Daily Independent (Lagos)
Kingsley Ighomwenghian
25 November 2008
As the fierce legal battle for the soul of Chevron Oil Nigeria Plc lingers unabated last week, its share price decline also intensified, as it added yet another N12.66 to its string of losses, in what may be the result of some other investors dumping their shares on the market to take what is left of profit. So bad has the situation degenerated that last week's decline brought total loss at the beginning of the week ended October 31 to N141.33, translating to a 36.96 per cent within the period.
The loss accruing to investors is even worse for those who had hoped for a quick resolution of the crisis that is now threatening the very foundation of the company, which recently changed its name from the original Texaco Nigeria, following the acquisition of its parent company by Chevron Oil Overseas. When benchmarked against the year high of N441.00, last week's slide brought cumulative loss to investors to N200.03, translating to a decline of 45.35 per cent, aside from the other reality that there may be no dividend payout at the end of this year.
At the end of last financial year, Chevron Oil ranked among the highest paying companies, both on the Nigerian Stock Exchange and particularly the petroleum products marketing sub-sector, where its 750 kobo per share placed it second only to Total Nigeria, which offered 990 kobo by way of interim (350 kobo per share) and final dividend of 640 kobo, from its earnings per share of N12.03.
The first real sign that all what was not well with the company became very evident with the submission of its un-audited result for the first quarter ended March 31, 2008, with the management blaming the industrial strike action embarked upon by one of the labour unions in the oil industry seriously depressed its performance in the first quarter ended March 31, 2008.
The two industrial unions, the National Union of Petroleum and Natural Gas (NUPENG) and the Petroleum and Natural Gas Senior Staff Association of Nigeria (Pengassan) had also showed interest in buying out the core investors, hence the decision to embark on an industrial action to drive home the point. Daily Independent had at that time reported on the need for a drastic solution to salvage the company within the remaining nine months of the year, if shareholders are to receive get returns on their investment. This was, however, not the case, instead, more troubles reared its head with the court case instituted by petroleum products marketing giant-Zenon Petroleum and Gas Limited against the company and its parent companies overseas challenging the decision to sell it to other bidders. Zenon currently had a 19 per cent stake in Chevron Oil.
According to the first quarter result presented to stockbrokers, sales income fell by N9.74 billion or 53.10 per cent to N8.6 billion from N18.34 billion reported in the corresponding first quarter of last year. Loss before and after tax within the period stood at N190.63 million, down from previous first quarter's profit figure of N531.24 million. But as if to show investors' understanding or even sympathy with the management, its share price rose by N17.00 on the day it was released as it led the gainers' side at N372.00 each.
The Ensuing Legal Battle
The legal battle for the soul of Chevron's over 400 retail outlets and a capacity to pump out well over 16 million litres per day and a storage capacity of well over 700,000 metric tonnes started with the decision of the board and management to divest and concentrate in its traditional exploration and production operations by selling the retail The Ensuing Legal Battleoutlet ownership of which it assumed following the acquisition of Texaco. The had subsequently called for expression of interest, which attracted the workers' unions, Zenon, and other competitors like African Petroleum Plc, Habitat Oil and Gas, Oando Plc and Acorn Oil and Gas Limited, among others.
The 60 per cent stake in contention was, however, sold to MRS Holdings Limited, Petroci Holdings and Corlay Global S.A., a Panamanian company owned by an African-based consortium composed of MRS Holdings Limited, an indigenous oil marketing firm owned by business mogul, Sayyu Dantata, and Petroci Holdings, a Bermudan company despite a court order on July 31, 2008, granting an interim injunction restraining the core investors from divesting 60 per cent stake from Texaco Nigeria Plc. Dantata, said: "We are very pleased to acquire Chevron Nigeria Holdings and this demonstrates further our vision in investing into the future of the downstream oil business in West Africa and its attendant enormous benefits to our dear country.
Meanwhile, Justice Lambo Akanbi had granted Zenon's prayers, restrained the U.S. energy group Chevron Corporation subsidiary and any of its agents from bidding, selling, alienating, transferring, disposing and or parting with the possession of the shares of the fuel retailing arm, pending the hearing and determination of the motion on notice. Zenon reportedly contended in its suit that Chevron did not obtain necessary approval from the Securities and Exchange Commission and minority shareholders before receiving bids from at least four suitors. They include Oando, Habit Oil and Gas, Acorn Oil and Gas Limited and African Petroleum, in which Zenon holds a majority stake and its proprietor as chairman, chief executive.
An indication of the fact that Chevron did not obtain regulatory approval before undertaking the bidding process, its share price was some months ago, placed on full suspension (meaning that there would be no trading in its shares until the suspension is lifted).
