Tuesday, August 02, 2016 8:22AM /NSE
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 unaudited results for the six months period ended 30 June, 2016, with the following highlights
· Turnover increased by 18%, N212.0 billion compared to N180.0billion (H1 2015)
· Gross Profit decreased by 49%, N19.0 billion compared to N37.1 billion (H1 2015)
· Loss-After-Tax decreased by 23%, (N27.0 billion) compared to (N35.0 billion) (H1 2015)
· One-off unrealized foreign exchange losses of N28.6 billion from dollar denominated liabilities as a result of currency devaluation
·Refinancing of debt through N108 billion Medium Term Note, including the conversion of a substantial portion of the dollar denominated debt into Naira.
· Oando Energy Resources (OER) through its 81.5% held subsidiary, Equator Exploration Ltd, successfully farmed out 65% participating interest in blocks 5 & 12 in the Exclusive Economic Zone of the Democratic Republic of Sao Tome and Principe.
· Oando Gas & Power achieved 55% completion of the Central Horizon Gas Company (CHGC) 8.5km pipeline expansion.
· 200% subscription of gas capacity in the 20 mmscf/day Mini LNG plant development in Ajaokuta, Kogi State.
· Oando PLC concluded $210 million recapitalization and partial divestment of Oando Downstream.
As the global economic challenges persist, Oando has been duly affected as a result of the new reality in international commodity prices of ~$50/barrel and the operating challenges in the Niger Delta that have occasioned a 25% reduction in daily production volumes from ~56kboepd H1, 2015 to 45kboepd H1, 2016.
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 above N280.00:$1.00, has resulted in unrealized foreign exchange losses due to our dollar denominated liabilities.
We have taken action by converting $133 million liabilities on our books to N38.6 billion which are currently being serviced by naira, hence leaving only dollar denominated liabilities to be serviced by our dollar earnings.
In the period under review we have executed 70% of our asset disposal target and 100% of our refinancing target and are poised to return the business to profitability by year end 2016.
Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “The first half of the year has attested to the deplorable state of security in the oil & gas environment in Nigeria, having experienced a 25% decline in production volumes arising from the increased disruptions from militant activities.
On a positive note the company has benefitted from the implementation of the oil price hedge, which has helped to calm the effects of the disruption of production activities and aided in the rapid pay down of the $900 million of Upstream related liabilities at the time of the Conoco Philips Acquisition, to $440 million today.
We are pleased to have received $210 million into our downstream group representing 70% of our asset disposal plans and also concluded the restructuring of our debt through the N108 Billion medium term note.
Now that the dollar liquidity position in the country has improved, we have limited the risk of exchange rate volatility by converting a substantial portion of our dollar denominated obligations to naira, thereby matching our dollar liabilities to our dollar generating businesses. We reiterate our forward looking business model of a focused upstream and export trading businesses, which will drive profitability through consistent dollar earnings”.
Oando PLC successfully restructured its debt through a N108 billion Medium Term Note with lower capital costs circa 15% and a renewed 5 year tenor.
Oando Energy Resources (OER) through its 81.5% held subsidiary, Equator Exploration Ltd, successfully farmed out 65% participatory interests in Block 5 and Block 12 in the exclusive economic zone of the Democratic Republic of Sao Tome and Principe to Kosmos Energy Sao Tome.
The farm out leaves the company with a 20.0% and 22.5% interests in Block 5 and 12 respectively. This is evidence of our 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.
Oando Gas & Power (OGP) as at H1 2016, achieved 55% completion of the Central Horizon Gas Company pipeline expansion project, the pipeline, which is set to be completed in Q4 2016, and will 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 our footprint nationwide.
The unrest in the Niger Delta has led to increased disruption in the nations gas supply, in response to this development, we have put out an expression of interest for the supply of LNG through Floating Storage and regasification Units (FSRUs), mobile/modular onshore Liquefied Natural Gas (LNG) and other similar solutions. This will provide an alternative source of gas to ensure the nation is adequately powered and supported.
In July 2016, Oando PLC successfully concluded recapitalization and partial divestment of Oando Downstream for $210 million, the net cash proceeds of the transaction have been used to reduce a significant portion of the debt on the group balance sheet. This partnership which has been renamed OVH Energy is positioned to revolutionize Nigeria’s downstream sector and create one of Africa’s largest downstream operations. We are excited to reap the successes and returns this new business will deliver.
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