By Modupe Gbadeyanka
**Profits Rises 405% to N19.8b
Nigeria’s leading indigenous energy group listed on both the Nigerian and Johannesburg Stock Exchange, Oando Plc, last week announced its audited results for the 12 months period ended December 31, 2017.
In the company’s earnings, gross profit increased by 81 percent, N88.1 billion compared to N48.6 billion in 2016, while the Profit-After-Tax increased by 405 percent, N19.8 billion compared to N3.9 billion two years ago.
However, the firm’s turnover decreased by 13 percent to N497.6 billion from N569.2 billion a year earlier, while the net debt reduced by 6 percent from N1 billion to N230.6 billion in 2016.
It was revealed that the group’s upstream arm, Oando Energy Resources (OER), recorded a 8 percent decrease in total production to 14.7MMboe (average 40,188 boe/day) from 15.9MMboe (average 43,503 boe/day) in comparative period of 2016.
OER realised a net profit of N26.7 billion ($86.1 million) compared with N91.83million ($0.33 million) in the comparative period of 2016.
During the period under review, the firm maintained 2P Reserves of 470.7mmboe due to good reservoir management practices and also concluded the sale of interests in OMLs 125 and 134 to the Operators for cash proceeds of N1.7 billion ($5.5m) and the assumption of N26.2 billion ($84.5m) in cash call liabilities due to the joint ventures.
Furthermore, OER recorded an average production of 40,188 boe/day in the 12 months ended December 31, 2017 compared to 43,503 boe/day in the comparative period of 2016. This was primarily due to significant reductions in gas production and delivery caused by including the rupturing of Gas Transmission System (GTS-4) gas line, pipeline and terminal constraints at OML 60 to 63. The Sale of OML 125 & 134 also contributed to reduced total production for FY 2017.
Also, OER recorded a net profit of N26.33 billion ($86.1 million) compared with N91.83million ($0.3 million) in the comparative period of 2016. The increase in profitability was primarily due to improved revenue between the periods, income from the sale of OML 125 & 134, lower production expenses, increase in gains on financial instruments which were offset by lower tax recoveries.
For its midstream:, its affiliate, Axxela, achieved an 11 percent increase in natural gas deliveries and the Greater Lagos IV pipeline network was completed.
An additional six customers were added to the Greater Lagos IV pipeline network bringing the total number of customers to 175.
Also, during the period, the company completed the Central Horizon Expansion Pipeline in Port Harcourt as well as the Tincan HDD project.
Axxela recorded an 11 percent increase in natural gas deliveries in 2017. This achievement was in spite of restricted gas supply in H1 2017 due to the sabotage of upstream gas supply facilities by militants.
The construction of Phase IV of the pipeline network in the Greater Lagos Industrial Area and the Central Horizon Expansion Pipeline in Port Harcourt were successfully completed. These projects expanded the firm’s distribution infrastructure and enabled it reach a wider demand area for delivery of gas. Consequently, six (6) additional customers were connected to the pipeline network. The Tincan HDD project was successfully concluded; a project which involved restoring leakages at a pipeline that has 2 river crossings so as to reconnect existing customers to the network.
Axxela continued to maintain its Quality Management System Certification and recertified its ISO quality accreditation to the most up to date standards – ISO 9001:2015 (Quality Management Standard) and ISO 14001:2015 (Environmental Standard). These standards were successfully merged with OHSAS 18001 (Occupational Health and Safety) creating an Integrated Management System. The business achieved 3.1 million man-hours without a Lost Time Incident (LTI), a testament to its commitment to safe operational practices and continued alignment to global standards.
For its downstream, Oando Trading (OTD), it recorded a 9 percent increase in traded volumes of crude oil and over 15 million barrels of Crude Oil traded, with an additional 833,000 MT of Refined Petroleum Products.
Also, OTD sustained growth in its Crude Oil business resulting in a 9 percent increase in traded volumes just as the trading Revenues remained relatively stable at N391 billion ($1.26 billion), primarily driven by growth in Crude Oil activity.
The first half of 2017 saw Nigeria experience its worst foreign exchange crisis and a recession that was exacerbated by low crude oil prices and a decline in oil production as a result of vandalism. By the end of June, the economy had moved out of a recession and benefitted from being excluded from the OPEC’s oil production cuts, boosting performance in the oil and gas sector which is still the mainstay of the economy. The Government’s efforts to further improve the sector led to the approval of the Petroleum Industry Governance and Institutional Framework Bill (PIGB); the anticipated fall out of the PIGB being a more efficiently regulated oil and gas industry and conducive business environment for sector players. Despite a rocky start, the year ended on a firmer and more positive note. On the global front, 2017 was another volatile year for oil markets, with prices finally appearing on track to a sustainable recovery after several false starts. A slew of positive developments bolstered confidence in crude with the year ending with prices reaching just over $60 per barrel. The outlook for 2018 remains positive with the continued upturn in oil prices and the Nigerian economy forecasted to grow.
Commenting on the results, Group Chief Executive, Oando Plc, Mr Wale Tinubu, stated that, “2017 was an important and positive milestone for the company.
“The business recorded a year-end profit of N19.8 billion; a culmination of 4 consecutive quarters of positive results, validating our promise to shareholders of returning to and maintaining profitability.
“This comes in the wake of oil prices on an upward trajectory, an improved operating environment, the exit of a 13 month long recession and most importantly the continued strengthening of our business model through the effective implementation of our strategic initiatives of growth through our dollar earning upstream portfolio; deleverage through asset divestments and the expansion of our oil export trading business.
“Against this backdrop we experienced challenges; the most significant being the Securities and Exchange Commission’s (SEC) investigation into the company which led to the technical suspension of free trading of our shares on the Nigerian and Johannesburg Stock Exchanges and the instituting of a forensic audit; we have and continue to provide full support to the SEC and are hopeful of a smooth and speedy conclusion.
“We have commenced 2018 buoyed by our unrelenting commitment to our strategy and remain confident in its success.”
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