A Review of the Nigerian Energy Industry

Oando reduces debts by N53bn

Oando27 August 2013, Lagos – Oando Plc has announced a reduction in its overall debt in the last 12 months from N289 billion to N236 billion, representing a decrease of 18 per cent or N53 billion.

The company said the debt reduction has also impacted on the company’s net interest expense, and was achieved through active restructuring activities it embarked upon over the last one year.

Oando said in a statement that in line with its corporate strategy for balance sheet optimisation and the financing of growth initiatives in the upstream sector, it hoped to raise about N54.6 billion through a Rights issue of 4.5 million ordinary shares to existing shareholders of 50 Kobo at N12 per share between December 2012 and February 2013.

It said that the proceeds from the Rights issue were earmarked for part-payment of a N60 billion syndicated loan used to fund the acquisition of some upstream assets and swamp drilling rigs, part-financing of the acquisition of upstream and midstream assets by Oando’s Upstream subsidiary, Oando Energy Resources, OER, and investment in working capital to support the increased level of business.

The statement read in part: “A total of N62 billion total subscriptions were realised from the Rights Issue, indicating an over subscription of N8 billion or 14 percent, due to high investor demand.

“As a result, the successful outcome of the Rights Issue has positioned Oando to further refine its three-pronged strategy to reduce debt, improve diversification in upstream, and focus on higher margins.”

The company also said it planned to increase growth margin value for shareholders in the Upstream through a focused portfolio growth in production, cash margins, and improved returns on capital deployed.

The ongoing acquisition of ConocoPhillips’ entire Nigerian assets for $1.79 billion will transform OER from a small size oil company with 4,500 bbls/day production and nine million barrels of oil equivalent (“MMboe”) to a midsize oil producer with close to 50,000bbls/day production.

Once completed, the purchase will substantially increase its crude oil market share, and strengthen white products market position by leveraging new import infrastructure.

In the first half, H1 2012, OER successfully conducted five drilling campaigns in Nigeria in three oil fields: Abo Field (OML 125), Ebendo Field (OML 56) and Qua Iboe Field (OML 13).

Posts N4.3bn PAT in H1 2013
Meanwhile, the company has declared N4.3 billion as its profit-after-tax for the first half of 2013.

The sum however represents a decrease compared to its 2012 posting, which it attributed to a reduction in downstream importation due to substantial unpaid outstanding subsidy obligations by the Federal Government.

Oando claims to hold 15 per cent market share in Premium Motor Spirit, PMS, importation.

The Group Chief Executive of the company, Mr. Wale Tinubu, said the company remains steadfast in its commitment to develop the higher margin in mid-upstream operations.

“We remain steadfast in our commitment to developing the higher margin mid-upstream operations, which have performed creditably as opposed to our downstream where we have had to reduce our imports by over 30 per cent as a result of delays in the payment of our guaranteed subsidy payments due, thus directly affecting our revenue and net profit. We, however, continue to explore efficiency plays to increase our margins and add value to the sector.

“The company expects to commission an Alausa Independent Power Plant, a flagship Compressed Natural Gas Facility, and the Apapa Subsea Marina jetty before the end of H2 2013.

“Once operational, the subsea marina jetty in Apapa will contribute significantly to Oando’s overall net profit as a result of tolling fees and substantial cost savings on imports and demurrage,” Tinubu explained

On the company’s short-term and midterm goals, Tinubu said: “As we drive to closure of our key diversification initiatives that will transform the company into Sub-Saharan Africa leading private sector indigenous Mid-Upstream player, we note that this can only be achieved through the execution of a bold and unprecedented strategy which will undoubtedly transform the energy landscape in which we exist, promote indigenous participation in our nation and create significant value for our shareholders.”

– Kunle Kalejaye, Vanguard

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