Oando posts N4.6b profit despite low oil prices

OIL giant Oando Plc has declared a N4.6 billion profit in its half year ended June 30, 2017.

An analysis of the half-year  results of oil and gas companies operating in the country revealed an increase in earnings.

Royal Dutch Shell’s cash flow rose to the highest since the oil price crash began. It generated $3.6 billion.

Tullow Oil’s revenue increased by 46 per cent to $0.8 billion . A comparative review of Oando’s financials showed positive performance. Its turnover increased by 26 per cent to N267.1 billion from N212.3 billion; its gross profit rose by 76 per cent to N33.4 billion from N19 billion; and its net finance costs more than halved to N16.4 billion from N35.3 billion.

The firm’s profit-after-tax  (PAT) increased by 117 per cent to N4.6 billion from a loss of N26.9 billion in the same period last year. For the third time in a row, Oando posted positive financials, defying speculations and bolstering confidence in the Oil and Gas sector.

In its final year-end 2016 results, the oil firm declared N3.5 billion PAT; in the first quarter of 2017, it posted N1.7 billion PAT and more recently, N4.6 billion PAT in its half year ended June 30, 2017 results. Amidst the sectorial challenges the company continues to wax strong. These numbers are indicative of the company’s ability to manoeuvre the cyclical nature of the sector by adapting quickly to continued low oil prices. Oando has done this through the successful implementation of its corporate strategic initiatives of growth, deleverage and profitability alongside its renewed focus on its dollar earning businesses.

Commenting on the company’s financials, its Group Chief Executive, Mr. Wale Tinubu said: “With security concerns in the Niger Delta receding, Nigeria’s economic recovery has been buoyed by a boost in oil output, while the legislative approval of certain segments of the Petroleum Industry Bill (PIB) provides greater long-term policy certainty for the sector. Our returns underline our continued successful foray into the upstream.”

Oando scored significant operational highlights in the first half of this year.

Through its upstream business, Oando Energy Resources, successfully realised N3.2 billion in net cash from the crystallisation of the corporate facility hedges (1,590 bbls/day) while in the second quarter of 2017, it successfully completed the sale of its interest in oil mining leases (OMLs) 125 and 134 to Nigerian Agip Exploration Limited (NAE) for a profit of N4.6 billion.

In its Downstream business, Oando Trading (OTD), the company recorded a 40 per cent growth in traded volumes and a commendable 147 per cent increase in turnover to N217.5 billion compared to N88.1billion for the comparative period of last year. The trading business lifted volumes exceeding 7.5mmbbls of crude and imported 610,000MT of refined petroleum products, a 72 per cent and 20 per cent increase respectively.

The Structured Trade Finance lines in its downstream business increased by N76.5 billion to N214.1 billion in total, from a total of five international and African banks, further validation that Oando is still a good business investment. This increase in financing allows the company to achieve greater trading capacity and in turn more volumes.

Speaking on the outlook for the company in the second half of 2017, Tinubu said: “We remain committed to optimising our overall production base, seeking unique profit-driven opportunities to further partner with IOCs, while firming up our balance sheet to provide greater shareholder value.”

Analysts say the oil and gas sector is gradually recovering from the upheaval of low oil prices due in part to the exemption of Nigeria from the global oil production cut by the Organisation of the Petroleum Exporting Countries (OPEC) as well as containment of the Niger Delta unrest which has led to a steady rise in oil production. In May 2017, the country’s oil production increased by 273,600 barrels per day (bpd) to 1.484 million barrels per day (bpd), a testament to these changes.

The approval of the PIGB is set to further improve the sector. The anticipated fall out of the PIGB is a more efficiently regulated oil and gas industry and a conducive business environment for sector players. More recently, three petroleum industry bills passed second reading in the Senate; this is expected to further encourage substantial investment in the petroleum industry.