Oando Consolidates with N54.6bn Capital Injection

30 Jan 2013

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Oando Plc

Goddy Egene writes that the current effort to raise N54.6 billion through a Rights Issue will consolidate Oando’s position as a leading integrated energy firm.

Oando Plc, listed on the Nigerian Stock Exchange and Johannesburg Securities Exchange (JSE) Limited, is Nigeria’s leading indigenous integrated energy solutions company with footprints in Europe , North America and West Africa.

The company attained the status of an integrated energy solutions provider by adding natural gas distribution, independent power generation, oilfield drilling services as well as exploration and production to its petroleum marketing business. However, the company has gone through metamorphosis to attain the present status. It commenced operations in Nigeria in 1956 as Esso West Africa Incorporated as a subsidiary of Exxon Incorporation of the United States. Thirteen years later, precisely on August 25, 1969 , the company was incorporated under Nigerian law as Esso Standard Nigeria Limited. But in 1976, the Federal Government of Nigeria bought Exxon's interest in the company and rebranded it as Unipetrol Nigeria Limited, which led to its transformation into a public limited company in 1991 and its listing on the NSE in 1992.

In 2000, Ocean & Oil Investment Limited (OOL) acquired 30 per cent stake in Unipetrol from the Federal Government of Nigeria and then became the core investor, while the remaining 10 percent was sold to the public. Executing its expansion plan for Unipetrol, OOL in 2002 acquired 60 per cent equity in Agip Nigeria, which was divested by Agip Petroil International B.V.Agip. OOL thereafter merged Agip Nigeria with Unipetrol and rebranded the new company to become Oando Plc.

To further expand its operational coast, Oando went ahead to register as an external company in South Africa in 2005 and became the first African company to accomplish a cross-border inward listing on the JSE. Again, last September, a subsidiary, Oando Energy Resources Incorporated, was listed on the Toronto Stock Exchange . That firm has signed an agreement to acquire Conoco Philip's Nigerian assets for $1.79 billion in Nigeria.
Shareholding Structure and Board

Currently, Oando’s company's authorised share capital is N5 billion comprising 10 billion ordinary shares of 50 kobo each, of which N1,137, 059,069 comprising 2,274,118,138 ordinary share capital issued and paid-up.

As at last August, OOL held 10.63 per cent of Oando's equity while Stanbic Nominees Nigeria Limited - Trading A/Cs, accounted for 11.5 per cent. The remaining 77.87 per cent is held by individuals and institutional investors.

In terms of board of directors, Oando has an experienced and widely diversified board composed of 11 members with four as executive directors while the remaining seven are in non-executive capacity.The board is chaired by Oba Michael Gbadebo, The Alake of Egbaland, Ogun State.

The executive management led by Group Chief Executive, Mr. Jubril Tinubu, includes: Mr. Omamofe Boyo(deputy group chief executive);Mr. Olufemi Adeyemo(executive director/chief financial officer); Mr. Mobolaji Osunsanya (executive director). Others are: Chief Sena Anthony; Mr. Oghogho Akpata; Ammuna Lawan; Yusuf N’ije; Ms. Nana Afoah Appiah-Korang and Ms. Ayotola O. Jagun, who is also the company secretary.

The board of directors of the company is responsible for setting the strategic direction of the company and overseeing and monitoring its business affairs. The board ensures that the company is fully aware of its responsibility to all relevant stakeholders in the conduct of its operation. The management takes responsibility for the day-to-day running via the execution policies approved by the board. The group's business is organised into six divisions:Energy Services and Exploration & Production (in the upstream sector), Gas & Power (in the midstream sector) and Marketing, Supply & Trading and Terminals & Logistics (in downstream sector).

