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Oando’s huge N4trn turnover fails to lift profit of N48bn

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Oando's huge N4trn turnover fails to lift profit of N48bn

  …as forex impact raises cost of operations

Riding on the back of the recent acquisition of onshore oil and gas assets of Eni’s subsidiary in Nigeria, Nigerian Agip Oil Company (NAOC), higher crude oil and natural gas production, improved prices, and the impact of foreign exchange gains, leading energy solutions provider, Oando Plc., has continued its trend of impressive growth and performances in the past two years.

In its latest unaudited financial report for 2024, released on the Nigerian Exchange (NGX) on January 30, 2025, Oando declared a full-year pre-tax profit of N47.7 billion.

While the figure indicated a decline from the 2023 full-year pre-tax profit of N102.9 billion, it pointed to a strong recovery in the fourth quarter of 2024, where the indigenous energy giant posted a pre-tax profit of N16.6 billion, bouncing back from a loss of N29.5 billion in the same quarter in 2023.

Business Hallmark’s analysis of the report shows that Onado Plc recorded a revenue increase of 87.96 percent in Q4’2024, reaching N932.4 billion, up from N496.1 billion in Q4’2023.

Further breakdown of the unaudited report showed that the company’s revenue surged for the 12-month period ending 31st December 2024, achieving a total of N4.1 trillion, representing a substantial year-on-year increase of 44.86 percent from N2.8 trillion reported in 2023.

Specifically, the supply and trading of crude, refined and unrefined petroleum products contributed N3.7 trillion to Oando’s annual revenue figure, representing 89.73 percent.

The remaining revenue figure of 10.27 percent revenue was contributed by the Exploration and Production division 10.11%, and 0.10% by the ‘corporate and others’ segment.

While the cost of sales climbed to N3.8 trillion year-over-year (39.09 percent increase), compared to N2.7 trillion reported in the prior year, gross profit soared by an impressive 232.31% year-over-year, reaching N282.5 billion, compared to N85 billion in 2023.

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However, other operating income, especially foreign exchange, saw a slight decline of 12.56%, falling from N399.9 billion in the previous year to N349.7 billion in Full Year 2024. FX  gains alone accounted for 91.04% of the total figure.

Likewise, income from core operations experienced an increase of 0.87%, climbing to N220.1 billion from N218.3 billion recorded in Full Year 2023.

In Q4’2024, pre-tax profit reached N16.6 billion, representing a significant recovery, compared to a loss of N29.5 billion in Q4’2023.

The energy giant also announced a post-tax profit of N65.4 billion in FY 2024. This represents an increase of 8.65% compared to the  post-tax profit of N60.2 billion achieved in 2023.

The report also showed a remarkable appreciation in Oando’s assets. The company reported total assets of N7.5 trillion in the full year of 2024, a significant N4.9trillion increase from the N2.6 trillion recorded in 2023.

Likewise, non-current assets rose from N1.8 trillion in 2023 to N3.8 trillion for FY 2024, with property, plant, and equipment accounting for 53.13 percent of the total amount, while intangible assets accounted for 33.18%.

Total current assets also climbed from N815.5 billion to N3.6 trillion in the two periods under review, with trade and other receivables, alongside contract assets  representing 92.68% of the total current assets.

The feat by Oando Plc comes on the heels of a recent corporate governance and transparency crisis that rocked the company to its foundation.

From 2017 to late 2024, Oando experienced a debilitating internal strife with minority shareholders, who accused the majority-installed management of unethical practices, including allegation of profit distribution policies favouring majority shareholders; 9 percent collection of management and technical fees from gross profits, as well as the perennial delays in the release of financial audits, which made the financial health of the company to be unclear.

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The crisis culminated in the suspension of the firm’s statutory Annual General Meetings (AGMs) for several years by the Securities and Exchange Commission (SEC); suspension of the trading of the firm’s shares on the NGX and the Johannesburg Stock Exchange, and the suspension of the Wale Tinubu led management and board by the capital market regulator.Also, Oando’s efforts to delist on the NGX has stalled.

Back from insolvency

When the company’s audited results for the 12 months period ended December 31, 2022 was released in April 2024, well beyond the time limit stipulated by SEC, data shows that its total liabilities outweighed its assets.

For instance, while Oando’s total assets in the period under review stood at N1.252 trillion, total liabilities were put at N1.449 trillion.

Financial experts, who spoke to BH when the result was released, said Oando must have relied heavily on borrowings to sustain its operations.

According to Investopedia, when liabilities exceed assets, a firm is said to be technically bankrupt or insolvent. Investopedia further defined insolvency, as when an individual or company can no longer meet their financial obligations to lenders.

However, after the initial setbacks, Oando has been able to shake off the negative effects of the crisis to bounce back to reckoning by making solid back-to-back financial performances.

Like it did in 2024, the company reported a 42.73 percent revenue increase in 2023, with a profit after tax of N60.28billion.

BH findings revealed that several factors are responsible for the impressive showings.

