As part of its long-term plan to raise fresh capital for its ambitious expansion programme, and nearly three and a half years after its shareholders approved a N200 billion additional capital proposed by the board, integrated energy player- Oando Plc, last weekend opened the second tranche of capital raising exercise on the Nigerian Stock Exchange (NSE).
The group one of the most diversified in the oil and gas sector, with direct interest in 33 subsidiaries, and indirect stake in eight others, and enjoys dual listing in Nigeria and Johannesburg Stock Exchange (JSE), is seeking N54.6 billion. The company through the offer, which will also open Friday, January 4, 2013, on the JSE Limited, offering 4,548,236,276 units by way of rights to existing shareholders, on the basis of two new ordinary shares for every unit held as at the close of business on Friday, 19 October 2012, at N12.00 per share.
Proceeds from the rights issue, according to a statement by group, will be used to refinance part of its N60 billion syndicated loan used to fund the acquisition of upstream assets and swamp drilling rigs.
According to the rights circular, a copy of which was made available to **Daily Independent** at the weekend, four banks that syndicated the loan are expected to get N27.776 billion or 52 per cent of the net offer proceed of N52.938 billion within nine months. They are: First City Monument Bank, which would get N9.969 billion or 19 per cent; Guaranty Trust Bank, N9.22 billion or 17 per cent; First Bank, N6.396 billion; and Stanbic IBTC Bank, N2.189 billion or 4 per cent.
Over a nine-month period also, another N23.7 billion or 45 of the net proceeds is set aside for refinancing the acquisition of upstream and mid-stream assets by Oando Energy Resources selected as preferred bidder for Conoco Phillips’ Nigerian business. They include: 20 per cent stake in OMLs 60, 61, 62 and 63; 17 per cent stake in Brass LNG; 95 per cent stake in OML 131; and 20 per cent stake in OPL 214.
The remaining N1.461 billion, or 3 per cent, is to be invested in enhancing the group’s working capital, to support its increased level of business.
In a letter to shareholders of the company, the company’s chairman, Oba Michael Adedotun Gbadebo, noted that “Oando has continued the execution of its long-term strategy that is intended to drive the Company’s business forward, ensuring that in the years to come, Oando remains a leading integrated energy player in the Oil & Gas sector with a diversified revenue base.”
He recalled that shareholders had on July 30, 2009, at an annual general meeting, authorized the directors to raise additional N200 billion additional capital for the purpose as the deem fit. So far, he continued, “only raised N21.1 billion via the rights issue of 2010, leaving a head room of N179.9 billion.”
Forecast
Arising from the use of the fresh funds and refinancing of its acquisition and use of the new assets, the directors forecast total revenue of N708.252 billion for 2013, compared with N638.27 billion at the end of last year, representing a rise of about 10.96 per cent. This will further rise by 12.56 per cent to N797.252 billion the following year, before slowing down to 0.88 per cent growth at N804.323 billion.
Cost of sales is projected to rise significantly within the period from N565.7 billion in 2012; to N608.792 billion next year; N666.619 billion by 2014; and N690.208 billion the following year. This will leave gross profits of N72.575 billion initially; before rising to N99.46 billion; N130.633 billion in 2014; before sliding N114.115 billion.
Profit before and after tax is forecast to hit N19.222 and N11.741 billion in 2012; N31.35 and N15.003 billion, 2013; N56.581 and N30.048 billion in 2014; and N44.315 and N28.818 billion by the end of 2015. Of this, the directors expect to offer a dividend of 140 kobo from earnings per share of 516 kobo in 2012; 129 kobo from 220 kobo next year; 261 kobo from 440 kobo and 250 kobo from 422 kobo in 2014 and the following year.
Conclusion
A statement by Meka Olowola, head, corporate communications of the group noted last weekend, quoted Wale Tinubu, Group Chief Executive, as saying that with the offer, “We are at the final stages in the execution of overall strategy to increase our exposure to the upstream sector whilst reducing the dependence on the downstream.
“The successful outcome of the Rights Issue will position Oando to increase value for shareholders in the Upstream through focused portfolio growth in production, cash margins and improved returns on capital deployed. We count on the consistent support of our shareholders to seize the opportunity to take up their rights and benefit from the higher margin value creation the Upstream offers.”
Continuing, Tinubu recalled that “in 2010 we raised N21.1 billion through a rights Issue, it was a highly successful event, as it closed 28 per cent oversubscribed and we look forward to a similar outcome in this exercise. We count on the consistent support of our shareholders to seize the opportunity to take up their rights and benefit from the higher margin value creation the Upstream offers.”
While Vetiva Capital Management Limited is lead issuing house, FBN Capital Limited and FCMB Capital Markets Limited are Joint Issuing Houses.
Oando has transformed from being just a petroleum products marketing company when it commenced business in 1956 as ESSO West Africa Incorporated, a subsidiary of Exxon Corporation of the USA. In 1976, the Federal Government acquired Exxon Corporation’s interest, thereby fully indigenizing the company, re-branding it Unipetrol Nigeria Limited, which was listed in February 1992, following its conversion to a public limited liability company in 1991, when government divested 60 per cent of its shareholding to the general public. The turning point was the acquisition of 30 per cent stake in Unipetrol from government by Ocean & Oil Investments Limited in year 2000 to become the core investor. In August, 2002, Unipetrol acquired a 60 per cent stake in Agip Nigeria Plc from Agip Petroil International B.V for $86 million. Both companies were then merged, and the combined entity re-branded Oando Plc in December, 2003.
