Oando losses N52b in Q3

Oando Plc recorded a pre-tax loss of N52.03 billion in the third quarter, continuing a string of losses that has significantly impaired the assets and share price of the indigenous integrated energy group.

Nine-month report for the period ended September 30, 2015 showed that the oil and gas group was totally in the red during the period, with decline in turnover and operating loss, pre-tax loss and net loss after tax.

The latest report came on the back of reports last week that the oil and gas group recorded a net loss of N183.9 billion in the year ended December 31, 2014 while net loss after tax stood at N21 billion and N35 billion in the first and second quarters of this year.

Key extracts of the nine-month report indicated that turnover dropped to N95.78 billion by September 2015 as against N101.33 billion recorded in comparable period of 2014. Gross profit declined from N64.12 billion to N41.06 billion. As against operating profit of N31.78 billion in third quarter 2014, the company recorded operating loss of N13.18 billion in third quarter 2015. With net finance costs rising from N28.6 billion in 2014 to N38.83 billion in 2015, loss before tax stood at N52.03 billion in 2015 compared with pre-tax profit of N3.22 billion in 2014. After taxes, net loss stood at N47.80 billion in 2015 compared with net profit of N10.7 billion in comparable period of 2014.

The negative profit and loss accounts also affected the company’s balance sheet as total assets dropped by N57.75 billion from N889.37 billion recorded at the beginning of this year to N831.62 billion by September 2015.

Oando’s share price dropped by 9.64 per cent to close at N9 yesterday at the Nigerian Stock Exchange (NSE).

But the management of Oando yesterday insisted that the fundamentals of the oil and gas group remained sound and there were no cause to fear about its going concern and future returns.

At a presentation of underlying reasons and facts behind the performance of the company yesterday at the Nigerian Stock Exchange (NSE), group managing director, Oando Plc, Mr. Wale Tinubu, provided further details on the underlying reasons for the losses in the 2014 and this financial year, assuring the investing public that the intrinsic fundamentals of the integrated energy group remain strong.

According to him, the losses recorded in recent periods were cautionary impairments and write-downs due to the steep declines in crude oil price and depreciation of Nigerian currency and would in no way jeopardize the medium to long-term performance of the group.

He said Oando Group has built enormous assets across the broad spectrum of the oil and gas industry that would ensure that it meets investors’ aspirations in the years ahead.

Read also: Oando sells downstream business in $461m deal

Tinubu explained that the impairments that led to the losses were not cash losses but were cautionary reductions in the value of assets of the group including oil reserves, oil debts and drilling rigs in the face of the global fluctuation in the oil and gas industry and related foreign exchange challenge in Nigeria.

“The company’s fundamentals are sound, it has the right products in the right markets,” Tinubu assured, drawing attention to the facts that Oando Group has the largest indigenous oil production, the largest swamp drilling fleet in Nigeria servicing international oil companies, the largest indigenous gas distribution network and the largest indigenous supply and trading network in the Sub-Saharan Africa region among others.

According to him, the group decided to take realistic approach to current valuations of its assets and contracts in line with the current global trends, and future improvements in the global oil industry could lead to similar write-backs in addition to operational performance of the group, which would both deliver better returns to investors.

He added that the oil assets of ConocoPhillips, which the group acquired in 2014, would start to contribute to the group profitability as from 2016.

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