Oando Cuts Debt Levels by 8%, Raises PAT by 26% in Q3

By Modupe Gbadeyanka

The management of Oando Plc under the leadership of Mr Wale Tinubu has continued to show that he has the ability to turnaround fortunes of the leading indigenous energy group in Nigeria.

The energy firm, listed both on the Nigerian and Johannesburg Stock Exchange, announced its unaudited results for the nine months period ended September 30, 2019 and from the highlights, it declared a 26 percent rise in profit after tax, which went up to N13.1 billion from N10.4 billion despite the total generated revenue going down by 18 percent to N413.8 billion from N505.1 billion, with the operating profit going down by 31 percent to N19.8 billion from N28.7 billion.

However, due to the strategies mapped out by the board and management, Oando was able to reduce its total borrowings by 8 percent to N193.1 billion from N210.9 billion, while the production increased by 8 percent to 43,045boe/day from 40,039boe/day.

This was driven by an 11 percent increase in natural gas production (from 120,047mcf/day YTD September 2018 to 133,415mcf/day YTD September 2019) and an 8 percent increase in crude oil production (from 16,850bbls/day YTD September 2018 to 18,147bbls/day YTD September 2019).

In YTD September 2019, Oando Trading traded approximately 9.3 million barrels of crude oil under various contracts with the Nigerian National Petroleum Corporation (NNPC) and delivered 317,649MT of refined products.

It incurred capital expenditure of $84.3 million in the nine months of 2019 compared with $59.3 million in same period in 2018. This consists of $77.3 million at OMLs 60 to 63, $5.6 million at OML 56, and $1.4 million on other assets.

During the year, the company, in conjunction with its JV partners, aggressively ramped up its drilling program towards increasing oil revenue and meeting gas obligations and as at September 2019, it has successfully completed a side track at OML 56, shoring up net production by nearly 1,500bbls/day, whilst also drilling and completing five wells across three rig lines at its joint venture operations on OMLs 60-63.

Recall that last month, Oando announced that the NNPC/NAOC/OANDO Joint Venture (of which Oando Energy Resources [OER] holds a 20 percent working interest) had made a significant gas and condensate find in the deeper sequences of the Obiafu-Obrikom fields in OML 61, onshore Niger Delta.

Preliminary evaluation indicates that the find amounts to about 1 trillion cubic feet of gas and 60 million barrels of associated condensate in the deep drilled sequences.

The well can deliver in excess of 100 million standard cubic feet/day of gas and 3,000 barrels/day of associated condensates. The discovery is part of a drilling campaign planned by the Joint Venture aimed at exploring near-field and deep pool opportunities as immediate time to market opportunities.

The JV started gas and condensate production from the Obiafu-41 discovery just 3 weeks after completion and the gas from this discovery will largely be channelled to the domestic market in order to feed the power sector.

Oando said the full impact of this discovery will be determined and communicated to the market on conclusion of the next annual independent reserves and resources evaluation.

Commenting on the results, Mr Tinubu said, “In the period under review, we made substantial progress on our top priority of operational growth and recorded an 8 percent increase in hydrocarbon production.

‘In conjunction with our partners, we successfully completed an ambitious 6-well drilling program, the results of which have been positive, and are particularly excited about the discovery of a significant gas and condensate find at a field in OML 61 of our Joint Venture.

“This has had a major impact on our reserves and consequently future cash flows. Production has since commenced in October on the completed wells, and the gas will largely be channelled to feed the nation’s power sector through our Joint Venture’s Okpai Power plant, Nigeria’s first independent power plant.

“In addition, we achieved an 8 percent reduction in our debt levels, whilst growing free cash flows. Over the last quarter of the year, our focus will be on the completion of our drilling program as well as tie-in of the new discoveries.”