By OKEY ONYENWEAKU
On the heels of the Security and Exchange Commission, SEC’s investigation of alleged infractions ranging from false disclosures, market abuses, manipulation of financial statements and internal control failures, analysts are hazarding a bleak future for stakeholders of the once most prized indigenous Nigerian energy sector leader.
This is on account of their fear that Oando’s ambition to attain the status of a global brand may have currently been squandered given that the crisis rocking the indigenous giant oil company may have presently reached a crescendo.
Clearly, there is a consensus that building a global brand requires more than just mouthing it. It takes, according to experts, strategy, hard work, focus and good corporate governance to build a strong brand.
This is even as almost nobody doubts that it is the deft cultivation of such business and market elements that have helped build the likes of Coca Cola, Toyota, Apple and Samsung.
On the part of Oando, the SEC investigations found the company wanting with the regulator also promptly removing Oando Plc’s board and barring the MD/CEO, Mr. Wale Tinubu, and his deputy, Omamofe Boyo, among others from holding the position of director in a public company in Nigeria for the next five years.
The commission also went ahead to constitute an interim management on May 30, 2019 as recounted in a press statement it circulated, which stated, ”the commission hereby informs the public of the constitution of an interim management team headed by Mr. Mutiu Olaniyi Adio Sunmonu CON, to oversee the affairs of Oando Plc, and conduct an Extraordinary General Meeting on or before July 1, 2019 to appoint new directors to the board of the company, who would subsequently select a management team for Oando Plc.’’
Though, the Federal High Court sitting in Lagos under Justice Mojisola Olatoregun has restrained the Securities and Exchange Commission from removing Messrs Wale Tinubu and Omamofe Boyo as Oando Plc’s Group Chief Executive Officer and Deputy Group Chief Executive Officer, respectively, reports say that SEC’s temporary management team have presently taken over the reins of leadership at Oando.
As the fear of what becomes the fate of Oando Plc continues to agitate the minds of investors, these are clearly not easy times for stakeholders of Oando Plc. Ordinarily, each day comes with a fresh challenge but for Oando people today, it is looking like they are not coming now for the right reasons. The company’s problems continue to deepen as it fights for its life. Indeed, if there is anything the top management of Oando can do to possibly turn the hand of the clock and consign this neck breaking challenge to the sea of forgetfulness, there is no doubt that it would quickly take the option.
But as the company continues to struggle to drag itself out of the mudslide, its setbacks seem to be expanding, with the overall scenario seemingly continuing to take further twists and turns.
Not even Oando’s suit against SEC is likely going to save the company’s fortunes from nose diving.
WHAT HAPPENED TO OANDO
Former Director General of SEC, Mounir Gwarzo had insisted on investigating Oando when some of its major shareholders, notably Ansbury and Manga petitioned the Securities and Exchange Commission, alleging gross abuse of corporate governance standards and acts of financial recklessness by the firm’s management. They subsequently called for the removal of the management of the company as well as the associated removal of all board members.
This development occurred at about the same time when Gwarzo was alleged to have himself been involved in unethical practices, including paying to himself the sum of N104.8million as severance package and was suspended by the then Minister of Finance, Mrs. Kemi Adeosun.
Unfortunately for the Oando management, even the acting SEC Director General who came in after Gwarzo insisted on yet carrying out a forensic Audit on the activities of Oando Plc despite the Minister of Finance, Mrs. Kemi Adeosun’s suspension of Mounir Gwarzo, for alleged financial impropriety. And at that point, market observers yet feared that Oando’s fate still hung in a balance. But everyone waited.
The Allegations against Oando
With the benefit of hindsight now, Oando’s crisis appears to be deeper than the understanding of most of the followers of the story. The surface problem with Oando Plc was that its balance sheet sunk into the deep red to the tune of over -N200billion. But that is a symptom of a deeper management flaw.
Shareholders and other stakeholders became apprehensive at this point as the now obtusely exposed company was clearly headed for the woods, prompting opposing actions of some of its part-owners in 2016.
The catastrophe in Oando heightened when two of its major shareholders, Ansbury and Manga petitioned the Securities and Exchange Commission, alleging gross abuse of corporate governance standards and reckless fiscal management. They subsequently called for the removal of the management of the company and other board members from its leadership.
Manga, BH investigation reveals owns about 17.9 per cent share of the company, and had expressed discomfort over the management’s handling of notably the ConocoPhillips acquisition transaction.