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They include change in business model, higher crude oil and natural gas production, improved prices in the international oil and gas market, and the impact of foreign exchange gains.

Before its resurgence, the tide started turning against Oando in 2000 with the decline of Nigeria’s oil and gas industry.

New business model

Due to teething problems in the oil-rich Niger Delta, including youth restiveness, vandalism of oil assets, massive crude theft, aging pipelines, shutdowns, reduced investments in the upstream oil and gas sector, and the exodus of International Oil Companies (IOCs), Nigeria’s crude oil production plunged from its peak of 2.482million barrels per day in 2005, to below 1 million bpd in May 2023, before rising to its present level of 1.8million bpd.

The massive decline in oil production led to significant revenue losses for the government and operators.

Also, the persistent forex crisis, which prevented oil marketers with permits to import and supply petroleum products, as well as the government’s war against fuel subsidy thieves led to many petroleum marketers abandoning petrol import, leading to heavy losses for marketers.

As a result, the Nigerian National Petroleum Company Limited (NNPCL) became the sole importer of PMS in Nigeria in 2016, with the downstream petroleum sector becoming less profitable for marketers, including Oando Plc.

In the face of these challenges, the management of Oando decided to change direction by adopting life saving moves.

Specifically, Oando began divesting from the nation’s  downstream petroleum sector on June 30, 2016, when it partially divested its majority interest in its downstream business, Oando Marketing Limited, by selling 60% its shares in the firm to a consortia consisting of International Trading Company, Vitol Group (Vitol) and Helios Investment Partners (Helios), an International Private Equity firm for $276 million.

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The resulting entity was called OVH (Oando, Vitol and Helios) Energy BV, reflecting the names of the three partners.

On the 5th of October, 2017, Oando further divested an additional 35% of its shareholding in OVH Energy to Vitol and Helios.

On November 29, 2019, Oando completed its exit from the downstream and midstream business when it sold its remaining 5% stake in OVH to the duo of Vitol and Helios.

It then refocused all its energy on its then marginal upstream business by expanding its portfolio upstream assets in a Joint Venture (JV) with oil giant, Nigerian Agip Oil Company (NAOC), owned by Eni, and the NNPCL from 20% to 40%.

The agreement, which was signed in September 2023, involved buying Italy’s Eni 20% stake in oil rich fields, particularly, the Qua Iboe (OML 13) and Ebendo (OML 56) wells, and OMLs 60, 61, 62 and 63.

Before the deal, NOAC held 20 per cent operating stake, Oando 20 per cent and NNPCL 60 per cent. With the completion of the deal, Oando’s stake in the JV rose to 40 per cent.

Sources in the company attributed the impressive 2023 and 2024 financial results to the impressive performance of its upstream petroleum arm, buoyed by improved oil production and a hike in crude oil prices in the international market.

Speaking on the feat, the company’s Group Chief Executive Officer, Wale Tinubu, attributed the performance to the firm’s strategic expansion, particularly its acquisition of a 20 per cent additional stake in NAOC Limited, which significantly boosted production capacity.

“Our successful integration of NAOC Ltd enabled us to achieve peak operated production of 103,206 barrels of oil equivalent per day (bpd) and net entitlements of 45,000 bpd”, Tinubu stated.

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While reacting to Oando’s successful acquisition of Eni’s stake in the JV in September 2023, oil and gas expert, Dr. Femi Douglas, predicted that the firm’s fortune will improve further, barring any major shock in the oil petroleum sector.

“The successful acquisition of Nigerian Agip Oil Company will no doubt, be transformative for Oando, potentially boosting its production capacity and shifting its revenue mix towards more stable and profitable sources.

“We expect that Oando will more than double its profits by December if it can realize its production target of 50,000 bpd by the end of the year.

“With the new acquisitions, Oando will become one of Nigeria’s biggest domestic producers”, Douglas had noted.

Speaking on the sidelines of the just concluded World Economic Forum (WEF) 2025 in Davos, Switzerland, Wale Tinubu disclosed that with the acquisition of Eni’s onshore oil assets in Nigeria,  Oando now has over 1 billion in oil reserves, 300,000 barrels a day of oil processing capacity, 2 billion cubic feet a day of gas capacity, with net present value of the oil in its facilities standing at over $10 billion.

The twin decisions of exiting Nigeria’s troubled Niger Delta region and the acquisition of idle onshore wells abandoned by Eni Petroleum, experts argued, contributed largely to the turnaround in the firm’s financial fortune.

Oando is one of the indigenous oil firms leading Nigeria’s drive to ramp up crude oil production after the exit of International Oil Companies (IOCs) from the restive Nigeria Delta region and a sustained lack of investment in the industry led to the near collapse of Nigeria’s oil and gas industry.

As a result of the drop in investments and the exit of IOCs, Nigeria’s crude oil production dropped from about 2.5million barrels per day in 2005, to about 900 000 million bpd in May 2023, before rising to its present level of 1.8million bpd.

 

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