OANDO PLC announces FYE 2014 results, posts NGN 425.7 billion top line revenue

Lagos, Nigeria, Capital Markets in African — Oando PLC (referred to as “Oando” or the “Group”), Nigeria’s leading indigenous energy group listed on both the Nigerian and Johannesburg Stock Exchange, today announced audited results for the twelve months period ended 31 December, 2014, with the following highlights:

Financial Highlights:

   –   Turnover decreased by 7%, N425.7billion compared to N457 billion (2013)

   –   Gross Profit increased by 17%, N69.8billion compared to N59.4 billion (2013)

   –   Profit-Before-Tax decreased to (N176.2) billion compared to N7.7 billion (2013)

   –   Profit-After-Tax decreased to (N183.9) billion compared to N1.4 billion (2013)

2014 was a year of extreme volatility in the oil and gas industry. The year commenced with crude oil prices as high as $110 per barrel with the year exiting as low as $60 per barrel registering the lowest price in a 5 year period as a result of a supply shift from the non-conventional oil types that the high oil price regime promotes. Turmoil in the industry for both oil companies and service companies, ensued as they had to adjust to the new reality of low oil prices, increased supply and competition. Projects which were once economically viable were reclassified and postponed till a higher oil price regime emerges. As such the industry and all companies are experiencing asset write-downs totalling billions of dollars and are reducing their subsequent investments.

Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “the global industry clearly shaped our financial outcome as a company in 2014. We thrived in our operational achievements, with a 5 fold increase in total production over 2013, but this was adversely countered by the slump in global crude oil prices. In this new pricing reality we have provisioned for a number of write-downs as a result of reduced activity in the service sector as well as the value of reserves in our legacy portfolio. We see this period as a time for prudent consolidation and will be focusing our energies on creating value through optimization of resources, via efficiency in our operations, deleverage and risk management – as demonstrated with our hedging instruments that yielded $234 million in proceeds, whilst, seeking the right opportunity to substantially expand our reserve and production base”. 

Although the weak oil price environment may minimize our operational achievements, it is still imperative we acknowledge that 2014 was a transformational year for the company. We evolved from a predominantly downstream company to a leading indigenous upstream company, consistent with our growth strategy. We are delighted with the development in our upstream business as evidenced by the increase of production from ~5,000 boepd in 2013 to ~51,000 boepd by the end of 2014 as well as an increase in our 2P reserves from 18.9 mmboe to 430 mmboe in the same period.

Nevertheless, the year turned out to be a challenging year for the industry as well as for the company as we witnessed a sharp decline in global crude oil prices of over 30%. In addition to the decline in oil prices there was a 8.4% devaluation of our local currency (Naira) which has generated significant foreign exchange loss in our downstream business. The nature of the business makes us extremely vulnerable to foreign exchange risks as we import in dollar denomination and recover our costs in Naira. The delay of payments of subsidies from the Federal Government has served to increase this vulnerability and led to a realization of N7.3Bn in foreign exchange losses.

We have braced ourselves for this new world order of low prices, reduced investments and industry shrinkage by implementing effective cost cutting initiatives, disciplined CAPEX investments towards maintaining production levels and growth through M&A deals that create immediate value.