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Oando takes heaviest blow from drop in oil prices, weak naira amongst oil majors

02 Nov 2015
Chibuike Oguh

Summary

Wale Tinubu said his company suffered several challenges including lower oil prices, weakening naira and rising interest rates.

Wale Tinubu, CEO, Oando Plc

Depressed oil prices have taken significant toll on the financial results of Nigerian indigenous oil and gas companies as well as oil majors in Nigeria. Nine months results released by some oil companies operating in Nigeria, both in the upstream and downstream sectors, have been largely disappointing due to oil prices that have declined more than 50 percent since June last year.

Oando, the indigenous oil and gas exploration and distribution firm, posted a hefty after-tax loss of N47.65 billion in the nine months ending on September 30, 2015, compared with a N5.17 billion profit posted in the same period last year. Between January and September this year, the company’s revenues dropped 6 percent to N95.78 billion. The company posted N101.33 billion as last year’s revenues for the same period.

Oando’s chief executive, Wale Tinubu, said his company suffered several challenges including lower oil prices, weakening naira and rising interest rates. In the nine months ending on September 30, the company’s administrative expenses rose 20 percent to N45.88 billion, compared with N37.03 billion reported in the same period last year. Finance costs also increased by 21 percent to N37.49 billion in nine months, compared with N29.44 billion posted last year.

In 2014, Oando completed the $1.65 billion acquisition of the Nigerian operations of ConocoPhillips, the American oil giant. But Tinubu denies that the company’s losses are related to the ConocoPhillips acquisition. “We have generated over $600m a year in cash flows from that operation and we have paid down over $400m of debts,” Tinubu told CNBC.

However, at the end of the 2014 fiscal year, Oando posted a record loss of N183.89 billion, compared with a profit of N1.40 billion reported in the previous year. The company’s administrative expenses jumped seven times to N271.86 billion in the 2014 full year compared with N41.40 billion in the previous year.

Seplat Petroleum, the indigenous oil and gas exploration firm, reported that its after-tax profits for the nine months ending on September 30, 2015 fell 70 percent to N68.7 billion, compared with N227.9 billion posted in the same period last year. The company’s revenues fell 30 percent to N419.9 billion between January and September this year, compared with N592.5 billion in the same period last year.

Aside from the drop in oil prices, Seplat Petroleum had to cut down oil production in some oilfields this year as a result of pipeline vandalism on a key pipeline in Forcados.

Unlike oil exploration companies, oil marketing and distribution companies generally have more wiggle room because of strong domestic demand.

Meanwhile, the petroleum marketing and distribution giant, Total Nigeria, reported a 19.5 percent drop in after-tax profits in the first nine months of this year to N2.13 billion, compared with N2.65 billion reported in the same period last year. Its gross revenues also fell 10.4 percent in the between January and September this year to N159.3 billion, as compared with N177.81 billion reported for the same period last year.

Mobil Oil Nigeria, the petroleum marketing and distribution giant, reported that its after-tax profits in the nine months ending on September 30, fell 39 percent to N3.65 billion, compared with N5.99 billion posted in the same period of last year. The company’s revenues fell 25 percent to N45.33 billion, as compared with N60.72 billion posted in the same period last year.

Unlike other petroleum marketing and distribution companies, MRS Oil and Gas, reported that its after-tax profit in the nine months ending on September 30, rose 27 percent to N730.59 million, from N577.24 posted in the same period last year. The company stated that its revenues fell 6 percent to N64.59 billion, compared with N69.24 billion posted in the same period of last  year.

Chibuike Oguh is Financial Nigeria's Frontier Markets Analyst



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