Oando records N212bn revenue, cuts debt by half

 
Oando Plc has announced unaudited results for the six months period ended 30 June, 2016. The company’s turnover increased by 18 per cent to N212 billion, compared to N180 billion in half year 2015, while gross profit decreased by 49 per cent, N19 billion compared to N37.1 billion in half year 2015.

Along with many in the industry, Oando’s profit after tax numbers are indicative of the effects of the global slump in oil prices which has seen Nigeria’s oil export receipts decline dramatically, indigenous firms face a scale back in proposed Joint Ventures with IOCs, deeper cuts to capital spending, finding new markets and investor wariness.

A review of the half-year results of oil and gas companies operating in Nigeria reveals a continued steady decline in earnings, Royal Dutch Shell missed its quarterly profit expectations by more than $1 billion after reporting a 72 per cent plunge in earnings due to weak oil prices and high costs following its $54 billion takeover of the BG Group. ConocoPhillips posted a loss of $1.1 billion in second quarter, a six fold increase in loss over the same period in 2015 and Chevron, a $1.47 billion loss in its half year 2016 result compared with profit of $571 million in the preceding year.

Oando’s profit after tax numbers were further impacted by a 25 per cent reduction in daily production volumes from 56kboepd in half year, 2015 to 45kboepd in half year, 2016.

Furthermore the devaluation of the Naira by the Central Bank of Nigeria in second quarter 2016, from an average exchange rate of N199.00:$1.00 to N280.00:$1.00, resulting in unrealized foreign exchange losses due to the company’s dollar denominated liabilities also impacted Oando’s profit after tax numbers.

Commenting on the results, Group Chief Executive, Mr. Wale Tinubu, Oando Plc said, “The first half of the year has revealed how challenging the oil & gas environment is in Nigeria, having experienced a 25 per cent decline in production volumes arising from the increased disruptions from militant activities, we however benefit from the implementation of the oil price hedge, which has helped to calm the effects of the disruption of production activities. Now that the dollar liquidity position in the country has improved, we have converted 60 per cent of our dollar denominated obligations to Naira, while restructuring our debt through the N108 billion medium term note, thus managing any future currency volatility. We reiterate our forward looking business model of a focused upstream and export trading businesses, which will drive profitability through consistent dollar earnings”.

As part of plans to return the company to profitability by year end 2016, Oando is in the concluding phase of its five-pronged strategic group initiatives, 67 per cent of its non-producing asset disposals and 50 per cent of refinancing target have been concluded. The company successfully restructured its debt through a N108 billion Medium Term Note with lower capital costs circa 15 per cent and a renewed 5 year tenor in the first quarter of 2016 as well as the full divestment of its upstream services business, reducing the group’s debt profile by 32 per cent. In July 2016, it successfully concluded recapitalization of its downstream business for $210 million, the net cash proceeds of the transaction have been used to further reduce a significant portion of the debt on the group’s balance sheet. This partnership is positioned to revolutionize the Nigeria’s downstream sector and create one of Africa’s largest downstream operations. Most recently, Oando concluded the conversion of N47 billion Ocean and Oil Development Partners Limited notes to equity, increasing shareholder funds.