Cross-sectional case study of human capital trends in selected downstream Oil and Gas companies


All analysis contained herein is not meant to vilify any of the companies analyzed, but to provide an understanding to target audience on general pattern of human capital activities in the companies. Information utilized for the analysis are strictly those provided in the companies’ financial statement.


This analysis examines the implication of companies’ financial performance, (primarily the profit or loss account) on staffing, employee benefit and productivity. This will provide a guide to investors on line items and relationships to look out for in financial statements when assessing how organizations treat its staffs


A set of four companies in the downstream oil and gas sector: Seplat, Oando, Forte and Conoil are selected for analytical comparison. These companies are all publicly listed, compete in the same consumer and input market and complies to similar regulatory body- in this case, the NSE and the Ministry of Petroleum Resources. The financial statements used are those for their respective FY’2018, filed with the Nigerian Stock Exchange (NSE)

What are the items related to staffing and employee cost in the statement of financial performance?

  • Wages and salary
  • Pension and gratuity
  • Number of staffs

What are the items that can measure how employee cost affects a company?

  • Revenue 
  • Profit before interest and tax 

Because employee cost draws down directly on these components

Analysis of Human capital statistics and financial performance

Staff size

  • Seplat has the highest number of staffs: 464; followed by Conoil: 217; Forte: 210 and Oando: 137.
  • In terms of growth in staff size, Conoil recorded the highest figure: 24%; followed by Seplat: 12.1%; Oando: 3.8%.  Forte staff size reduced by 1.4%

Wages and salaries

  • Oando had the highest staff expenditure in 2018: N10.1bn; followed by Seplat: N6.0bn; Conoil: N1.8bn and Forte: N1.5bn
  • The growth in staff expenditure was highest for Oando: 57.9%; followed by Seplat: 20.1%, Forte: 3.6% and Conoil: 0.1%
  • From the graphs on staff size and salary expenditure, there is no correlation between staff size and salary expenditure in the set of companies compared.
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  • Like the pattern of salary expenditure, Oando incurred the highest employer contribution in 2018: N844mn; followed by Seplat: N439mn; Conoil: N121mn and Forte: N97mn. 
  • Oando recorded the highest growth in pension contribution in 2018: 57.1%; followed by Seplat: 44.9%; Forte: 7.8% and Conoil: 1.5%
  • The amount of salary expenditure is closely tied to the amount of pension expenditure. That is, the ranking of salary expenditure was the same for pension contribution.   

Downstream companies with smaller staff sizes can maximize revenue-salary expenditure ratio compared to companies with bigger staff size

Conoil, Forte and Seplat had an increase in revenue to salary ratio in 2018. The biggest growth in the ratio was Forte oil and this was driven by higher revenue. Companies with smaller staff sizes like Conoil and Oando were able to maximize their revenue to salary expenditure ratio compared to bigger companies like Forte and Seplat. This suggests to management that the number of staffs is a necessary, but not a sufficient condition for maximizing revenue per employee cost.

Growth in the number of staffs provides support for growth in revenue, but the impact on revenue is not only about the size of increase in staffs.

Forte oil’s performance was most striking as revenue grew by 56.4% despite the decline in staff size by 1.4%. next to Forte oil was Oando, which reported a-9.67 times increase in revenue per increase in staff size. Conoil, Oando and Seplat reported an increase in the number of employees in 2018. Revenue reacted to this by surging up. However, while Conoil, which had a faster growth in staff size – 24% reported a 5.8% boost in revenue, Oando and Seplat, which grew relatively slower reported bigger increases in revenue.

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Downstream companies with higher salary expenditure can still achieve higher PBT to salary expenditure ratio if they can keep their PBT well ahead of salary cost

Seplat maximized the profit before tax per salary expenditure relative to its peers. The ratio more than doubled between FY’17 and FY’18. This implies that Seplat’s employee cost was more profit-productive relative to other companies. in second place was Conoil, but this was mainly due to lower salary expenditure. Oando and Forte experienced a drop in the ratio of PBT to salary expenditure because of higher lower profit in FY’18

Salary expenditure constitute more than 10% of operating cost of bigger downstream companies

As a fraction of total operating expenditure, salary expenditure in FY’18 was highest in Seplat: 30.4%; followed by Conoil: 20.5%; Forte: 14.4% and Oando: 14.3%. in terms of salary cost efficiency, Forte appeared to perform best. Apart form achieving a lower salary cost proportion in FY’18, it was the only company to reduce the cost proportion.

To maximize PBT per employee, downstream companies must make productive use of its employee stock such that PBT grows faster than the stock of employees and associated cost.

PBT per employee is higher in Seplat compared to other companies. In 2017, PBT per employee stood at 69.5 and increased by 164% to 184 in 2018. This was a stellar performance. A flip performance is observed with Oando. PBT per employee dropped by 48%. This was mainly due to lower bottom line because Oando’s staff strength increased only marginally. Conoil and Forte saw a decline in PBT per head.

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Based on this analysis, the following conclusions are eminent

  • Downstream oil companies with a higher number of staffs recruit more than others
  • Downstream oil companies have differentiated compensation packages for employees
  • There is no certainty that downstream oil companies with higher number of staffs will record higher revenue, unless productive use of staff is ensured.
  • Salary cost contributes no less than 10% to overall operating cost in downstream oil companies

Key insights

1. Although there are a lot of employees’ benefit that are not clearly shown on the face of the financial statement, the compensation and benefits differ across downstream oil companies. A job seeker in the banking industry will be better off to consult from inhouse staffs before deciding.

2. Downstream companies should note that minimizing salary cost is not an efficient means of optimizing performance. This is because salary cost does not contribute more than 30% of overall operating costs.

3. Fresh graduates who want to work in downstream oil and gas companies will find it easier to get into the ones with higher staff sizes than those with smaller staff sizes. They also have the opportunity of earning bigger remuneration compared to their peers in smaller downstream companies. this is because the bigger downstream companies have inbuilt mechanism that ensures the productive use of labor. This helps to grow the bottom line along with higher staff cost.

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