Report: Oando Plc Records 44% Decline in Profits

Oando Plc, a Nigerian energy company, has recently reported a 44% decline in its half-year profit to N62.6bn from N112.45bn which was recorded as of half-year 2023.

The company disclosed this in its H1 Unaudited 2024 results filed with the Nigerian Exchange Limited.

Oando blamed the dip in its profit after tax on higher exchange rate translations on administrative expenses and net finance costs.

However, revenue for the period increased by 51 per cent to N2tn at half year compared to N1.3tn in H1 2023, positively impacted by exchange rate translations and higher crude oil volumes lifted, offset by lower trading volumes, reduced natural gas and Natural Gas Liquids volumes, and lower realised sale prices for natural gas and NGL.

Speaking on the half-year results, the Group Chief Executive, Oando PLC, Wale Tinubu, blamed sabotage and thefts which impacted production for the recorded decline.

He said, “In the first half of 2024, we delivered a Profit After Tax of N62.6bn, despite persistent challenges occasioned by sabotage and theft across our assets in the Niger Delta, which led to frequent shut-ins and impacted production.

“Since assuming operatorship, we have implemented a series of production-enhancing initiatives, which are already yielding results, as demonstrated by a 36 per cent increase in output within the first 30 days following the acquisition. As we navigate a dynamic market environment, we are confident in our trajectory toward sustained production growth, positioning us to deliver long-term, sustainable value for all stakeholders.”

Meanwhile, Oando Plc announced a N60.28bn profit after tax for the year 2023in its audited financial statements for the financial year 2023 filed with the NGX on Friday.

This is as the independent auditor’s report on the Consolidated and Separate Financial Statements continued to raise concerns about the company as a going concern due to its negative asset position as well as funding shortfall.

According to the results, revenue increased by 43 per cent to N2.9tn from N1.9tn in 2022, positively impacted by a significant increase in our trading activity and exchange rate translations, higher oil and natural gas production, offset by lower NGL production volumes, and realised prices.

Operating profit for the period increased by 961 per cent, primarily driven by the increase mentioned above in revenue and a significant increase in other operating income largely due to foreign exchange gains on the group’s US dollar-denominated monetary assets.

This is despite an increase in administrative expenses primarily from exchange losses from the impact of the Naira devaluation on its foreign currency-denominated liabilities.

The independent auditor’s report conducted by BDO Professional Services signed by Henry Omodigbo continued to raise concerns about the company as a going concern due to its negative asset position as well as funding shortfall.

Recall that the auditor has raised similar concerns in the 2022 FY statements of the oil company.

In its latest report, BDO Professional Services, said, “We draw attention to Note 49 of the consolidated and separate financial statements which indicates that the Company recorded total comprehensive loss for the year ended 31 December 2023 of N216.2bn (2022: total comprehensive loss of N41.7bn) and as at that date, its current liabilities exceeded current assets by N469.2bn (2022: net current liabilities of N267bn).

“The Company also reported net liabilities of N460.1bn (2022: net liabilities of N243.9bn). The Group recorded a total comprehensive loss for the year ended 31 December 2023 of N70bn (2022: total comprehensive profit of N56.8bn) and as of that date, the Group’s current liabilities exceeded its current assets by N1.6tn (2022: net current liabilities of N816.8bn). The Group also reported net liabilities of N267.2bn (2022: net liabilities of N197.2bn).

“The Group and the Company continue to incur losses and the reversal of this trend is dependent on successful outcomes of its planned actions to refinance its debts in order to manage the funding gap of N3tn and N1.4tn and the attainment of revenue in the Group’s forecast for the years ending 31 December 2024 and 31 December 2025respectively.

“As stated in the note, if the planned actions are successful, it will only address 53.60 per cent of the Group’s projected funding gap for the year ending 31 December 2024. Management has additional plans to address the 46.4 per cent funding gap shortfall 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. These conditions together with other matters, indicate the existence of significant uncertainty that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the ordinary course of business.”

It also flagged three transactions that the company had been involved in, one being a $20m loan agreement between Oando Servco Nigeria Limited (an indirect subsidiary of Oando PLC) and OODP BVI (a subsidiary of Whitmore Asset Management Limited), owned by the Group Chief Executive and Deputy Chief Executive of Oando Plc, for the purpose of providing funds for OODP BVI corporate activities.

A forex forward contract between Oando Servco Nigeria Limited and Argentil Asset Management Limited and concerns about PMS purchased from Russia which was sold to NNPC were also listed under the Emphasis of Matters segment of the report.

On the oil purchase, the independent auditor said, “We draw attention to Note 45(item v) which indicates that Oando Trading DMCC (a subsidiary of the Parent Company), using the signed Novation Agreement among OTD, NNPC and Litasco SA, purchased four PMS cargoes which were originated from Russia. These cargoes were sold by the Company to NNPC.

“Purchase of cargoes from Russia falls under the OFAC and United Kingdom sanctions and Regulations. We understand that there are sanctions on crude oil and related products originating from Russia by the US, EU, and UK governments that include the application of price cap and prohibition by the United Kingdom on her citizens regardless of where they are from being involved in the execution or operations of such transactions.

“The note includes among others, management’s position based on an independent legal opinion that OTD being a non-United Kingdom national is not subject to the United Kingdom Sanction Regime and Regulation,” the auditor asserted.