investment we look at the power business and healthcare. We have a children's hospital in Okija that we expanded to include women and children, so we are investing more money into that. Ultimately, however, the production of oil remains the cash cow for the group, at least for the next two years. Still, in the long term, we are looking to diversify further. We need to first consolidate on the investments we have made, as most of these companies are set up and are all on their own. If the oil price remains stable for the next two years, we should be able to deliver some of those companies, as some are major investments like the dry dock.
How do you see the infrastructure gap changing in the near future, and what needs to be done to address the situation?
If the government plans to do something about it with the Petroleum Industry Bill (PIB), then it needs to enforce it now, as it will bring capital inflows into the country. Secondly, many businesses are not doing well because the climate has to be great for assure investors that when they invest money in oil and gas, they can collect their profits. When IOCs sold most of their assets, they knew very well the infrastructure required to produce all this was not available. No one was thinking about how oil and gas would be excavated, and so one of the reasons why the government needs to encourage more pipelines to be laid is because gas cannot be transported from the Niger Delta without pipelines. This is why there is a shortage of natural gas in hospitals or for cooking. It is all tied to infrastructure investment, and if the government focused on providing what is required for this investment to happen, then the issue of infrastructure will be addressed. The government needs to get the PIB signed off, as it has been in limbo for years now.
What is your outlook for 2019?
For the group, we expect to have a great 2019 if nothing extraordinary happens. As long as the oil price is above USD50, then we are comfortable, and we expect a bright future for the group as all the work we have done over the past two years will start to bear fruit. This means that we have steady production, know what we are producing, and intend to ramp up production. If the oil price does not go down below USD60-70, then we will have a great year and can enough profits to start bringing up some of the projects that we have been keeping in the closet for some time now. Most of our success in 2019 will be based on the international market and international off takers, and our hopes lie in the price of crude, which we do not expect to change much from today.