Zenon then returned to the Federal High Court in Lagos for protection, joining other respondents like Chevron Oil Nigeria, Chevron Global Energy Incorporation, Chevron Africa Holdings Limited, BNP Paribas, Securities and Exchange Commission, NSE, Corporate Affairs Commission and the four bidders.
Shareholders at the last annual general meeting had wondered why the management of Chevron was stripping assets, contrary to the promise that things would get better with the coming of the new core investors.
Nona Awoh, an shareholder rights activist, told Waynes Klahs, the company's chairman: "Why are we in a hurry to sell the company's properties, especially the warehouse? You gave us the impression that things will get better if the new investors come in but how can things get better when we are selling our assets."
The shareholders demanded that the core investor must sell at least 33 per cent of the 60 per cent investment to minority shareholders and the company's workers as a condition for its divestment.
"If the foreign investor wishes to divest, 33 per cent of their holdings should be sold to local investors. If the Nigerian investors here decide to support you, we can stop them from being directors, even in other companies. No director seeking re-election will be allowed to come back. If you don't handle this situation very well, you will put the Nigerian directors here in trouble," Awoh said.
Adeleke Adebayo, general secretary, Independent Shareholders Association of Nigeria (ISAN) stretched the argument further when he noted that the 750 kobo dividend from earnings per share of 487 kobo is an indication that the difference is from extra-ordinary income from the sale of company assets. Much more importantly, he continued: "The high dividend you are paying us is a parting gift to the core investors. We are happy but our major concern is the continued sustenance of this company. We don't want our company to be sold to people we don't know. But we should not give people outside an impression that will have negative impact on our investment," he added.
Klahs, in his response assured the shareholders that Chevron Corporation was merely testing the market and had not taken final decision to sell the company. Not too long after this assurance however, workers of the Nigerian arm raised alarm on plans being intensified for the "secret sale of Chevron shares," without fulfilling basic obligations to its over 258 Nigerian employees. Specifically, the workers complained that Chevron proposed an exit package of one to three months basic salary (a proposition it says is anchored on cessation of employment in lieu of notice) plus a highly uncompetitive, involuntary severance package that will apply to not more than 15 per cent of the workforce, which again would be determined only by Chevron.
President of PENGASSAN, Comrade Babatunde Ogun, reportedly lamented the attention being given to potential buyers that bid in excess of 300 per cent over and above the then market price of N202 per share on the NSE.
The workers, according to Bayo Olowoshile, PENGASSAN Secretary-General, accused Chevron management of arrogance and unwillingness to reward its workers, some of whom have put in 25 to 30 years of service into the company.
"Our members have helped build Texaco into a brand that has become attractive to private entrepreneurs, who are now interested in acquiring it. They laboured night and day to make the brand what it is today. Now that Chevron wants to divest its stake, it is not interested in settling all pending labour issues. All the management is interested in is to sell the shares and take all the money away from this economy. We are demanding nothing less than 30 per cent as compensation to our workers. We hear somebody is set to buy it for between $1 billion and $1.2 billion, that is nearly N150 billion, (attracting a N22 billion interest per annum). We cannot allow them to take away that money from our economy. They must compensate the workers with a minimum of 30 per cent of that amount (N45 billion).
"That company is not worth more than N350 per share, but now they want to sell to a preferred bidder who is willing to pay N900 per share. The question now is how will the preferred bidder liquidate the debt, bearing in mind that all that money will be sourced locally? Texaco's profit is in the region of N5 billion per annum. Its first quarter result for 2008 was a loss. The exposure to banks will be tremendous, so you can see that our worries are justified. We want this company to remain a solvent company. But Chevron people are merely interested in collecting our money here and running away," he stressed.
Chairman, PENGASSAN, Chevron Branch, Clement Ofoegbu, said the sale was another gimmick to deny workers of their benefits and severance package.
"We heard the announcement that the company had been sold to a Panamanian company, when we all know it is MRS Oil and Gas, but they will not go too far. The unions are going to meet to discuss the development, because of this Panama angle. That was the same thing the management did when the issue of the divestment came up, and suddenly Chevron Oil became a Bermuda company, rather than the one in San Ramon, California. No matter what excuse they come up with, they must pay us because we have worked for it, and to think that the announcement was made when the matter was still in court shows that some of the top management is ready to go to prison."
Several weeks after, indications are that the workers are ready to return to their desk, but not before the new owners reached an agreement on some germane issues including that the company would retain 80 per cent of the workforce. Separation packages of these workers are to be paid into a fixed deposit for a period of three years, at the end of the three years, those who chose to remain after collecting his entitlement will be deemed to have served the company for only three years, irrespective of the actual number of years he had worked.
All the workers, reportedly, had wanted to be paid off immediately, but the management insisted that the company, which it has a commitment to keep afloat might collapse before the new owners come, if all the workers were allowed to go.
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