Oando dips 10% as investors react to earnings report

There was a significant sell-off of Oando shares on January 31, with its share price dropping 10percent to close at N68.40. Oando had traded at N76 per share on Thursday January 30. Investors may have been reacting to the company’s earnings report recently released on the NGX.

According to NGX’s Data Portal, about N2.22 billion worth of Oando shares were sold off in the market. The slump in Oando’s share price was the driving force as the NGX ended the last day in January on a bearish note, as the All-Share Index declined by 0.24 percent to close at 104,496.12.

The sell-off comes as no surprise, following the release of Oando Plc’s 2024 unaudited results, which fell short of market expectations. In 2024, Oando posted a net income of N65.5 billion, which was a slight uptick from the N60.3 billion recorded in 2023. However, with a revenue of N4.1 trillion, the group’s profit margin in 2024 was just about 2 percent, no change from 2023’s figure.

Muktar Mohammed, a personal finance expert, shared insights on BusinessDay TV’s Economy and Markets, which aired on January 31,

Read also: Oando posts N65.5bn full year profit as revenue hits N4.1trn

“Oando is on full offer because of their unimpressive earnings. When you observe the market, investors are looking at the numbers, such that if the numbers are impressive, you get their attention.”

The group’s operating margin in 2024 was a meagre 5 percent, with an operating profit of N220.2 billion. In contrast, fellow upstream player, Aradel Holdings posted an operating margin of 51 percent in 2024.

Oando’s 2024 earnings fell short of investor expectations, with a N5 earnings per share (EPS)—the same figure reported in 2023—leading to a dampened outlook for dividends.

Although, Oando turned the corner in 2023 with its profit returns, the market expected more from the company, with the acquisition of NAOC’s assets in Nigeria. However, a review of the group’s financials shows that the acquisition of NAOC had an N870.9 billion impact on its cashflow statement.

The acquisition of NAOC assets impacted the group’s total assets, as it jumped by 181 percent to N7.5 trillion, from N2.7 trillion as of 2023. Through the acquisition, the Oando group now holds a 40 percent stake in OML 60, 61, 62, and 63. However OMLs 60-63 have reportedly reached 76.6 percent of their total recoverable reserves, with peak production reached in 2006.

Through the acquisition of NAOC, Oando aimed to double its oil output to 50,000 barrels per day, a strategy that attracted new investors despite a history of no returns for previous shareholders. This optimistic outlook contributed to a 529percent surge in Oando’s share price in 2024. However, the company’s 2024 results have yet to live up to the expectations that investors had placed on this growth potential.