Oando Plc is struggling to stay afloat despite offloading several subsidiaries a few years ago. Since its shareholders’ equity turned negative in 2019, the gap between its liabilities and assets has almost tripled, according to its latest financials.
In its long-delayed 2022 financial statements released last week – nearly a month after it was suspended from the Johannesburg Stock Exchange (JSE) – auditors raised the alarm again about “the existence of a material uncertainty that may cast significant doubt on the group’s and the company’s ability to continue” as an ongoing concern, something they have been aware of since 2015.
Nevertheless, Oando is yet to turn a corner, and shareholders have not received a dividend in eight years.
Listing suspension
The JSE suspended the secondary listing of Oando’s securities on 27 March due to the inability to meet the extended deadline to publish its 2022 audited results and the interim results for 2023.
The 2022 results showed that the company’s total comprehensive loss widened to N41.7bn ($30m)from N28.1bn in the previous year, while the group posted a loss of N56.8bn as against a profit of N30.6bn in 2021.
“The group and the company continue to incur losses and 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 N3trn and the attainment of revenue in the group’s forecast for the year ending 31 December 2024,” its independent auditors, BDO Professional Services, said.
Until Oando is found to be unable to pay its debt in line with the provisions of the law, the ‘going concern’ status of the company cannot be said to have been lost
Oando’s net current liabilities ballooned to N818.7bn from N668.4bn, while net liabilities rose to N197.2bn from N129bn.
With a negative operating cash flows of N16.5bn in 2022, it could not pay the outstanding principal on the medium-term loan (MTL) of N92.2bn, the corporate facility of N100.6bn and accrued interest of N83bn as well as settle other net current liabilities of N338.8bn.
Last year, it renegotiated the MTL with the lenders and got a moratorium of 18 months from the effective date of April 2023 and a tenor of four years.
“One of the reasons why a company may be wound up is if the company is unable to pay its debt,” says Ayodele Oni, an energy expert and partner at Bloomfield LP, a Lagos-based commercial law firm.
He says “until Oando is found to be unable to pay its debt” in line with the provisions of the law, “the ‘going concern’ status of the company cannot be said to have been lost”.
From fuel retailer to multinational
In 2000, Ocean and Oil Investments (Nigeria) Limited acquired a 30% controlling interest in Unipetrol Nigeria Plc.
Ocean and Oil Investments (Nigeria) Limited was co-founded by current Oando CEO Wale Tinubu in 1993 to supply and trade petroleum products within and outside Nigeria.
Unipetrol was initially known as ESSO West Africa Incorporated, a subsidiary of United States-based Exxon Corporation that began petroleum marketing business in Nigeria in 1956. It was renamed in 1976 after the Nigerian government nationalised it.
Oando [was] the first African company to accomplish a cross-border inward listing on the Johannesburg bourse
The company was listed on the Nigerian Stock Exchange in February 1992 after the government’s sale of 60% of its stake to the public in the previous year.
Seven years after listing, Unipetrol acquired 40% in Gaslink Nigeria Limited, which was increased to 51% in 2001 after Ocean and Oil bought into the former.
Unipetrol acquired 60% equity in Agip Nigeria Plc in 2002 and was renamed Oando Plc after the merger of the two entities the following year.
In 2005, Oando became the first African company to accomplish a cross-border inward listing on the Johannesburg bourse.
Between 2003 and 2010, the company incorporated several subsidiaries, including Oando Marketing, Oando Trading, and Oando Supply & Trading, Oando Gas & Power, Oando Energy Services and Oando Exploration & Production.
In 2012, the company acquired Canada-based Exile Resources Incorporated, and renamed it Oando Energy Resources (OER).
That same year, it announced that OER had agreed to buy the Nigerian upstream oil and gas business of US oil major ConocoPhillips for $1.5bn. The acquisition was completed in 2014 shortly before global oil prices plunged.