Financial Performance
Oando Plc has put up an impressive financial performance over the past years, growing its turnover by 216 per cent in the last five years. Profit has followed the same pattern, growing by 119 per cent. Specifically, turnover, which stood at N186 billion in 2007, rose to N339 billion in 2008, N336.7 billion in 2009, N378 billion in 2010 and N586 billion in 2011. Profit after tax grew from N5.4 billion in 2007 to N8.3 billion in 2008, N10.1 billion in 2009 and 14.3 billion in 2010. However, profit fell to N3.4 billion in 2011 due to firm’s decision do a one-off write-offs that include impairments of assets, project expenses from capital raising exercises, acquisitions, and termination of technical and managerial charge.

In terms of dividends payment, shareholders of Oando Plc have been enjoying significant cash dividends and bonus issues. The company has been consistent in this regard from 2007 to 2010 paying dividends. Although no cash dividends was paid in 2011, a bonus issue of one for every four shares was given to shareholders. Going forward, the company has projected dividends of N8.831 billion at the end of this year, N17.827 billion in and N17.1 billion in 2015.

Rights Issue
However, the financial performance of the Oando going forward will depend partly on its ability to finance its operations. This has informed the on-going rights issue to raise N54.6 billion from existing shareholders. The company is offering 4.548 billion ordinary shares of 50 kobo each at N12 per share. Existing shareholders are being offered an additional new two ordinary shares of the company for every one share ordinary held.

The issue is a very critical step towards the execution of its strategic expansion plans; optimising its balance sheet and improving its leverage position. The net issue proceeds, estimated at N52.939 billion after deducting the total cost of the issue estimated at N1.64 billion representing 3.01 per cent of the issue, will be used as follows: N27.777 billion( 52 per cent)-refinancing of upstream assets. The sum of N23.7billion (45 per cent) is expected to be used for the purchase of Conoco Phillip's Nigerian business assets for which a sales and purchase agreement has been signed by both parties. The balance of N1.462 billion (three per cent) will be ploughed back into the company as working capital.

The Group Chief Executive Officer of Oando Plc, Mr. Wale Tinubu, has said: “The successful outcome of the rights issue will position Oando to increase value for shareholders in the upstream through focused portfolio growth in production, cash margins and improved returns on capital deployed. We count on the consistent support of our shareholders to seize the opportunity to take up their rights and benefit from the higher margin value creation the upstream offers.”
Shareholders’ Support
Already some key shareholders of the company have expressed support for the rights issue and asked others to take up their rights so as not to miss out in this opportunity.

For instance, the National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Mr. Sunny Nwosu: “Shareholders should embrace the shares as a future stock. The company has made good investments in the energy sector and very soon the benefits will begin to manifest. The rights issue is, therefore, an opportunity to buy more shares and wait for the returns that would come from those investments,” he said.

Speaking in the same vein, the President of Nigeria Shareholders Solidarity Association (NSSA), Chief Timothy Adesiyan, noted that the price of the issue was very attractive, considering the assets and future prospects of the company.

“As you are aware Oando Plc has huge assets in the energy sector. Its operations were only affected by the challenges in the environment. But I believe the bad times are over. The company has a very bright future and I have so much confidence in the business they are into. The price of N12 for the offer is an opportunity no shareholders should miss. The shareholders should take up their rights and increase their holdings,” Adesiyan said.

Similarly, the President, Association for the Advancement of the Rights of Nigerian Shareholders (AARNS), Dr. Faruk Umar, urged shareholders to take up their rights because he expects the company’s profitability to rise on strong business fundamentals. He also believed that the market would have been picked up by the time the rights issue offer was concluded.

Also, the National Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie, said: “The Oando rights issue is good buy any day. Given the level playing ground, Oando, which is major integrated energy firm, will do well and surpass expectations. This is the right time to buy into the company and reap significantly in the future.”

Analysts said the unique position Oando Plc had strategically placed itself in the energy business was bound to yield returns.
According to them, the involvement of a sizable number of institutional investors in the company was a show of confidence in the future value of the equity. The multiple listing is expected to expose the company's operations to global standards thus reducing the risks of failure. Above all, if the management and board of the company work hard enough to deliver the values it promised in the four years forecast, then investors will reap fair returns on their investment both in capital appreciation and dividends payment.

Tags: Nigeria, Featured, Business, OandO, Consolidates, Capital Injection

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