KenolKobil shares surged to a one-month high following the settlement of protracted disputes with the energy sector regulator. Photo/FILE
Shares of Kenya’s second largest oil marketer, KenolKobil, surged to a one-month high following news that the company had reached a settlement on protracted disputes with the energy sector regulator and the Kenya Petroleum Refinery.
The shares rose 7.41 per cent to a high of Sh10.10 in Friday’s trading at the Nairobi Stock Exchange, calming nervous shareholders who had seen the share sink to a low of Sh8.65 at the height of the firm’s tiff with energy ministry and refinery officials in the past one month.
The dispute culminated in cancellation of Kenol’s oil import licence and denial of access to the refinery.
The Permanent Secretary in the Ministry of Energy, Mr Patrick Nyoike, announced on Thursday that the oil firm would be allowed access to the refinery and would get back its licences, which had been withdrawn.
KenolKobil Managing Director and Chairman Jacob Segman said in a letter sent to the NSE that the Ministry of Energy’s move to resolve disagreements would help improve oil supply stability.
“We believe that such stability and improvement in the supply chain will lead to lower pump prices in the whole region,” he said.
He said the company had signed a new transportation and storage agreement with KPC, though the two parties still have cases pending in court.
A dealer at Faida Investment Bank, who requested to be anonymous so as to speak candidly, said it was unlikely that the disputes between it and the government organs would end any time soon.
He added that the share would remain “under watch” while evaluating the information and implications of the new deal.
Analysts at Sterling Investment Bank said demand for the share remains high with three million shares having traded last Friday.
They added that the company’s strong fundamentals such as consistent profitability and significant market share (estimated at about a quarter of the market) make it an attractive stock.
Despite being regionally diversified, the oil company takes great interest in its Kenyan operations mainly due to the market size.
According to an analysis by Africa Alliance PanAfrican Securities Research, KenolKobil generates 30-50 per cent of its profits from Kenya, while lower and stable oil prices have improved its margins.
But the letter by KenoKobil hinted at a lingering dispute relating to storage space allocation at the Kenya Pipeline Company (KPC’s) storage tanks
“Management wishes to qualify the (PS’s announcement) by requesting the Government to ensure that oil marketing companies with heavy investment and customer base in retail and commercial sectors in Kenya and the region, will have a corresponding ullage in the system to ensure timely and better flow of products from source to consumers,” stated Mr Segman.
The CEO suggested that KenolKobil would welcome investment jointly with the Government in a new planned fuel storage facilities offshore Mombasa Coast line, or any other oil storage facility.
In a statement two weeks ago, David Ohana, the general manager for the oil firm’s Kenya operations, said that there were “serious concerns that the speculative activities taking place in the government-owned KPC were similar to a recent saga that cost the Kenyan economy billions of shillings.”
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