Oando Returns to Profitability, Reports N4.1bn Profit in Q1

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By Goddy Egene

Prospects of Oando Plc’s shareholders receiving dividend soon have brightened as the indigenous energy group has bounced back into profitability for the first quarter (Q1) ended March 31, 2016.

The company ended December 31, 2015 with a loss of N49.689 billion, which is a reduction from the loss of N145.655 billion recorded in 2014. Oando improved its performance to a profit after tax of N4.1 billion in Q1 of 2016, as against a loss of N20.912 billion in the corresponding period of 2015.

According to the audited results made available last Friday, the company ended 2015 with a revenue of N381.7 billion, down by 10 per cent from N425.7 billion in 2014. It posted a loss of N49.7 billion compared with N145.655 billion in 2014.

The company said the results were delayed due to an exhaustive audit process overseen by external auditors, Ernst & Young, with approvals from the Securities and Exchange Commission (SEC) and the Financial Reporting Council (FRC).

Commenting on the full year results, Group Chief Executive, Oando Plc, Mr. Wale Tinubu, said: “2015 remained a turbulent year for the global oil and gas industry as traditional energy business operations had to be altered to enable industry players survive this new reality, utilising cost optimisation systems, increased operational efficiency as well as downscaled capex budgets. This re-evaluation of our business has resulted in the execution of strategic initiatives, which we are confident will return our business to profitability in the short-term in 2016. As the global economy returns to normalcy, we remain committed in our drive to building platforms for long term sustained value creating businesses.”

He said in spite of the numerous challenges, Oando made significant achievements across the value chain in 2015.

According to him, Oando Energy Resource (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 and 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,” he said.

> Tinubu declared that in 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 plant capacity was upgraded from 15mt/day to 30mt/day, representing a 100 per cent increment, while the Benin plant was upgraded to include the best in industry safety standards,” he said.

Meanwhile, commenting on the return of the company into profitability in Q1 of 2016, Tinubu said: “This Q1 of 2016 demonstrates our dedication to return our business 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.”

According to him, as oil prices gradually increased, Oando commenced 2016 with a reinvigorated strategy hinged on key corporate initiatives to drive the company back to profitability and ensure fiscal efficacy.

“To optimise its balance sheet, the company focused on aggressive debt reduction and recapitalisation. The Group successfully restructured its existing debt through a N94.6 billion Medium Term Note with a local consortium with lower interest rates and a renewed five-year tenor. Its upstream subsidiary, 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,” he said.