Oando Reaffirms Commitment for Value Creation to Shareholders

Oando PLC Nigeria’s largest indigenous energy solutions provider listed on both the Nigerian and Johannesburg Stock Exchange successfully concluded its 40th Annual General Meeting (AGM), in Uyo, Akwa-Ibom state Goddy  Egene writes

Shareholders voted unanimously in favour of all resolutions passed including a vote of confidence in the management of the company. The vote of confidence was evidently borne from the company’s ability to manoeuvre the cyclical nature of the sector by adapting quickly to continued low oil pricesfollowing its record loss in 2014. Oando initiated a five-pronged restructuring program in 2016 of Growth in its upstream division; Deleverage, through divestments resulting in a net debt reduction to N218 billion as at half-year 2017; and Profitability by focusing on its dollar denominated earnings. This plan has enabled the Group reduce its debt profile by over 40% as noted by the Wale Tinubu, GCE, Oando PLC, at the AGM.

Oando has kept its promisemade in 2015 to shareholders,to return the company to profitability.  In its full-year ended December 31 2016 financial statement, it declared a 3.5 billion naira profit-after-tax; in the first quarter ended March 31, 2017, it posted a 1.7 billion naira profit-after-tax and most recently in its half-year ended June 31, 2017, Oando posted 4.6 billion naira profit-after-tax.
“As your management team we assure you that our main focus will continue to be geared towards sustaining your company’s profitability and ensuring adequate return for you our esteemed shareholders. Our story has always been one of resilience, innovation and growth, and I assure you that we are fully committed to positioning your Company towards sustained growth.” Tinubu said.
Commenting at the AGM, the Chairman of the Board of Directors, HRM Oba Michael A. Gbadebo noted that despite the challenges, the Company was on course towards becoming Africa’s most respected oil and Gas Company. He said, “As we pursue our vision to be the most respected African oil and Gas Company, we are experiencing a period of restructuring for sustained growth.  We will continue on our aggressive reduction of debt to create a platform for long term profitability, while driving growth via our dollar denominated upstream and downstream trading businesses. Cost reduction will remain key to us and we will ensure disciplined execution of our corporate initiatives towards achieving long term profitability and guaranteed returns for all shareholders.”
In 2016, Oando partnered with a consortium of Helios and Vitol Investment for cash proceeds of $210 million in its downstream business. This cash injection into the business / economy was made possible at a time when everyone thought it impossible to bring foreign investment to the country. Commenting on the transaction, Oando PLC’s Group Chief Executive, Wale Tinubu, said: “Despite global economic headwinds, we have taken the proactive approach to establish a strategic partnership which will leverage Oando’s sector dominance, considerable local knowledge and expertise; together with HVI’s international, and technical capabilities. This partnership will reinvigorate Nigeria’s downstream sector and create one of Africa’s largest downstream operations. We are extremely confident in the success and potential returns this alliance will deliver.”
Oando further divested 75% of its stake in its midstream business, Oando Gas and Power, to Helios Investment for cash proceeds of $115.8 million. Co-founder and Managing Partner of Helios Investment Partners, Tope Lawani said: “The completion of this transaction underscores Helios’ commitment to investing in businesses that deliver energy solutions to industries and consumers across the continent. We look forward to working closely with the OGP management team and other industry stakeholders to consolidate the company’s position as a premier provider of cost-effective and reliable gas and power infrastructure.”
Oando also entered into a 94.6 billion naira Medium Term Loan agreement with a syndicate of Nigerian banks. Commenting on the transaction, Mr. Wale Tinubu, Group Chief Executive, Oando PLC, said “In a bid to return to profitability in 2016, I am happy to announce the successful completion of restructuring our overall debt profile into a N94.6 Billion Medium Term, 5 year consolidated facility, with a 3 year moratorium on principal. The company now stands diversified with higher weighted dollar denominated earnings, an optimised and restructured balance sheet with lower cost of capital and longer tenors. With the upturn in the global oil prices to levels above $50 per barrel, we now look forward to the successes of 2016, having ridden out the storm”.
Speaking at the AGM on issuance of dividend, which some of the shareholders raised,   Tinubu reassured shareholders that following the completion of the company’s strategic deleveraging initiatives, they have evolved into a leaner but more focused organisation with two core dollar earning entities with an assurance of returns in the near future.
According to him, Oando scored significant operational highlights in the first half of 2017. The company through its upstream business, Oando Energy Resources, successfully realised N3.2 billion in net cash from the crystallisation of the corporate facility hedges (1,590 bbls/day) while in the second quarter of 2017, it successfully completed the sale of its interest in OMLs 125 and 134 to Nigerian Agip Exploration Limited  for a profit of N4.6 billion.In June 2017, the company successfully realized N3.2 billion in net cash from the crystallization of the Corporate Facility hedges.
In the downstream, Oando Trading (OTD), a key participant in international oil markets with a significant presence in the West African region, witnessed a 40% growth in traded volumes and a commendable 147% increase in turnover to N217.5 billion compared to N88.1billion half-year2016. The trading business lifted volumes exceeding 7.5mmbbls of crude and imported 610,000MT of refined petroleum products.
Furthermore, the Structured Trade Finance lines in the business increased by N76.5 billion to N214.1 billion in total, from a total of 5 International and African banks. This allows the company to achieve greater trading capacity and in turn, more volumes.
The GCE thanked the shareholders for their continued support of the Company in the challenging times. He said moving forward, the company’s focus is geared towards sustaining growth via its dollar earning upstream and downstream trading businesses, while continuing to provide the necessary support to its new partners in the midstream and downstream businesses.“In addition to our growth focus, profitability will be driven by focused cost and liquidity management, with significant selective oil and gas production initiatives planned for 2017,” he said.
Tinubu also mentioned that “With security concerns in the Niger Delta receding, Nigeria’s economic recovery has been buoyed by a boost in oil output, while the legislative approval of certain segments of the Petroleum Industry Bill (PIB) provides greater long-term policy certainty for the sector. Our returns underline our continued successful foray into the Upstream.”
Speaking on the outlook for the company in the second half of 2017, Tinubu said: “We remain committed to optimising our overall production base, seeking unique profit-driven opportunities to further partner with international oil companies, while firming up our balance sheet to provide greater shareholder value.”