Upstream Bolsters Oando’s 2010 Earnings with N35bn
Oando’s strategy to invest in the upstream and midstream businesses from the traditional petroleum marketing (downstream) continued to drive the Group earnings as well as positioned it as sub-Saharan leading energy company. The gas and upstream divisions continue to deliver outstanding results to the Group’s earnings.
The upstream division in particular added to the bullish outlook of Oando Plc during the year ended December 31, 2010 when it raised its turnover for the year on the back of better than expected numbers.
BusinessDay learnt that the upstream business contributed a record N35 billion to Oando Group turnover, mainly from Energy Services (N15.5 billion) and Exploration and Production (19.5 billion) during the year under review.
Specifically in 2010, Oando witnessed tremendous growth in its financial results to rise above the global economic slowdown experienced since the downturn that began in 2007. “Our 2010 results reflect resilience in our integrated business model in a challenging environment. Our strategy to lay more focus on the higher margin upstream sector yielded dividends, with this sector contributing immensely to our earnings,” said Wale Tinubu, Oando’s Group Chief Executive.
Oando holds interest in 13 licenses for the exploration, development and production of oil and gas assets located onshore, swamp, and offshore. Its primary task is to harness optimally the potentials of its existing portfolio.
A cursory look at the Group financial result for 2010 showed that turnover increased from N336.9 billion in 2009 to N378.925 billion in 2010. Profit before Tax (PBT) stood at N24.318 billion compared to N13.512 billion in 2009, while shareholders got a dividend of N3.00 per share, a cummulative dividend of (N2.76billion) from the year’s profit and a bountiful bonus of 1 new share for every4 already held by them . This result had been commended by the shareholders at the company’s annual general meeting which held last week in Lagos.
Indeed, the year proved to be an opportunity for Oando Energy Services, a unique part of the upstream business, to solidify its position as a leading drilling services provider to the oil and gas industry. On the other hand, the sustenance of the amnesty experienced in the Niger Delta in addition to the steady rise in oil prices led to an increase in confidence for operators in the sector, thus having a corresponding positive effect on drilling activity in the region.
Going forward, officials of the company said plans are in place to form an alliance with an integrated project management company that will focus on bundling all service offerings of the Energy Services company along with other third party services in order to offer independent oil companies and indigenous players a one-stop shop for their drilling campaigns.
On the exploration side, the company relished a zero percent casualty level even as it pushed average daily production to 4,500 bpd through its upstream vehicles.
“Given these achievements as an indigenous player, our ambition going forward is to enhance and optimize the intrinsic value of the assets in our portfolio using the most productive capital structure whilst releasing more resources to capitalise on opportunities the ongoing reforms in the industry should present in the near future.” Tinubu stated.
He said despite the challenges experienced in 2010, “we see a healthier growth outlook and are very optimistic about 2011 especially as the industry expects to be repositioned by the much anticipated passage of the Petroleum Industry Bill (PIB). In 2010, Oando recorded notable achievements in the upstream business including successful production tests on Akepo 1 oil well, commencement of production from Obodeti/Obodugwa oilfields which is expected to average over350bpd in 2011 upon completion of drilling program for this year.
Similarly, the company commenced deployment of oil rigs fleet with International Oil Companies contracts in the Niger Delta, Even as the group’s focus is to deliver the promise of superior shareholder returns through astute investments in upstream oil and gas field appraisal and production, Oando maintained refining options as part of a Group of investors invited by the Nigerian National Petroleum Corporation (NNPC) to develop refining capacity.
Accordingly, the long term solution will be a multi-billion dollar development of the first Greenfield refinery development in Africa for over twenty years. Specifically, the first phase of a proposed 360,000 bpd refinery is expected to satisfy at least half of the nation’s import requirement and enhance shareholder value with strong distillates exports to meet severe deficits in the Atlantic basin.
Meanwhile, officials say 2011 will see the kickoff of a development program in OPL 236, located onshore Akwa-Ibom State with a total acreage of 1,650 Km. this is aimed at harnessing the gas reserves in line with proposed industry gas master plan and delivering the much needed clean energy for the growing utilities and power industry within the region. Chairman of the company, HRH Oba Michael Gbadebo, the Alake of Egbaland told shareholders at the AGM that Oando remained positioned for immense growth in 2011 especially with the anticipated passing of the PIB, which invariably, will promote indigenous firms in the upstream. “With our focus and strategy remaining clear, we are in a prime position to surpass our past performance to the ultimate satisfaction of our esteemed shareholders,” he added.