Ansbury, on its part, had accused the management of the company of lack of capacity, efficiency and effectiveness in the running of the firm, believing that Oando’s future was uncertain as a result.
“Strong uncertainty regarding the going concern of the group (Oando) had already arisen in 2015 and strengthened in 2016 as pointed out by the auditors in their report.” Ansbury had petitioned
“In the previous financial statement, the management had proceeded to liquidate part of the assets of the company and many are going to be liquidated, and in particular, under the notes to the account, management intends to sell its participation in OER (the last asset attributable to the company) in the name of restructuring or re-establishing the group’s going concern.” Ansbury added. These groups were later joined by Mr. Olufemi Timothy, President, Renaissance Stakeholders Association of Nigeria Incorporated, who had taken a petition against the company’s management to the National Assembly even as he noted that the external auditors had also expressed concern over its financial statements.
According to him, the external auditor’s reported ‘strong doubtful going concern’ over the Group’s annual financial statement.”
“The Group has negative working capital of over N263 billion as a consequence of current liabilities above, lighter than current assets, meaning that the management was unable to service its obligations financially”, he had articulated in the petition.
The group noted that claims of creditors became higher than the owners’ shareholders equity, endangering the company’s fortunes and future, expressing fear that the group could be liquidated by the creditors anytime if urgent action was not taken.
According to the group, “With accumulated losses of over N159 billion, shareholders could not get a dime as cash dividend. No hope of redeeming these reserved losses.”
“Court cases as projected by the management may take claims of over N608 billion which is far greater than the assets of the entire group, meaning that the group was at a very high risk of liquidation if the court cases against the company succeeded.
“Cost of litigation is very high. Litigation has a damaging consequence on our company’s reputational risk under the current management. Management was increasing entitlements, remunerations despite lack of working capital.
“Both current liabilities and long-term liabilities stood at over N799 billion. Management was selling assets of the company, especially money-spinning assets such as downstream (Marketing) business without meaningful improvement in debts situation. It was planning to sell its share in OER which unfortunately is the last asset belonging to the company”, he also said.
Recall that some shareholders had expressed mixed feelings over the performance of the company during the year as a number of them called for the resignation of the company’s Group Managing Director, Wale Tinubu.
The group of shareholders, under the aegis of Oando Shareholders Solidarity Group, had stormed the venue of the AGM in 2016 with placards and demanded the resignation of the company’s Group CEO.
According to the leader of the group, Mr. Francis Michael, they were protesting so as to change the management of the company over gross mismanagement and abuse of corporate governance.”
Many stakeholders in Oando do not seem to be happy with the top management team of the company headed by Mr. Wale Tinubu, a lawyer by training.
The firm’s problem had started long before now as reports alleged the company’s managers had manipulated the share structures to suit their purposes. This, according to reports, was reflected in the numerous rights Issues, bonuses and public offerings the management had deployed to raise capital for its operations over the years.
Numerous acquisitions, especially that of Conoco Philips, an American Oil Company valued to the tune of $1.7bn, and which was also suspected to have been over-valued, was also fingered as having aggravated its problems. It was believed that Oando’s management team ran a very complex structure with about 44 subsidiaries.
The effect of the unrealistic ambition has come to haunt the company which was seen as a colossus in the corporate world in Nigeria and Africa.
From huge revenues of N337billion in 2009 and earnings per share which of N11.32, Oando which had taken advantage of the oil boom to make most of its acquisitions is finding it difficult to breathe well now. Its loan book had grown from about N113billion in 2012 to about N470 billion by the end of 2014. The ambitious moves by Wale Tinubu which received applause at the time had now become a thorn in the flesh of the company.
To its credit, Oando, known as Nigeria’s leading indigenous energy group listed on both the Nigerian and Johannesburg Stock Exchange, had also paid over N30 billion dividends in 9 years from 2005 to N2013. But it is also shareholders that are now at the receiving end as the firm experiences seemingly very painful contraction signs.
Protest from Shareholders
Before making its strategic acquisitions of ConocoPhillips and Medal Oil within one year and raising hopes of investors, Oando had in 2007 acquired two oil drilling rigs and emerged Nigeria’s first indigenous oil company with interest in producing deep water assets through acquisition of equity in two oil blocks and 5 swamp rigs. The company also launched its first independent power plant for the Lagos State Water Corporation, LSWC.
