Angolan energy giant failed to make money from oil in 2019 as debt bites

* Sonangol debt repayments in 2019 exceed basic profit

* Net profit was helped by loan cancellations and asset sales

* Total liabilities are $ 36 billion

* Angola wants to privatize Sonangol, depends on its income

LONDON, Sept. 29 (Reuters) – The Angolan state-owned oil giant did not make any money from its core oil business last year, according to a Reuters analysis of its full accounts, as billions of dollars in Debt repayments have eaten away at profits.

The grim disclosure in the company’s 121-page annual financial results released in Portuguese last week underscores the perils facing the impoverished and oil-dependent nation, even before oil prices plunge due to the epidemic of coronavirus.

Sonangol is the engine of sub-Saharan Africa’s third-largest economy and Africa’s second-largest oil exporter.

The company announced last week that its net profit fell to 46 billion kwanza ($ 125 million) in 2019, down more than half in dollars from 80 billion kwanza ($ 316 million) in 2018, using official average exchange rates for those years.

This despite the average Brent crude oil price of $ 64 a barrel last year, not far below the $ 71 of 2018. For 2020 so far, the average is $ 40.

Core businesses lost 351 billion kwanza ($ 955 million) against a 2018 profit of 69 billion ($ 274 million).

Falling crude prices have increased Angola’s debt burden.

Sonangol itself has borrowed billions of dollars from China and banks such as Standard Chartered in recent years, pledging its oil exports as collateral, to support the economy and its own expansion.

Its total liabilities at the end of 2019 stood at 13.4 trillion kwanza ($ 36 billion), including loans, risk reserves and accounts payable.

In 2019, its debt repayments reached 764 billion kwanza ($ 1.8 billion), compared with operating profits from oil production, sales and refining of 580 billion kwanza (1.57 billion dollars). dollars).

“NET PROFIT”

The company hailed its overall net profit as “strong growth … due to stabilizing revenues and strong cost reductions in the context of the ongoing restructuring”.

Angola has placed its hopes of mitigating a predicted steady decline in its oil production on a drive to privatize key state assets, including parts of Sonangol itself, by 2022.

But much of the net profit was generated by 397 billion kwanza ($ 1.1 billion) of “extraordinary results”, mainly from the cancellation of large old debt and the sale of certain assets.

This figure is almost 30 times higher than in 2018.

It includes 280 billion kwanza from a debt cancellation to South Pars, Phase 12 – an Iranian company formed with Sonangol to develop a giant gas field where activity ultimately never got off the ground due to the sanctions.

Other “extraordinary items” included a gain of 46 billion Kwanza from the sale of a real estate company and 13 billion Kwanza from the transfer of medical care for several hundred workers to the state.

The KPMG auditor said Sonangol’s liabilities at the end of 2019 outweighed its assets, which has not happened since the oil price crash in 2016. (Report by Dmitry Zhdannikov; edited by Kevin Liffey)

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