Oando records N4.1b net profit in three months
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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