Today that great company’s management and future plans have been faulted by stakeholders.
The auditor to Oando Plc, Ernest & Young had also faulted some aspect the 2016 financial statement of the company, even as shareholders expressed mixed feelings on the company’s performance.
According to the auditors, “We are drawing attention to note 45 in the financial statements, which indicates that the company reported a comprehensive loss for the year of N33.9 billion ( 2015: loss N56.6 billion) and as at that date, it’s current assets exceeded current liabilities by N14.6 billion (2015: N32.8 billion net current liability). The group recorded a comprehensive income of N112.4 billion for the year ended December 31, 2016 (2015: loss N37.8 billion) and as at that date, its current liability exceeded current assets by N263.8 billion (2015: N260.4 billion). As stated in the notes, these conditions, along with other matters, indicate that a material uncertainty exist that may cast significant doubt on the company (and Group’s) ability to continue as a going concern.”
Gabriele Volpi, an Italian-born Nigerian businessman, who has interest in Oando had insisted that the Group Chief Executive Officer of Oando Plc, Wale Tinubu, vacate his position over alleged mismanagement, cooked books and huge debts.
Tinubu had requested Volpi to invest in the British Virgin Islands-registered firm when Oando Plc was seeking to acquire ConocoPhillips’ upstream oil and gas assets in Nigeria for $1.5 billion, a deal eventually consummated in 2014.
The London Court of International Arbitration LCIA rules
The crisis had resulted to Oando being forced to cough out a whopping $680million (N244.8bn) to pay Ansbury Investments, which is owned by Mr. Gabriele Volpi.
According to the story, The London Court of International Arbitration (LCIA) ordered two companies owned by the Chief Executive Officer of Oando Plc, Mr. Wale Tinubu and his deputy, Mr. Mofe Boyo, to pay US$680 million (N244.8 billion) to Ansbury Investments.
The ruling of July 6, 2018 by the LCIA held that Ocean and Oil Development Partners (OODP), British Virgin Islands, which owns 55.96 per cent of Oando Plc through a holding company, Ocean and Oil Development Partners (OODP) Nigeria Limited, was owing Ansbury Investments Incorporated US$600 million (N216 billion).
Ansbury Investment’s counsel, Mr. Andrea Moja who confirmed the LCIA award in a statement to the media said the Arbitration Court also held that Whitmore Asset Management Limited, whose ultimate beneficial owners are Tinubu and Boyo, was also owing Ansbury Investment US$80 million (N28.8 billion).
With these, the cumulative debt owed by the Oando chief executives to Ansbury Investment totals US$680 million and the development had elicited debate in many corporate offices, while most of the discussions in Marina and Broad streets at the moment also are centered on how the deals affect shareholders of Oando.
The management of Oando had invited Ansbury and Manga to take part in funding the acquisition of ConocoPhillips which market observers believe was what did the company in.
The debate that ensued hinged on whether the statement that awarded the huge sum to Ansbury only concerns Mr. Wale Tinubu and Omamofe Boyo who are top executives in the company. But analysts believed that Oando could possibly not be affected if the top executives could pay the whopping sum without recourse to the oil giant. Nevertheless, the caveat is how and where these executives who own about 60 per cent of Oando can raise $244.8billion to offset the debt.
It is not only SEC that is baring its fangs on the Oando chiefs as shareholders had over time, kicked for the removal of the board of Oando, especially the CEO, Mr. Wale Tinubu who has been on the saddle of its leadership for about 20 years.
A shareholder of the company, Mr. Okezie Boniface, told BH that the action of SEC was commendable though a little late.
” I know that the board of Oando will challenge that action. However, SEC should also go ahead to put in place term limits for the top executives of quoted companies to guide against the fate of Oando in other organizations,” He said.
A senior stock broker who would not want his name mentioned in print said that dealing members have also not been happy with the activities of the company. He said the company has been overtrading in the sense that it has been to the market several times to raise money through public offerings without giving adequate account of the funds raised. He added that Wale Tinubu is suspected to be diverting the funds he gets from the market to personal uses. However, this charge could not be corroborated by BH.
The crisis in Oando Plc, the giant oil company rose to a crescendo last Friday May 31, 2019 when the Securities and Exchange Commission (SEC) finally released the Sword of Damocles and barred the CEO of Oando Plc, Mr. Wale Tinubu, from holding the position of director in a public company for the next five years.
