In light of Oando’s FYE results released earlier in the week, the Company reveals its plans to raise fresh capital over the next two years and repay debt used to acquire Conoco Phillips’ Nigerian assets. This was revealed by Oando’s Group Chief Executive Adewale Tinubu to Reuters.
Oando has transformed itself in the past few years from a downstream player to one of Nigeria’s largest indigenous upstream players, which now competes with multinationals such as Shell and ExxonMobil, but its growth has been largely built on debt.
It bought Conoco Phillips’ Nigerian assets for $1.5 billion in 2013, but high financing costs coupled with lower oil prices hit profit, leaving it unable to repay its debt.
Tinubu said Oando has paid over 77 % of the acquisition debt and plans to pay-off the rest in 12 months, which would allow it to resume dividend payments. He said Oando would be left with total debt of $300 million. He says they are confident the next 24 months they will be successful in their capital raise endeavours, highlighted in their recently released accounts. The Company has a strong financing track record having raised over US$3.5 billion via debt and equity over the last 9 years.
Oando’s growth plan is to continue to pursue acquisitions as multinational oil companies sell assets, Tinubu said but added that he would take on new deals after paying down debt.
Exxon Mobil is weighing the sale of its Nigerian oil and gas fields for up to $3 billion to focus on new developments in U.S. shale and Guyana, industry and banking sources said. “Our expectation is that over a four-year horizon we will no longer have long term debt,” Tinubu told Reuters by email.
“GOING CONCERN”
Last week Oando’s losses narrowed to 18.3 billion naira ($59.8 million) for 2018 while its auditor Ernst & Young questioned its “going concern” status, saying that its current liabilities were in excess of its current assets.
Oando said it would reclassify some current liabilities as long-term liabilities to remedy its working capital by June and swap 27.5 billion naira of debt into equity, it said in a note to its 2018 accounts.
It also plans to sell up to $200 million via a rights issue by October and cut its stake in its upstream unit to raise $275 million in 2020, Oando said in its accounts.
Tinubu said he was confident with the capital raising initiatives and that over the next 24 months Oando would raise funds as plans were far advanced.
The Company’s objective is to continue on in its upward trajectory and deliver value to its stakeholders.
