Oando Plc has reported a revenue of N212 billion for the half year ended June 30, 2016, showing an increase of 18 per cent above N180 billion recorded in the corresponding period of 2015. Gross profit decreased by 49 per cent from N37.1 billion in 2015 to N19 billion in 2016. However, the company recorded one-off unrealised foreign exchange loss of N28.6 billion from dollar denominated liabilities as a result of currency devaluation. Consequently, it ended the H1 with a loss after tax of N27 billion in 2016, as against a loss of N35 billion in H1 of 2015.
Along with many in the industry, Oando’s PAT 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 Q2 – 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. Also, Seplat Petroleum declared a N13billion loss in Q2 2016. Revenue dipped 41% to N29bn ($143m) partly owing to the vandalism of its Forcados terminal
Commenting H1 results, Group Chief Executive, Oando Plc, Mr. Wale Tinubu, 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.” According to him, 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.”
He noted that 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 five 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.