SEC equally sanctioned the company’s deputy CEO, Omamofe Boyo, even as it directed other board members found culpable of infractions to resign. The apex regulator also ordered an extraordinary general meeting of the company before July 1 to appoint new directors. The crisis which engulfed the oil giant has lingered for some time, almost hampering the focus of its management. However, SEC has hinged its bold decision on the outcome of the investigations of the activities of Oando after a forensic audit carried out by Deloitte & Touche at its instance.
The investigations revealed that the company committed a number of serious infractions ranging from false disclosures to market abuses, manipulation of financial statements and internal control failures. Hence, the shocking statement last Friday announcing the easing out of Oando’s directors which was made to the capital market community.
Oando Plc, in the first quarter posted a profit after tax of N4.6 billion in 2019, starting the year on a good note. With the unaudited results the indigenous energy solutions provider announcement of a third consecutive year of profits.
On the face of things, the company continues to wax strong posting fairly impressive results for Q1, with profit after tax of N4.6 billion, which is an 11 per cent increase from Q1, 2018, despite the volatile nature of the sector and economy.
The company said it leveraged on the increase in the price of crude oil which peaked at a little over $66 per barrel in the first quarter of the year, $3 more than the projected average for 2019.It also said current stability in oil pricing has also favoured the Nigerian economy as the government predicated a $60 per barrel price in the 2019 budget.
Its turnover grew by 12 per cent to N168 billion from N150.6 billion in Q1 2018, even as profit-after-tax increased by 11 per cent to N4.6 billion compared with N4.2 billion in Q1 2018.
Oando’s trading which recorded an 11 per cent increase year-on-year, was driven by strong performance in its crude oil trading division and a three per cent increase in turnover to $312 million, up from $301 million.
“Our results reflect the progress made over the last few quarters and provides an indication of our expectation for the year. Now that our debt profile is down by 78 per cent from $2.5billion as of December 2014 to $558million, and our de-leverage program is 90 per cent complete with most of our non-core operations divested for good value, we can now focus on steady growth in our upstream entity.” Wale Tinubu, CEO of Oando Plc said.
The company had in 2018 year end posted a turnover increase by 37% to N679.5 billion compared to N497.4 billion in 2017, driven by higher commodity prices and higher oil production. Its Gross Profit also rose by 9% to N96.3 billion compared to N88.1 billion.
It’s Profit-After-Tax also increased by 46% to N28.8 billion, up from N19.8 billion in 2017
Oando’s Board continues to deplete
Figures apart, the squabbling persists. Last week, two non-executive directors, Sena Anthony and Oghogho Akpata quit the troubled oil company.
Their resignation details were contained in a notice sent to the Nigerian Stock Exchange (NSE) on Friday. It took effect on June 3.
“Oando PLC hereby notifies the Nigerian Stock Exchange (NSE), its valued shareholders, key stakeholders and the public of the resignations of its Non-Executive Directors, Chief Sena Anthony and Mr. Oghogho Akpata from the Board of Directors of Oando PLC, with effect from June 3, 2019,” Oando’s notice said.
This came a few days after the Commission (SEC) barred Oando Plc CEO, Wale Tinubu and the deputy, Omamofe Boyo from managing any publicly quoted company for five years.
Effect on share performance
In the critical arena of share price, Oando traded flat on Friday June 7, 2019 to close at N4.00 per share, having earlier gained 1.25 per share. The company’s stock had slipped on the day of the removal of its CEO, Mr. Wale Tinubu and his deputy.
Oando Plc’s stock price had plunged 31.1 per cent last Friday May 30, 2019 before climbing back by 25 per cent to close at N4.00 on Friday June 7, 2019. The stock which opened on Friday at N4.65 per share crashed to N3.20 per share and closed at N4.00 on Friday June 7, 2019. The equities market also dropped as the All share Index depreciated by 0.31 per cent last Friday to close at 30, 432.13 points.
This indicates a strong pessimistic posture from both investors and shareholders as the stock hit an all time low.
The company had come at the beginning of the year 2015 to raise funds from the market through the instrumentality of a rights issue at the price of N16.50 kobo per share and the sum of N48.779 billion was realized from the proceeds of that transaction. Also, in 2012, it raised N54.6 billion from the stock market through another rights issue and shareholders lost value from these bogus rights. This is one of the reasons that investors lose confidence in the Stock market more especially in the short term.