OANDO Q4'15 & Q1'16 Earnings Presentation: The key takeaways

Proshare

Monday, July 18, 2016 5:22 PM / Proshare Research

As a result of the difficult operating environment in the 2015 financial year, particularly in global oil market, Oando's turnover for 2015 FY declined by 10% with corresponding net loss of N49.69billion (a 66% decline), while it recorded significant negative impact from impairment of assets to the tune of N13.37billion (a 90% decline) and a 43% decline in its operating income.

In Q1'2016, the oil firm embarked on restructuring strategies to restore the business towards profitability. Thus, it posted improved operating income growth of 624% amidst decline of 34% and 55% in both its turnover and gross margin, respectively.

In addition, the firm posted a profit of N4.10billion, representing 120% growth in bottom-line, which was mainly driven by tax-credit. According to the management the decline in the value of Naira against dollar and activities of militants in the Niger Delta region had negative impacts on the company's performance so far in year 2016.

Summarily, below are the key takeaways from the 12Months 2015 and 3months 2016 earnings presentation as presented by the management;

         The firm is now in partnership with Helios Investment Partners and Vitol group to divest 60% economic rights of Oando Downstream for $461 total consideration.

         Net cash proceeds of N58.5bn from sales of downstream will be used to reduce  debt on the Oando Group Balance Sheet.

         Conversion of OODP convertible notes of N47billion into equity by 3Q’16 - To recapitalise the balance sheet, reduce the debt and commensurately increase shareholders’ funds.

         The firm is currently negotiating a sale  of 75% stake in OGP with a qualified buyer in 3Q’16.

         It has successfully divested the Akute 12.15MW power station servicing the Lagos State Water Corporation.

         Divestment of the 10.4MW Aluasa IPP, servicing the Lagos State Water Corporation is underway.

         Signed agreement for the development of a 20mmscf/day Mini LNG plant in Ajaokuta, Kogi State. Facility expected to commence operations in Q2 2017

         Earnings guidance for Q2'2016: possibility of lower earnings due unrealized foreign exchange losses, which emanated from devaluation of Naira.

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