Oando released its audited FY 23 results after market close on Friday. Analyzing this company can be challenging, as the figures are somewhat outdated and include some 2024 data. A more comprehensive understanding will emerge once the 2024 numbers are available.

SO my focus is on the financial statement and other key points i found interesting. 

About the firm

Oando PLC, initially established as Unipetrol Nigeria PLC, was formed through a special resolution following the Federal Government of Nigeria’s acquisition of Esso Africa Incorporated’s shares, the main stakeholder in Esso Standard Nigeria Limited.

The company underwent partial privatization in 1991 and was fully privatized in 2000 when the Federal Government sold its 40% stake to Ocean and Oil Investments Limited and the Nigerian public.

In December 2002, Oando PLC merged with Agip Nigeria PLC after acquiring a 60% interest in Agip Petrol’s holdings in Agip Nigeria PLC. The company officially rebranded from Unipetrol Nigeria PLC to Oando PLC in December 2003.

The company is listed on the Nigerian Exchange Group and the Johannesburg Stock Exchange.

Ocean and Oil Development Partners Limited (OODP) holds a 57.37% stake in the company, while the remaining 42.63% of shares are broadly distributed.

Ownership of OODP is split, with 66.67% held by Group Chief Executive Wale Tinubu and 33.33% by Deputy Group Chief Executive Mofe Boyo.

FY 2023 numbers 

The group made N2.8 trillion in revenue and a profit after tax of N60.2 billion. 

During the twelve months ending December 31, 2023, average production was 23,258bbl/day, compared to 20,703bbl/day in 2022.

In 2023, production consisted of 6,211bbls/day of crude oil,239bbl/day of NGLs and 16,808 boe/day of natural gas.

Production increase was a result of improved operations, repairs of shut in wells offset by persistent sabotage activities.

Segmental split

Revenue is divided into four segments: Exploration and Trading, Supply and Trading, Mining and Infrastructure Development, and the Corporate Unit.

Supply and Trading, which accounted for the largest portion of revenue, faced a N34.2 billion loss in FY 2023.

Exploration and Production generated N126.7 billion in revenue with a N17.7 billion profit after tax.

Mining and Infrastructure Development reported a N2.7 billion loss.

The Corporate Unit and others achieved N1.5 trillion in revenue and a N79.7 billion profit.

Going concern status is in doubt

Auditors flagged its going concern status. 

The Group and Company have going concern indicators which include reporting consistent total comprehensive losses in the last 3 years, negative working capital, inability to settle loan facilities as at when due and net liabilities (negative shareholders’ fund at the end of the reporting year.

Essentially, the firm’s entire working capital is made up of debt.

The Company recorded total comprehensive loss for the year ended 31 December 2023 of N216.2 billion  and as at that date, its current liabilities exceeded current assets by N469.2 billion.

What’s the action plan to fix this? 

In order to solve the capital deficiencies, the firm appointed a rating agency to provide a rating analysis for a bond, which process started in 2022. The rating of the bond had to be paused for the completion of the NAOC acquisition in August 2024. Activities on the rating have since resumed. The prospectus is completed and ready for filing with the SEC for approval in Q4 2024. The face value of the bond is N1.5 trillion. 

Management has additional plans to address the remaining 46.4% of the projected working capital deficiency through equity raises until such a time that profit and healthy cash flows from profitable operations will be achieved.

Management is currently making efforts to sign a binding agreement with each prospective equity provider. Management is hopeful, yet uncertain of the success and timing of the bond and equity raises. 

Mining operations

The firm gave a bit more colour on mining. Sharing here because i didnt know Oando was in that space. 

Oando PLC through its wholly owned subsidiary, Bitumen Resources Limited, entered into a Share Sale and Purchase Agreement on 21 June 2021 with Dr. Lawrence Ajayi and Mrs. Benita Funmilayo Ajayi  for the acquisition of 55% equity stake in Lakel Afrik Petroleum Limited (LAPL). 

The buyer received 13,750,000 ordinary shares of LAPL from the Seller for a consideration of US$1 million ($0.5 million payable immediately and $0.5 million agreed as deferred consideration). The Buyer paid US$500,000 on the transaction date. The transaction has not been accounted for as a business combination in these consolidated and separate financial statements because of migration issues. 

On 4 November 2022, the Buyer further acquired the remaining equity stake of 45% in LAPL from the seller for $20,000.

After concluding the transaction, LAPL became a wholly owned subsidiary of BRL. LAPL owns Bitumen Exploration Licence EL 28420 and Bitumen Mining Lease ML 30585. 

A few key matters highlighted by the auditors

On February 10, 2023, Oando Servco Nigeria Limited, an indirect subsidiary of Oando PLC, secured a $20 million loan agreement with OODP BVI, a subsidiary of Whitmore Asset Management Limited. This fund is intended to support OODP BVI’s corporate activities.

From the loan, Oando Servco directed Oando PLC to disburse $250,000 on August 8, 2023, and another $250,000 on October 24, 2023, to OODP BVI.

Furthermore, Oando Servco instructed Oando Trading DMCC and Oando PLC to pay $1 million on July 3, 2023, and $1.1 million on October 24, 2023, respectively, to Ansbury Investments Inc.

As of this report, OODP BVI owes a total of $2.6 million to Oando Servco Nigeria Limited.

OSNL and Argentil Asset Management Limited entered into a forward contract on August 23, 2024. Argentil agreed to advance NGN16 billion to OSNL between August 23 and August 28, 2024, at a spot rate of N1600:US$1 with a cost of carry of SOFR plus 8.5% per annum until the settlement date.

The N16 billion was credited to OSNL by various parties including OODP (an indirect subsidiary of Whitmore Asset Management Limited), owned by the Group Chief Executive and Deputy Chief Executive of Oando Plc. 

As at 25 October 2024 OSNL has partly paid USD5,500,000 to the Group Chief Executive based on Argentil’s instruction, from the advanced sum, with a total of USD 4,500,000 outstanding as payable to Argentil.

Directors renumeration and compensation.

In FY 2023, directors’ remuneration totaled N3 billion. The salaries for the five executive directors amounted to N2 billion.

Other emoluments was N834 million. 

Other non executive fees was about N260 million. 

*Included in other emoluments and other non-executive fees is the board duty allowance of N731.2 million received by five executive directors of the Company and an executive director of a subsidiary during the year. 

*Included in salaries and other short-term employee benefits of key management personnel are board duty allowance of: 

The highest paid director got a total of N973.2 million in FY 2023. 

Funding for the NAOC acquisition

Some colour was provided on the funding for  the NAOC transaction which occurred a few months ago. It was funded via loans from Indorama, Afrexim, and Mercuria. 

Indorama Capital Holdings Pte. Ltd lent the firm $150 million and African Export-Import Bank $350 million. The tenure of the loan is 7 years with a moratorium period of 1 year and the interest rate is 8.55% + SOFR (Secured Overnight Financing Rate). 

It also obtained a $150 million loan from  Mercuria Asia Resources Pte Ltd. The loan has a tenure of 7 years with a moratorium period of 2 years and the interest rate is 10.55% + SOFR (Secured Overnight Financing Rate). 

Additional Details on Project Gazelle Funding

Project Gazelle is a $3.3 billion structured finance facility backed by crude oil forward sales, sponsored by the Nigerian National Petroleum Company Limited (NNPC Limited). Three subsidiaries of Oando PLC contributed a total of $550 million, distributed as follows:

• Oando Gazelle Limited: $250 million
• Oando Trading DMCC: $200 million
• Oando Gazelle BVI Limited: $100 million

No mention of the terms and conditions.