Oando Plc’s operational reports and audited financial statements indicate that the leading indigenous energy group recorded a net profit of N4.1 billion in the first quarter of this year.
The three-month report is for the period ended March 31, 2016. It was released at the weekend.
The report raises hopes on the prospects of the energy group in the current business year, after global and domestic headwinds left the company in the red in the previous two years. Oando also released its full-year audited report and accounts for the year ended December 31, 2015.
Flowing from the results, Oando’s share price rose by 2.92 per cent on Friday, the fourth highest gain in a trading session that saw average decline of 0.99 per cent at the stock market.
The results were delayed, the company said, due to an exhaustive audit process overseen by external auditors, Ernst & Young. As a result, it an extension was sought and approvals received by Oando from the Securities and Exchange Commission (SEC) and the Financial Reporting Council of Nigeria (FRCN).
Investors will be buoyed by the N4.1 Profit-After-Tax increase, representing a 120 per cent increase compared to this Q1 2015 figures. The company’s financial highlights also indicated that turnover decreased by 34 per cent, with N64 billion realised compared to N97.1 billion for the same period last year.Global crude pricing fluctuation has changed the corporate landscape for oil companies, and has had far-reaching economic implications on Oando and many other indigenous firms in the industry.
The Group’s Chief Executive, Oando Plc, Wale Tinubu, said the first quarter performance demonstrated the group’s dedication to return to profitability by the end of the 2016.
“We have implemented constructive corporate initiatives which are driving forces for our business in this new global reality of economic restraint and lower oil prices in our industry. The successful and ongoing implementation of these initiatives reiterates our strategy of growth, deleverage and a return to profitability by the end of 2016. As a group, we have placed our focus on growing our upstream higher margined business while still holding fundamental interests in the midstream and downstream sectors. We look forward to a rewarding year, where we solidify our aspirations and return to profitability,” Tinubu said.
According to him, as oil prices gradually increased, Oando had commenced 2016 with a reinvigorated strategy hinged on key corporate initiatives to drive the company back to profitability and ensure fiscal efficacy, including optimisation of its balance sheet the company focused on aggressive debt reduction and recapitalisation.
He noted that the group successfully restructured its existing debt through a N94.6 billion medium term note (MTN) with a local consortium with lower interest rates and a renewed five-year tenor, while its upstream subsidiary, Oando Energy Resources (OER), completed its 2015 year-end summary of reserves recording a six per cent growth in 2P net reserves from 420.3 mmboe to 445.3 mmboe. The increase is attributed to the recognition of reserves related with producible oil and gas volumes. 2C Resources also increased by 70 per cent from 122mmboe to 208mmboe.
Official operational report showed that in the midstream, Oando Gas & Power (OGP) maintained its legacy of building successful pipeline businesses, generating returns and transferring on operatorship. The company successfully concluded the divestment of the Akute Independent Power Plant, a 12.15 megawatts power station servicing the Lagos State Water Corporation. OGP also signed a development agreement with TVER/ Micro LNG to develop a 20 mmscf/d Mini LNG plant in Ajaokuta, Kogi State, which will service a 1,000km radius in the Northern and Central regions of Nigeria. The facility is expected to commence operations in the second quarter of 2017.
Also, Oando Downstream agreed on the terms for the sale of a N70.5 billion partial divestment to Vitol, the world’s largest commodities trader and Helios Investments Partners, a premier West African focused private equity firm. This alliance has been hailed as a testament of Oando’s legacy of building a successful downstream giant and a rejuvenation of Nigeria’s downstream sector through operational efficiencies and economies of scale.
For the full year ended December 31, 2015, Oando recorded a net loss of N49.7 billion on a turnover of N381.7 billion as the global oil and gas industry struggled with historic slump. Oando’s 2015 losses were largely due to impairments and the acquisition cost and interest on debt facilities in Oando’s prolonged acquisition of ConocoPhillips Nigeria’s (COPN) onshore hydrocarbon assets.
Tinubu recalled that 2015 was a turbulent year for the global oil and gas industry as traditional energy business operations had to be altered to enable industry players survive new reality, utilising cost optimisation systems, increased operational efficiency as well as lower capital expenditure budgets.
“As the global economy returns to normalcy, we remain committed in our drive to building platforms for long-term sustained value creating businesses,” Tinubu assured.
Official report meanwhile showed that in spite of the numerous challenges, Oando made significant achievements across the value chain last year. Oando Energy Resources (OER), increased its total production to 20 million barrels of oil equivalent (mmboe) in the period compared with 9.1 mmboe in 2014. The increase between the annual periods was primarily from the acquisition of OMLs 60 – 63 in H2 2014, as well as the commencement of production from the Qua-Iboe field in Q1 2015.
OER also successfully realised a cash inflow of $234 million by resetting its crude oil hedge from the previously hedged average of $95.35 per barrel to a new price of $65.00 per barrel on 10,615bbls/day till July 2017, as well as an additional 1,553 bbls/day until January 2019. The proceeds of the hedge reset along with cash-in-hand were used to pay down substantial portion of the company’s debt.
By December 2015, Oando Gas & Power (OGP) had completed 87 per cent of the Greater Lagos Phase 4 pipeline project which runs from Ijora to Bonny Camp in Lagos State. The Midstream subsidiary also commenced an 8.5km pipeline expansion project for the Central Horizon Gas Company, to increase CHGC’s capacity to 70mmscf/day.
Oando Downstream successfully concluded tie-ins to third party terminals via a 2km Horizontal Directional Drilled pipeline. The jetty will alleviate delays associated with product delivery into the Apapa, reduce long term cost of operations, as well as provide possible revenue streams from excess capacity. In 2015, the marketing arm completed upgrading of its LPG plants, the Apapa LPG plantcapacity was upgraded from 15mt/day to 30mt/day, representing a 100 per cent increment, while the Benin plant was upgraded to include best in industry safety standards.
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