Oando Rebounds to Profitability, Posts N3.5 Billion PAT, reduce debt by 35 percent
Oando PLC has announced its audited results for the year ended 31 December, 2016, recording Profit After Tax (PAT) of N3.5 billion which increased by 107 percent compared to a loss N47.6 billion recorded for the year ended December 2015.
Further financial highlights of the group’s results showed Turnover increased by 49 percent to N569.0 billion compared to N382.0 billion in 2015, EBITDA increased by 51 percent to N71.0 billion compared to N47.0 billion in 2015 while the oil group’s Net debt reduced by 35 percent to N230.6 billion compared to N355.4 billion in the previous year.
Operational Highlights of the company showed that the Upstream segment of Oando Energy Resources (OER) during the year ended December 31, 2016 recorded a 20 percent decrease in total production to 15.9MMboe (average 43,503 boe/day) from 19.9MMboe (average 54,520 boe/day) in comparative period of 2015.
The company said “Approximately 46 percent of crude production as at December 31, 2016, 9,590 bbls/day was hedged at $65/bbl (average) with expiry dates ranging from July 2017 to January 2019, and further upside on the condition of certain price targets being met, while 2P Reserves increased by 5 percent from 445mmboe in 2015 to 469.3mmboe due to reservoir performance.
Oando also concluded the sale of its interests in OMLs 125 and 134 to the Operators for cash proceeds of $5.5m and assumption of $88.5m in cash call liabilities due to the joint ventures.
In the Midstream segment, Oando completed the partial divestment of 49 percent of the voting rights in the company’s midstream business subsidiary, Oando Gas and Power Limited (“OGP”), to Glover Gas & Power B.V., a special purpose vehicle owned by Helios Investment Partners LLP (“Helios”), a premier Africa-focused private investment firm for $115.8 million.
Oando Gas and Power (OGP) concluded the sale of Akute Independent Power Plant for a transactional value of N4.6bn.
Meanwhile in the downstream, Oando said it successfully concluded the recapitalization of its downstream business for $210 million by HV Investments II B.V., (“HVI”), a joint venture owned by Helios Investment Partners (“Helios”), a premier Africa-focused private investment firm and the Vitol Group (“Vitol”), the world’s largest independent trader of energy commodities.
Oando Trading witnessed continued growth resulting in a 106 percent increase in traded volumes of Crude Oil and Refined Petroleum Products, accomplished through a number of structured and well executed initiatives.
Physical volumes of 13 million barrels of crude oil and 3 million MT of refined petroleum products were transacted.
“Trading revenues hit a four-year high at $1.4 billion.
The volatility in oil prices continues to impact the balance sheet of oil companies globally. This is evident in a decline in Oando’s crude oil and natural gas sales in the year ended 31 December, 2016. Unrest in the Niger Delta forced a reduction in Oando’s production, specifically sabotage activities at OMLs 60 to 63 and a Force Majeure on the Qua Iboe terminal, resulting in losses estimated at 11,600bbl/d.
Despite these challenges the company achieved successes in the year as witnessed by an improvement in top line revenue, deleverage of the company’s balance sheet and growth in its business model of higher weighted dollar earnings in both the Upstream and Downstream operations.
Commenting on the results, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “2016 saw the country plunge into a recession, the first in over 2 decades, besieged with liquidity constraints, devaluation of the naira and a slump in oil earnings due to low oil prices intensified by the insurgency in the Niger Delta.
We were proactive in the timely execution of our restructuring program of Growth in our upstream division; Deleverage, through divestments resulting in a net debt reduction of N125bn; and Profitability by focusing on dollar denominated earnings. In the, upstream we witnessed a decline in production but an increase in our 2P Reserves from 445mmboe in 2015 to 469mmboe.
We are hopeful that the FGN will establish a long term resolution to the conflict in the Niger Delta which will positively impact the oil and gas industry, consequently ramping up our daily production.
In the Midstream we concluded the partial divestment of Oando Gas and Power (OGP) to Helios Investment Partners to further expand our gas footprint, whilst in the Downstream our trading business continued to make in-roads in crude lifting.
As we enter a new phase in our business evolution we are optimistic about 2017 and look forward to even more successes having braved the challenges of 2016.” He concluded
Operational Update
In the Upstream Oando Energy Resources (OER) had an average production of 43,503 boe/day compared to 54,520 boe/day in the year ended 31 December, 2015. This reduction was mainly due to increased disruptions in the Niger Delta and led to the company incurring repairs and a restoration cost estimated at $17 million.
Although the Midstream was also impacted by the unrest in the Niger Delta leading to a drop in gas volumes from 62mmscf per day in 2015 to ~40mmscf per day in 2016, the company recorded the successful conclusion of its partial divestment to Helios Investment Partners.
This partnership will firmly leverage OGP’s local knowledge and expertise, alongside Helios’s global network and financial capabilities to optimise the company’s existing operations and expand its footprint.
Also nearing completion was the 8.3km Greater Lagos 4 pipeline project culminating 3 river crossings and the deployment of advanced technology extending OGP’s gas footprint from the Ijora area of Lagos State through to Marina Business District; enabling improved utilisation of the company’s 100mmscf per day gas distribution capacity.
In the Downstream, Oando Trading executed significant joint venture trading opportunities with ENI and Cepsa, positively impacting revenues of $1.4 billion, a 4 year high for the business.
