HEADLINENEWS.NEWS correspondent reported that Oil and gas firm Oando has released its delayed 2022 audited account, indicating that as of December 2022, it required at least N3 trillion to clear debts and inject cash into its operation.
However, it is now about 16 months since the company faced that dire situation and it is unclear how much of that lifeline it has raised so far. In November 2023, it was widely reported that the firm signed an agreement with Afreximbank for a $800 million loan to facilitate its acquisition of 100 per cent shares of the Nigerian Agip Oil Company (NAOC) in OML 60-63.
According to the company’s 2022 audited report, the most pressing of its obligations in the twelve-month period reviewed by its auditors was N686.6 billion (84.1 per cent of outstanding borrowings), which became due and needed to be paid.
Oando, listed in Lagos and Johannesburg, said its liabilities to trade partners and other payables as of 31 December 2022 stood at N705.8 billion.
“A material uncertainty, therefore, exists that may cast significant doubt on the company’s and group’s ability to continue as a going concern, thereby resulting in the company’s and group’s inability to realise the assets and settle the liabilities in the ordinary course of business at the amounts recorded in these consolidated and separate financial statements,” said Independent auditor BDO Professional Services.
The company shares had plunged by 9.8 per cent in Lagos at 15:40 WAT on Tuesday, less than 24 hours after the earnings report was released.
“It is a major sign of business collapse, meaning that their liabilities are far more than the assets,” Folorunso Adeleye, team lead internal audit and compliance at Lagos-based commercial printing company Superflux International, said, referring to the independent auditor’s comment.
“Even at the points of liquidation, if the assets are disposed of, it may not cover the commitments.”
However, the company said its management has lined up a list of plans to rescue the company and return it to profitability.
One of the measures is a fresh loan of N1 trillion it planned to source in the form of bonds from investors to partly close its N3 trillion funding gap by 32 per cent. What progress the company has made on that front in the past 16 months remains unclear.
“Management has progressed the initiative to mitigate the ongoing concern uncertainties on profitability, working capital deficiency and negative shareholder’s fund by appointing a rating agency to provide a rating analysis of the bond, which process started in 2022,” Oando said.
As of December 2022, accrued but unpaid interest on borrowings stood at N154.6 billion, the report noted.
“The repayment of the outstanding principal amounts and coupon will be made from cash flows from operations arising from efficient operatorship of the NAOC acquisition,” the energy company stated in the earnings report.
“The Group has forecast that it will return to profitability by 2024, but the forecast is highly dependent on the successful completion of the acquisition of NAOC’s working interest in OML 60 – 63,” Oando added.
Eni signed a Sales & Purchase Agreement (SPA) with Oando last September to sell its local onshore unit NAOC – Nigeria Agip Oil Company in total – in OML 60 – 63, a joint venture in which NNPC Exploration and Production Limited, a subsidiary of state-owned NNPC Limited (NNPCL), holds a 60 per cent stake.
A group of shareholders want to take the company private and are currently in court seeking approval to do this. Wale Tinubu, Oando’s CEO and his deputy Omamofe Boyo jointly hold the majority stake of 66.7 per cent in the energy firm through Ocean and Oil Development Partners Limited (OODP).
OODP, controlled by Messrs Tinubu and Boyo, last March tabled N37.5 billion before other shareholders to buy their holding at a 58 per cent premium above market price. That transaction is at the stage of getting a court order to launch a scheme of arrangement with shareholders.
“Management has additional plans to address the uncovered 68% of the projected funding gap through a combination of advances from its existing major shareholders and additional equities,” Oando said in the financial report.
Oando also said in the 2022 account that it considered “the issuance of stock instead of cash for payment for services to vendors until profit and healthy cash flows from profitable operations may be achieved”.
