Oando posts N212 bn top line revenue

 

Oando posts N212 bn top line revenue

FRIDAY EKEOBA

Oando Plc has announced unaudited results for the six months period ended 30 June, 2016. The company’s turnover increased by 18 percent to N212 billion, compared to N180 billion in H1 2015, while Gross Profit decreased by 49 per cent, N19 billion compared to N37.1 billion in H1 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 percent 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.

Oando’s PAT numbers were further impacted by a 25% reduction in daily production volumes from ~56kboepd H1, 2015 to 45kboepd H1, 2016, as a result of production disruption from militants’ activities in the Niger Delta, Seplat petroleum declared a N13billion loss in Q2 2016. Revenue dipped 41per cent to N29bn ($143m) partly owing to the vandalism of its Forcados terminal

Furthermore the devaluation of the Naira by the Central Bank of Nigeria in Q2 2016, from an average exchange rate of N199.00:$1.00 to N280.00:$1.00, resulting in unrealized foreign exchange losses due to the company’s dollar denominated liabilities also impacted Oando’s PAT numbers.

Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “The first half of the year has revealed how challenging the oil & gas environment is in Nigeria, having experienced a 25% 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. Now that the dollar liquidity position in the country has improved, we have converted 60% 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”.

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% of its non-producing asset disposals and 50% 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% and a renewed 5 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 percent. In July 2016, it successfully concluded recapitalization of its downstream business for $210 million, the net cash proceeds of the transaction have been used to further reduce a significant portion of the debt on the group’s balance sheet. This partnership is positioned to revolutionize the Nigeria’s downstream sector and create one of Africa’s largest downstream operations. Most recently, Oando concluded the conversion of N47 billion Ocean and Oil Development Partners Limited notes to equity, increasing shareholder funds.

Nonetheless, Oando scored significant operational highlights in the first half 2016. The company through its upstream business, Oando Energy Resources, farmed out 65% participatory interests in Block 5 & Block 12 in its 81.5% held subsidiary, Equator Exploration Ltd in the exclusive economic zone of the Democratic Republic of Sao Tome and Principe to Kosmos Energy Sao Tome. This validates the Oando’s ability to partner with a world renowned Exploration Company with an impressive track record of finding and developing large oil and gas resources at a more successful rate than industry standards.

In its midstream business, Oando Gas and Power has reached 55% completion of the Central Horizon Gas Company 8.5km pipeline expansion which is set to be complete in Q4 201 and is set to increase the throughput capacity by 400%, thereby providing increased supply of gas in the South-East region of Nigeria. The 20mmscf/d Mini LNG Plant in Ajaokuta has already received an overwhelming 200% subscription, fully contracting the total planned capacity. Oando Gas & Power commenced development plans for a replica 20mmscf/d Mini LNG Plant in Onne Port-Harcourt, which will provide alternative gas/power solutions for the South East region of Nigeria, further expanding the company’s footprint nationwide.