The unravelling of the conglomerate
Faced with a steep drop in oil prices and high financing costs, Oando swung to a record after-tax loss of N145.66bn in 2014 from a profit of N1.39bn in 2013.
Its liabilities more than tripled largely on the back of the ConocoPhillips acquisition, which was partly financed by debt. It was in 2015 that it started shedding significant stakes in its key subsidiaries.
The following year, Oando concluded what he described as a $210m recapitalisation and partial divestment of equity stake in its downstream operations to a consortium of Helios and Vitol. A new entity, OVH Energy, later emerged to hold interests in Oando Marketing, Oando Supply & Trading, Apapa SPM, and Oando Trippmart.
It offloaded several other subsidiaries including Oando Gas & Power and Oando Energy Services. After three straight years of posting profits as a group, Oando reported its biggest loss of N270.08bn in 2019.
The SEC accused Oando of committing ‘serious infractions’, including false disclosures, market abuses, misstatements in financial statements…
The company also faced a shareholder dispute that led to an investigation by the Securities and Exchange Commission (SEC), which in May 2019 ordered its group CEO Wale Tinubu, and other affected board members to resign.
The SEC accused Oando of committing “serious infractions”, including false disclosures, market abuses, misstatements in financial statements and internal control failures. The company denied the allegations and got a court injunction restraining the commission from executing any sanctions.
The dispute with the country’s apex capital market regulator was resolved in 2021.
A year later, the Federal High Court in Lagos ordered Oando to buy out the shares of all the minority investors in the company following a petition filed by a group of shareholders demanding the purchase.
Ocean and Oil Development Partners (OODP), jointly owned by Oando GCEO and his deputy Mofe Boyo, holds the majority stake of 57.37% in the company, while minority shareholders own the remaining 42.63%.
Oando missed the initial deadline for the buyout and got an extension in October 2022.
On 30 March 2023, the firm said it had received an offer from the OODP for the acquisition of the shares of all minority shareholders, adding that it would subsequently be delisted from the Nigerian and Johannesburg bourses.
Oando said last Friday that a hearing on the applications of certain shareholders challenging the buyout order of 7 June 2022 was adjourned to 24 June 2024.
Oando plans N1trn bond in push for profit
In its 2022 accounts, the company said it plans to raise N1trn through bonds as part of measures to close the funding gap of N3trn and “mitigate the going concern uncertainties on profitability, working capital deficiency and negative shareholder fund”.
It said the “management is working with the relevant consultants to submit the application for SEC’s approval of the bond raise prior to going to the market by Q2, 2024”.
Oando said its forecast of returning to profitability this year “is highly dependent” on the completion of its acquisition of the shares of Nigerian Agip Oil Company (NAOC) in OML 60-63, increased production from the assets and intensified security surveillance to arrest crude oil theft.
The company announced the proposed acquisition last September and signed a $800m loan deal with the Africa Export-Import Bank (Afreximbank) to facilitate the NAOC purchase.
“Oil and gas companies in Nigeria are generally faced with different challenges – prevalent of which is decline in production due to theft and vandalism. Oando, as a company, is also faced by this challenge,” Oni of Bloomfield LP says.
He points out that Oando’s production dropped to an average of 26,775 barrels of oil equivalent per day (boepd) in 2021 from 44,550 boepd in 2020.
He adds that to prevent going under, the company could go through corporate restructuring to create a balance in its financials.
“Also, the company can diversify its portfolio by investing in non-fossil and climate-friendly energy solutions,” Oni says. “This is believed to be capable of attracting international and high-level investment which could help the company recapitalise.”
Oando recorded a 23% decline in production to 20,703 boepd in 2022, with its CEO attributing it to the heightened militancy and pipeline vandalism in the Niger Delta and a major gas plant fire incident.
“We have put in place definitive measures to bolster our production and cash inflows towards ensuring a speedy return to profitability,” Tinubu said, adding that a strategic restructuring of key facilities had been implemented to ensure alignment with cash flow dynamics.
(The Africa Report)
