Lagos, Nigeria – Oando PLC (referred to as “Oando” or the “Group”), Nigeria’s leading indigenous energy group listed on both the Nigerian and Johannesburg Stock Exchange, today announced audited results for the twelve months period ended December 31, 2020.
HIGHLIGHTS
Operational
Upstream:5% production increase, 44,550boe/day compared to 42,492boe/day (FYE 2019)
- Oil production of 15,912bbls/day (vs 17,969bbls/day in FYE 2019)
- Natural Gas production of 26,881boe/day (vs 22,047boe/day in FYE 2019)
- NGL production of 1,757bbls/day (vs 2,476bbls/day in FYE 2019)
Trading:
- 13% increase in traded crude oil volumes of 16.1 million (vs 14.2 million in FYE 2019)
- 53% increase in traded refined petroleum products (694,653 MT compared to 452,919 MT in FYE 2019)
Financial
- 17% Turnover decrease, N477 billion compared to N577 billion (FYE 2019)
- Loss-After-Tax of N141 billion compared to Loss-After-Tax of N207.1 billion (FYE 2019)
- 16% Total Group Borrowings increase, N420 billion compared to N362 billion (FYE 2019)
Commenting on the results, Wale Tinubu, Group Chief Executive, Oando PLC said:
“The conclusion of our Full Year 2020 audit confirms our earlier published 2020 unaudited financial statements in which we announced negative earnings driven by asset impairments resulting from a combination of the impact of COVID-19 pandemic, and the regrettable, unfair, and coerced settlement of a long-standing shareholder issue.
The global pandemic had a profound impact on the entire oil and gas industry, leading to a sharp decline in energy demand and consequently, lower oil prices. As a result, we had to reassess the carrying value of our assets and investments, resulting in non-financial impairments. Furthermore, the second tranche funding of the settlement of a protracted and disruptive shareholder issue resulted in us taking a further impairment on a category of our financial assets.
Despite these challenges, we are optimistic about the future as our upstream production optimization initiatives are focused on securing our current production, increasing production efficiency, and reducing costs, while we strive for expansion by actively seeking out inorganic growth opportunities. Furthermore, our foray into clean energy will provide a hedge against the volatility of the oil and gas market, and position us for the energy transition, as well as long-term growth. We are excited about the opportunities and potential for growth that these initiatives will bring and look forward to updating our shareholders on our progress."
OPERATIONS REVIEW
Upstream:
Production for the twelve months ended 31 December 2020:
During the twelve months ended December 31, 2020, production was 44,550 boe/day, compared to 42,492 boe/day in 2019. In 2020, production consisted of 15,912 bbls/day of crude oil, 1,757 boe/day of NGLs and 161,288 mcf/day (26,881 boe/day) of natural gas. The increase in production was a result of increased natural gas production at OML 60-63 (22%) offset by 29% decrease in NGL production and 5% and 16% crude production decreases at OML 56 and OML 13 respectively. Production decreases were a result of shut-ins for repairs, maintenance and sabotage incidences at the facilities.
During the twelve months to December 31, 2020, Oando spent $82.8 million on capital expenditures related to the development of oil and gas assets and exploration and evaluation activities, compared to $79 million in the twelve months to December 31, 2019.
Capital Expenditures in 2020 consisted of $80 million at OMLs 60 to 63 incurred on oil and gas properties, $2 million at OML 56 and $1 million capital expenditure recorded on other assets.
Downstream:
Traded volumes for the twelve months ended 31 December 2020:
In FYE 2020, Oando Trading traded approximately 16 million barrels of crude oil under various contracts with the Nigerian National Petroleum Corporation (NNPC) and delivered 694,653 MT of refined products.
FINANCE REVIEW
Revenue
Revenue for the period was directly impacted by volatile product prices due to the global economic impact of the pandemic, with realized average crude oil price declining by 45% ($34.21 per barrel compared to $62.59 per barrel in 2019), natural gas by 23% ($1.19/mcf compared to $1.54/mcf in 2019), and NGL by 20% ($5.48/boe compared to $6.84/boe in 2019). These contributed to an overall decline in revenue of 17% (N477 billion compared to N577 billion in the same period in 2019) despite a 5% increase in production (44,550 boepd compared to 42,492 boepd in 2019), a 13% increase in traded crude oil volumes (16,081,633 bbls compared to 14,173,691 bbls in 2019), and a 53% increase in traded refined products (694,653 MT compared to 452,919 MT in 2019).
Operating Loss
The Operating Loss of N74 billion in 2020 was driven primarily by asset impairments totalling N66 billion as detailed below:
- Impairment of Non-Financial Assets: The futures market forward curve for brent carried lower forecasted prices due to the impact of the COVID-19 pandemic on global oil demand and subsequently crude prices. As such, OER’s Exploration & Evaluation (“E&E”) assets had to be impaired as their fair value less costs of disposal and the discounted estimated cash flows for producing assets became lower than their carrying value. This assessment of E&E impairment losses resulted in a total impairment of N3 billion.
- Impairment of Financial Assets: This largely relates to an impairment of receivables utilized towards financing of the settlement of a disruptive and value destructive long-standing shareholder dispute which culminated in the forced settlement of the indirect shareholder. In accordance with IFRS guidelines, an impairment test was carried out on the financing of the agreed settlement, resulting in an impairment on financial assets of N63 billion.
Loss-After-Tax
The Loss-After-Tax for FYE 2020 of N141 billion was driven primarily by the above asset impairments of N66 billion, as well as a 48% increase in Net Finance Costs to N60 billion (compared to N41 billion in 2019).
Total Borrowings
Total Borrowings increased by 16% to N420 billion (compared to N362 billion in FYE 2019) due to the financing of the settlement of the protracted shareholder dispute as stated above.
LOOK AHEAD
Despite the impact of the global pandemic, we remain excited about prospects of our upstream oil and gas industry as we continue to pursue organic and inorganic growth opportunities to increase production in the near term, whilst enhancing security initiatives towards securing our existing production. We will also continue working with our partners towards implementing efficient risk management and stringent cost optimization strategies across all our Joint Venture operations.
Our trading business (OTD) continues to actively focus on strategic partnership and operating joint venture structures towards increasing its trading volumes, expanding its trade finance lines and attracting new equity investments.
We have also taken a strategic decision to diversify our operations into the renewable energy space towards investing in climate friendly and bankable energy solutions across Nigeria, and meeting the Nation’s extensive energy demands through the exploitation of sustainable energy solutions. We look forward to keeping our shareholders informed of our progress in the coming years.
Ends.
