Oando PLC, a prominent player in Nigeria’s energy sector, recently released its audited financial results for the fiscal year ended December 31, 2022. The report provides a comprehensive overview of the company’s operational performance, financial standing, and strategic initiatives amidst a challenging business landscape.
Operational Highlights
Production Challenges in the Upstream Sector
Oando PLC faced a significant 23% decrease in production across its upstream operations. This decline, primarily attributed to heightened militancy and pipeline vandalism in the Niger Delta region, resulted in production downtimes for repairs and maintenance.
Trading Sector Resilience
Despite challenges in production, Oando’s trading sector witnessed a robust performance. Traded crude oil volumes increased by 25%, reaching 21.8 million barrels in FYE 2022. Moreover, the trading of refined petroleum products saw an impressive 101% surge, with 1,937,833 metric tonnes delivered.
Financial Performance Analysis
Turnover Surge and Loss-After-Tax
Oando reported a remarkable 148% increase in turnover, amounting to N2.0 trillion in FYE 2022. However, the company experienced a shift from Profit-After-Tax in FYE 2021 to a Loss-After-Tax of N81.2 billion in FYE 2022. This drastic change underscores the challenges faced during the year.
Impact of Increased Borrowings
Total Group Borrowings rose by 10% to N507.3 billion in FYE 2022, reflecting the company’s reliance on borrowing amidst operational and financial challenges. The rise in borrowings highlights the need for strategic financial management and debt servicing.
CEO’s Insights and Strategic Response
In response to the operational and financial hurdles, Wale Tinubu, Group Chief Executive of Oando PLC, outlined strategic measures. These include collaborating with partners to enhance security frameworks, exploring growth opportunities, and restructuring key facilities to align with cash flow dynamics.
Operations Review
Production Breakdown
The breakdown of production in FYE 2022 reveals a significant decrease across crude oil, NGLs, and natural gas. Crude oil production declined by 44%, NGLs by 72%, and natural gas by 6%. These reductions were primarily due to production downtimes and sabotage activities.
Capital Expenditures and Investments
Oando’s capital expenditures in FYE 2022 focused on the development of oil and gas assets, exploration, and evaluation activities. Investments totaled $101.9 million, with significant allocations to oil and gas properties across various operational licenses.
Financial Review
Revenue Dynamics
The surge in revenue to N2.0 trillion was driven by increased traded volumes and improved price realizations for crude oil and refined products. However, production declines and decreased NGL prices impacted overall revenue growth.
Operating Profit and Net Interest Expenses
Operating profit saw a significant decline of 74% compared to FYE 2021, primarily due to the absence of one-off large reversals of impairments. Additionally, increased net interest expenses, influenced by global interest rate trends, contributed to financial challenges.
Conclusion
Oando PLC’s audited FYE 2022 results reflect a mixed performance characterized by operational resilience in trading activities and production challenges in the upstream sector. The company’s strategic response underlines a proactive approach to address operational issues, enhance security measures, and explore growth avenues.
