For the first time in its 45-year history, the State’s flagship energy entity, the National Gas Company (NGC), has reported a loss.
In a statement late Friday, 100 per cent State-owned NGC reported an after-tax loss of $316.2 million for the first six months of 2020.
NGC’s loss for the period January 1 to June 30, 2020, follows the natural gas aggregator and merchant recording a group after-tax profit of $396 million in its 2019 financial year. That represented a decline of $2 billion or 83 per cent from the 2018 profit of $2.396 billion.
The company said its margins continue to be adversely affected by the volatility in the commodity markets with prices decreasing by 33 per cent, nine per cent and 44 per cent for methanol, ammonia and natural gas liquids, respectively, in the reporting period.
“The NGC Group of Companies has recorded a loss after tax of $316.2 million for the first half of 2020. This represents a decrease of 296 per cent or $477.3 million from the six-month profit for 2019 of $161.1 million. Revenues decreased by 22.9 per cent or $1.74 billion from $7.61 billion for the six months ended June 2019 to $5.87 billion for the six months to June 2020,” the statement said.
NGC Group chairman Conrad Enill noted in the statement that this decline in margins, as well as impairment provisions on assets associated with changes in market outlook, legacy issues and non-payment for gas sales by NGC’s largest customer have caused the overall results to be negative and contributed towards a tightening of NGC’s liquidity position.
The NGC’s profitability also impacted on the holding company, the National Enterprises Ltd (NEL), which recorded a loss of $327.5 million for the fiscal year ended March 31, 2020.
That loss, according to NEL chairman Ingrid Lashley, was attributed to the decline in its investments, in particular $175.3 million from NGC NGL.
“Owing to the fall in NGL prices of approximately 25 per cent across all products since fiscal 2018, the companies continue to experience decline in revenues and profitability. Improvement is expected in fiscal 2021,” Lashley said.
Moving forward
Despite the results, NGC said it retains an optimistic outlook for growth and profitability over the medium term because of an “uptick in upstream development activity, strategic partnerships and acquisitions, investments aimed at building the technology platform of the Group, and a sharpened focus on cost management and value generation initiatives”.
Among them are:
1. In 2020, NGC signed a framework agreement with Touchstone Exploration Inc and Heritage Petroleum Company Ltd for the development, sale and purchase of all-natural gas and natural gas liquids produced from the Ortoire Block and detailed discussions are in progress for the execution of a fully termed gas supply contract.
2. NGC also executed a new gas supply contract with BHP Billiton for the supply of gas from Block 3(a) which is under development, with first gas expected in fourth quarter 2021.
3. Through Phoenix Park Gas Processors Ltd (PPGPL), the Group has also continued with its internationalisation thrust by acquiring the NGL marketing assets of Twin Eagle Liquids Marketing LLC based in Houston. The performance of this asset has been positive and is expected to favourably impact the results of PPGPL and the NGC Group, the statement said.
“The Group’s outlook is also buoyed by the success of business continuity efforts during the Covid-19 pandemic. Not only was the Group able to sustain delivery of its critical services to the petrochemical, manufacturing, and power generation sectors, but changes effected during the first half of 2020 have helped create a solid platform for future innovation and improvement,” the company statement said.
“These have included process improvements in the areas of supply chain management, HSSE, operations and communications. Across the Group, people are working smarter, making greater use of available digital tools to streamline tasks and increase efficiency. This in turn is helping to build a leaner and more agile organisation,” Enill said.
In an interview with the Sunday Express last month, NGC president Mark Loquan said: “It is clear that NGC cannot simply rely on margins in buying and selling gas in its aggregator role, which is still an important role to balance disturbances in both upstream and downstream and ensure stability and power to the country. If there is one thing that NGC has learnt well from 45 years in the energy business, it is how to weather cycles of change. In fact, we have found that in times of challenge, there are more opportunities for growth.”
He noted then: “Over the last few years, market conditions have compelled our company to revamp our business model and seek alternative income streams to remain profitable. Strategies for growing our business in new directions-across the value chain and in international markets are already being implemented and are showing great promise. We at NGC have confidence that the work being executed is returning the organisation to a path of sustainable growth, and we expect to continue delivering exceptional value to country for many years to come.”
Loquan said moving forward, there were “fundamental” matters to address to ensure such sustainability.
“It is no secret that the era of abundant cheap gas is behind us. Increasing the Group’s profitability remains a priority and it rests on ensuring that T&T’s precious molecules yield maximum economic returns.
“The actions are clear—reduce the demand for natural gas for electricity generation and improve the efficiency of gas utilisation to release gas for higher value-added applications while working on value optimisation internally, across the Group, and across the entire value chain. NGC is now playing a leading role in energy efficiency policy and action in Trinidad and Tobago,” he said.
