Oando eyes profitability; posts increased revenue of N330bn in nine months

Oando Plc has announced unaudited results for the nine months period ended 30 September, 2016. The company’s turnover increased by 26 per cent to N330 billion, compared to N262 billion in year till date September 2015, while gross profit decreased by 52 per cent, N28.7 billion compared to N60 billion in half year 2015.

The slump in global oil prices continues to have far-reaching implications on indigenous companies such as Oando. In Nigeria, oil companies are faced with an even more challenging environment including;

Due to the production disruption by militant activities in the Niger Delta, Oando witnessed a 22.7 per cent decrease in oil production from 53,169 boe/day in third quarter, 2015 to 41,094 boe/day in third quarter, 2016. Seplat Nigeria recorded a N24.1b loss in third quarter, 2016 while Exxon Mobil reported a 38 per cent drop in quarterly profit and a 3 per cent fall in production as a result of production disruption by militants in the Niger Delta.

Devaluation of the Naira by the Central Bank of Nigeria from an average exchange rate of N280.00:$1.00 in second quarter 2016 to an average of N316.00:$1.00 in third quarter 2016, resulting in unrealized foreign exchange losses.

Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “The third quarter witnessed the FGN establish a ceasefire with the militants responsible for production disruptions in the Niger Delta, leading to stabilised daily productions from our assets and expectations of imminent increases to our 2015 production highs of 56kbbls/day. We have also been proactive in our cost management initiative to ensure maximised value extraction for every barrel of oil produced as the global oil price still lingers below $50/bbl. We are pleased to have executed a SPA with Helios Investment partners for $116 million, representing 49 per cent legal voting rights in the company’s midstream business, of which the proceeds of the divestment will be utilised towards the company’s debt restructuring initiative. Our trading business has grown significantly this year having exported over 11 cargoes of crude with volumes exceeding 11mmbbls and an additional 31 cargoes of other oil based products year to date. Our business model of dollar denominated earnings is taking shape as evidenced from the increased revenue line (95 per cent increase) and future increases from the Upstream business through increased daily production rates and export trading businesses through increased lifting’s, with a focus to return our business to profitability by year end.”

Inspite of these challenges Oando’s loss-after-tax reduced by 32 per cent from N27 billion in half year, 2016 to N8.7 billion in third quarter 2016, while it scored other significant operational highlights in the nine months ended September 30, 2016.

In its upstream business, Oando Energy Resources recorded a total production of 12.0 MMboe (average 43,617 boe/day) and substantially reduced its debt burden from $900 million post acquisition in 2014 to $407 million today, signifying a total pay down of over 50 per cent in 2 years.

Significant progress has been made in growing Oando’s trading business, through the exportation of Nigerian Crude oil and Petroleum Products. The company posted revenues of N64.9 billion in third quarter from lifting volumes exceeding 3mmbbls of crude and an additional 300,000MT of refined petroleum products.

Furthermore, in its midstream business, Oando Gas and Power, signed a definite agreement to divest 49 per cent voting rights in Oando Gas & Power (OGP) to Helios Investment Partners for $115.8 million reinforcing Oando’s position as a partner of choice.

Its midstream company renowned for pioneering captive power solutions reached 59 per cent completion of the Central Horizon Gas Company 8.5km pipeline expansion and is set to increase the throughput capacity by 400 per cent. This will provide increased supply of gas in the South-East region of Nigeria further expanding the company’s footprint nationwide. In addition the company achieved a 93 per cent completion of its Greater Lagos 4 Project.

Oando Plc is on a positive trajectory to enhance operations and financial position as the company works to return to profitability.