Oando Plc board’s plans to, once again, make the integrated energy and oil company profitable has received a boost, as shareholders approved the proposal to raise fresh N80 billion ($402 million) through rights issues.
Rights issues, which is the offer of shares at a price to only existing shareholders, is the company’s second in two consecutive years.
The company, which posted N184 billion losses in its 2014 full-year annual report and another loss of N48 billion in the first nine months of 2015, also plans to spin off its downstream petroleum operations, power and gas subsidiaries.
In June 2015, as part of their efforts to mitigate the impact of declining oil prices and a weak naira, Oando said it had concluded a deal to sell 60 per cent stake in its downstream business.
According to the company, a joint venture owned by Vitol Group and Helios Investment Partners paid N54.65 billion or ($276 million).
In another development, Oando, listed on the Nigerian, Toronto and Johannesburg bourses, received shareholder approval to issue N40 billion worth of shares out of its un-issued share capital to swap debt for equity.
Available company data showed that the debt-equity swap with Ocean and Oil Development Partners and QPR Limited, stemmed from Oando’s existing deal with the company’s two strategic shareholders.
Information at the Nigerian Stock Exchange indicated that Oando has been operating under massive debt since completing in 2014 the acquisition of the Nigerian operations of ConocoPhillips, the American oil giant, for $1.65 billion (N327.70 billion).
In the nine months ending September 30, 2015, the company reported that it has a net debt of $1.77 billion (or N350.46 billion) down from $2.41 billion (or N477.18 billion) in 2014.
Although Oando announced the repayment of $100 million (or N19.80 billion) loan obtained from the African Export-Import Bank to fund ConocoPhilips acquisition, the oil company shares have remained in a slippery swing, falling by more than 52 percent so far in 2015 compared with 34 percent loss recorded in 2014.
But speaking on growth initiatives for creating consistent future shareholder value at the company’s 38th annual general meeting on Monday in Lagos, Adewale Tinubu, the Group Chief Executive, Oando Plc, said 60 per cent sale in downstream operations was strategic in reinventing growth expectations in upstream businesses.
Mr. Tinubu explained that cash proceeds of the divestment will be used to reduce debt and shore up the company’s balance sheet in the ongoing oil industry challenging period.
“Our strategic focus is to increase our operational efficacy across our subsidiaries, deleverage our balance sheet, and return the company to profitability, whilst creating the necessary platform to be the partner of choice to the IOCs as they continue their divestment programmes,” Mr. Tinubu said
With crude prices in a lull and a renewed emphasis on gas globally, he said, Oando will seek expansion of its footprint in the electric power market with the development of up to 300MW grid/embedded power projects.