Page 11 - AfrOil Week 32 2021

AfrOil POLICY AfrOil
NOCK under fire from government auditors
KENYA
THE National Oil Corporation of Kenya (NOCK) is under fire from the government for its shaky finances, with the Office of the Audi- tor-General (OAG) expressing particular con- cern about the company’s failure to pay back loans from KCB Bank Kenya.
The OAG noted in a report on NOCK’s performance in Fiscal Year 2019/2020 that the state-owned firm had been borrowing far more money than it was capable of repaying. NOCK’s total debt load now tops KSH5bn, with debts to KCB Bank Kenya accounting for more than KSH3.6bn ($32.98mn) of the total, it said.
“As a result of the default, one of the lenders, KCB, consolidated its outstanding loans and interests into one term loan of KSH3.664121bn [$33.56mn] reported as current borrowings,” the OAG document stated. “The implication of the lender’s action to charge interest on the capi- talised interest thus [increases] the corporation’s liabilities.”
The report further noted that KCB Bank Kenya had offered to restructure the debt in July 2020 and criticised NOCK’s management for declining this proposal and not seeking another solution. “The impasse may lead to the corpo- ration losing strategic assets [that] were used as collateral to secure the loans to the financiers through repossession,” it commented.
OAG also noted that NOCK had accumu- lated KSH3.05bn in FY 2019/2020, describing the company as “technically insolvent.” It added that the firm’s “continued existence as a going concern is dependent upon the financial sup- port of the government, bankers and its credi- tors, unless management puts in place measures to improve the performance of the corporation
and to reduce reliance on financial support from the shareholders.”
The report pointed out that the company’s finances had deteriorated since May 2020, when it was barred from participating in the govern- ment’s Open Tender System (OTS) because of its failure to meet obligations to suppliers. Some of this decline stems from NOCK’s failure to opti- mise use of the M-Pesa mobile payment app and the Oracle e-Business software suite in order to generate automatic records of payments by cli- ents, it asserted. Discrepancies between M-Pesa reports and Oracle e-Business reports suggest that some of the money received from custom- ers was diverted before it could be deposited in NOCK’s accounts, it said.
It went on to say that if the company did not improve its finances, it ran the risk of being forced to shut down. As of press time, it was not known whether NOCK had responded to the OAG report’s criticism.™
United Oil & Gas reports on testing of Al Jahraa-8 development well
NOCK has failed to repay a bank loan worth more than $33bn (Image: NOCK)
PROJECTS & COMPANIES
EGYPT
UNITED Oil & Gas Co. (UOG) has announced that its tests on Al Jahraa-8 (AJ-8) development well, located in the Abu Sennan concession, onshore Egypt, showed signs of a maximum flow rate of production of 2,093 barrels per day of oil (bpd) and 3.63 mn cubic feet (102,800 cubic metres) per day of natural gas.
UOG holds a 22% working interest in the licence, which is operated by Kuwait Energy
Egypt. In a statement, the company said that this appraisal exceeded the pre-drill expectations. It also indicated that the well would be linked to the production line from the Lower Bahriya res- ervoir in the coming days.
Drilling work on the AJ-8 well commenced on May2. The well was targeting the Abu Roash and Bahariya reservoirs in an undeveloped -portion of the Al Jahraa field.
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