Forte Oil Plc plans to cancel six billion ordinary shares out of its 10 billion authorised shares and offset accumulated losses totaling N56 billion in a share capital reorganisation aimed at removing the last vestiges of the chequered past of the downstream marketing company.
In a document for the share capital reorganisation obtained by The Nation, the company indicated it would be reducing its authorised share capital of N5 billion, consisting of 10 billion ordinary shares of 50 kobo each, to N2 billion, consisting of 4.0 billion ordinary shares of 50 kobo each, thereby cancelling N3 billion, which represents 6.0 billion ordinary shares of 50 kobo each.
Also, the company plans to offset accumulated losses of more than N55.98 billion residual in its reserves with the N62.29 billion balance in its share premium account to remove the deficit and clear the last impediment that had debarred the company from paying dividends from its newly resurgent profit.
Shareholders of the company are expected to vote on the scheme of arrangement for the two proposals by the end of this month.
According to the scheme, the rationale for the share capital restructuring and offset of the deficit was to enable the company to comply with the provisions of the Companies and Allied Matters Act (CAMA) and put it in good stead to reward shareholders from its improving business operations.
It should be recalled that the external auditors to Forte Oil, PKF Professional Services, had in the audited report and accounts for the year ended December 31, 2012 noted that the company failed to comply with Section 99 of CAMA, which requires that a company must have a minimum issued share capital of 25 per cent of its authorised share capital. However, Forte Oil has an issued and paid up share capital of N539.37 million consisting of about 1.08 billion ordinary shares of 50 kobo each, representing 10.78 per cent of its authorised share capital.
With the planned cancellation of authorised shares, Forte Oil’s paid up share capital will rise to 27 per cent of its authorised share capital. Besides, negative reserve-share premium swap would positively balance the revenue reverses of the company and put it in good stead to resume dividend payment.
However, since the authorised shares billed for cancellation have not been issued, the capital reorganisation will not have any material change on the shareholders’ holdings and ownership structure of the company.
Also, the reorganisation will not lead to any tax liabilities on the part of the company or the shareholders. The major shareholders of Forte Oil, according to the latest audit, are Zenon Petroleum & Gas Limited, with 23.16 per cent; Thames Investment Incorporated, 13.19 per cent; ZSL Nominees, 11.84 per cent; ZSL A/C FOZ, 11.34 per cent and Mr Femi Otedola, who directly owns 5.87 per cent of the company. Otedola is also a beneficiary of the shareholdings by Zenon and related entities.
Already, Securities and Exchange Commission (SEC) has given provisional approval to the scheme of arrangement and the Federal High Court has sanctioned a meeting of shareholders as statutorily required.
Market analysts said the prospects of resumption of dividend payment in the light of the company’s improving profitability is a major driver of the company’s meteoric share price appreciation. Forte Oil has the highest capital appreciation so far this year among the quoted companies.
Interim report and accounts of Forte Oil for the nine-month period ended September 30, 2013 showed that net profit after tax quadrupled by 317 per cent from N656.4 million to N2.74 billion. This indicated earnings per share of N2.54 in the first nine months of this year compared with 61 kobo recorded in comparable period of 2012. Profit before tax had increased by 258.4 per cent from N898.3 million to N3.22 billion. Turnover rose by 28.97 per cent to N92.13 billion in 2013 as against N71.43 billion last year.
