Forte Oil H1 2015: Apparently, less is now more

Dear Africa Interested Individuals:

                                                       Forte Oil released its H1 2015 earnings on July 31st, 2015.  During my days of sending sporadic emails, I wrote an article discussing my serious concerns about the published figures of Forte Oil for Q1 2015.  The CFO of the company (first time in my history by the way) actually challenged me to an open debate to prove that I am wrong in my assertions.  I smiled to myself...  I said to myself "Jude wait for the H1 2015 result and see what management will do."  It is a case of either management will become more transparent in their bid to prove Jude and whomever else shares his view wrong or they will "lock up shop" and disclose less information to prevent me from picking out the holes (if any) in their published figures.  Forte Oil apparently chose the latter and through psychology, have proven that something is amiss without me even having to write a word.  The Q1 published financials is 37 pages; the H1 published financials is 5 pages.  

If a dialectic analyst has put you on the spot after your Q1 earnings, should the first logical action by a company's management not be to reveal more at H1 and definitely not less?  Management decided to provide less information in its H1 2015 earnings release, which to me, further showers on them unnecessary suspicion by their own making.  I guess the logic is, you cannot cook soup without all the necessary ingredients.  Actually I can... Now to the result.  I will make this snappy but give you enough to feel cozy.  

Forte Oil during the period April 1st, 2015 - June 30th, 2015, earned $12.33 million in interest income and spent on interest expense during the same period, $6.57 million.  The company received interest almost 1.9X more than what it paid in interest during Q2 2015.  Awesome!  Meanwhile, the company's cash position reduced further by $16.85 million from Q1 2015 to H1 2015 after reducing by $41.38 million from December 31st, 2014 - March 31st, 2015.  The company apparently earned back in interest 73% of what it spent in cash during Q2 2015 before factoring in interest expense.  

Cash at the bank now stands at $22.1 million as at June 30th, 2015.  Between March 31st, 2015 and June 30th, 2015, the company reduced its total debt outstanding by just $1.1 million and cash reduced by $16.85m.  Despite this, management tells us that it earned $12.33m in interest income in Q2, up from $1.47m in Q1 2015 and spent $6.57m in interest expense in Q2, up from $4.76m in Q1 2015.  Point to point, interest expense relative to debt increased from 2.5% - 5.9% while interest/finance income relative to cash increased from 3.8% in Q1 to 62.5% as at H1 2015.  

The increase in interest income from Q1 - Q2 2015 actually exceeds the increase in Q1 - Q2 profit attributable to shareholders by 53% ($4.27m.)  This figure is closely similar to the decrease in retained earnings from FY 2014 - H1 2015 of $3.69m a difference of $580,000.  The increase in total interest/finance income earned from Q1- Q2 2015 (3 months period) is already 19% more than the total finance/interest income earned during the twelve months of FY 2014.  As Luther Vandross said. "It's gonna be a lovely day." 

The Nigerian market will not consistently improve until, Nigerian companies are willing to tell it as it is.  Life has its ups and downs; so do companies.  Deal with it.                     

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For formal consulting only, you can reach me at dialecticafricaanalyst@gmail.com