• Sunday, March 03, 2024
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BusinessDay

Drilling into Oando’s acquisition of COP assets

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Oando a Nigerian integrated oil and gas company listed on the Nigerian Stock Exchange (NSE) recently bid for and won the rights to purchase ConocoPhillips’ (COP) local unit for $1.79 billion.

The deal is a potentially transformational transaction for Oando.

Oando is seeking to become one of Nigeria’s top oil explorers and producers, and currently pumps about 4,800 barrels of oil a day from its Abo and Ebendo fields.

Table 1: Oando key performanc indicators

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The COP assets give it about 43,000 barrels per day (bpd) from onshore fields, 213 million barrels of oil-equivalent in proved and probable reserves, and a 17 percent equity stake in the proposed Brass liquefied natural gas project.

The company has already paid a cash deposit of $435 million, while the outside date for completion of the ConocoPhillips acquisition has been extended from November 30, 2013 to January 31, 2014.

  • Oando announced recently that it had raised a total of $442m through the sale of the East Horizon Gas Company for $250m and a special placement of 2.05bn shares for US$192m, which makes it more likely for the COP deal to close.
  • The deal should increase Oando’s production capacity by 941 percent to about 50,000 bpd of oil/oil equivalents.
  •  This compares with other oil companies with African operations such as Afren with a daily oil production of 47,000 bpd, Heritage oil and gas with 35,000 bpd and Tullow oil at 79,200 bpd.
  • Oando had revenues of N386.25 billion in the nine month period to September 2013. The COP assets should boost revenues by up to $1.46 billion (N233 billion) in 2014/2015 (40,000 bpd at an average of $100 per barrel).
  • Oando had a market capitalization of $1.12 billion as at Friday December 10, compared with Afren ($2.9 billion), Heritage Oil and gas ($717 million), and Tullow oil ($12.8 billion), suggesting some upside in valuation for Oando.
  • Oando is a highly levered company however. The company lined up $800 million of debt from a mix of Nigerian and international banks, including Stanbic IBTC and Standard Chartered to help finance the COP transaction.
  • Oando had a debt-equity ratio of 162 percent as at the third quarter of 2013.The liquidity ratio stood at 0.58 as at Q3 2013 which is lower than the 2.1 industry average.

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