Shoreline Group, a Nigerian oil producer, has halted plans to issue $500m of Eurobonds and will cut staff as the economy struggles with plunging prices for the fuel, chief executive officer Kola Karim said.
In the middle of last year, Shoreline executives went on a two-week road show in the US and Middle East to discuss a debut issue of five- to seven-year debt to buy oil and gas assets across Africa.
Now with Brent crude trading below $30 a barrel and Nigeria’s central bank imposing restrictions on the amount of dollars businesses can obtain, Shoreline plans to cut 35% of its nearly 2 000 staff to survive the “tough” conditions, Karim, 47, said in an interview in his office in Lagos, Nigeria’s commercial capital.
“We went on a road show and the world of oil collapsed,” he said. “We’re going to wait until end of first quarter and see how stable markets are. Mid-last year, our projections were $60 a barrel for the next five years,” he said as he laughed.
Founded in 1997, Shoreline is one of several local businesses that bought fields in the oil-rich Niger River delta region after foreign companies, including Royal Dutch Shell, Total SA and Eni SpA sold onshore assets. With oil’s plunge, Karim said Shoreline is reducing production to 17 000 barrels per day for the rest of the year from 52 000 barrels per day.
Shoreline has seen its other businesses that range from construction to rope making come under pressure from foreign exchange restrictions. Efforts by the central bank to stem the fall of the local currency have led to trading curbs, causing a shortage of dollars in a country that imports almost all manufactured goods, hurting businesses and sending the unofficial naira market rate soaring to a record 305 per dollar.
Karim said he is switching Shoreline’s focus instead to gas production and distribution within Lagos, as it costs the company more than $20 to produce a barrel of oil.