Oando Puts Shareholder Dispute Behind It and Announces Full Year 2019 and 2020 Results
On Wednesday, June 22, Oando, Nigeria’s leading indigenous energy solutions provider, finally released its long-awaited financial statements for year-end 2019 and 2020. You will recall that the 3-year delay in releasing results of the company was precipitated by the Securities and Exchange Commission’s (SEC) suspension of Oando’s 2018 annual general meeting (AGM) following a dispute with an indirect shareholder, Ansbury Investment Inc.
The suspension of the company’s 2018 annual general meeting and ensuing issues prevented shareholders from being kept up to date on business operations, a move repeatedly decried by Oando and its executives as not in the best interest of the market.
In July 2021, Oando reached a settlement with the SEC on all matters in dispute and other issues arising therefrom, thereby ending part of the dispute with Ansbury. The key for Oando was that the SEC found the company to be guilty of no wrongdoing and, through a settlement, was able to prevent further market disruption and harm to Oando PLC shareholders. .
After 12 consecutive quarters of profits through the third quarter of 2019, the company reported in its 2019 audited financial statements a post-tax loss of N207.1 billion, largely attributable to goodwill and loan impairments associated with the dispute. indirectly between shareholders. The settlement of this long-standing dispute resulted in a N148 billion write-down on financial assets, but constitutes the final resolution and settlement of the dispute with Ansbury, the indirect shareholder whose shares had significantly destroyed shareholder value over the course of of the past four years. The company has been resolved to reaffirm that all actions taken to date have always been in the interest of all Oando shareholders. Additionally, shareholders have consistently called on the company to take all necessary steps to resolve this dispute and move the business forward.
The actions of the SEC and the indirect shareholder have largely contributed to significantly eroding the value of its share, from its listing price of an average of N9 per share in 2017 to an average of N3 per share in 2022. Despite the loss, this action has far-reaching and positive implications – the settlement finally knocks Ansbury out of the picture and will be a welcome relief to the company, its shareholders and the market as it finally allows management to focus their efforts. on defining a new path to growth and value creation for its shareholders.
With 2019 behind it, the business faced a new challenge in 2020 in the form of the COVID-19 pandemic which negatively affected all businesses, not just those operating in the oil and gas sector. In the company’s 2020 year-end financial statements, a post-tax loss of N132.6 billion, down 36% from 2019, was reported. A positive bias in the results of the previous year.
The drop in oil revenue is explained by the fall in the price of crude oil following the COVID-19 epidemic and the price war between Saudi Arabia and Russia, which led to a supply glut. The price war between Saudi Arabia and Russia that erupted on March 4 over the collapse of the OPEC+ deal was a major factor in turning an already deteriorating situation into an existential crisis for many companies including international oil companies like Royal Dutch Shell, Chevron, ExxonMobil, etc. and local businesses like Oando among others. Royal Dutch Shell, ExxonMobil, BP, Total, ENI, Baker Hughes, ConocoPhillips, Chevron, Equinor, Halliburton and Schlumberger had a combined net loss of $119.2 billion. ExxonMobil posted the biggest loss at $22.4 billion, followed by Royal Dutch Shell with a loss of $21.7 billion and BP with a loss of $20.3 billion. Closer to the original companies such as Seplat, another indigenous player had to revalue its oil and gas assets down by $114.4 million to reflect the drop in crude oil prices of 2020, which reversed the operating profit of $82.7 million to a loss for the year 2020 of US$85.3 million, the company additionally suffered a non-cash impairment of $144.3 million.
In this context and like other oil and gas players around the world, Oando reported further impairments of financial and non-financial assets which had a significant impact on its after-tax finances.
The COVID-19 pandemic was the cause of the oil and gas industry’s third price crash in 12 years. This was notably the worst shock among the three because there was an unprecedented drop in demand for oil and its derivatives. This, combined with OPEC+’s inability to accept production cuts, resulted in a global oversupply of 35 million barrels per day at the end of the first quarter of 2020.
Commenting on the 2020 results, Wale Tinubu, Group Managing Director, Oando PLC, said:
“2020 has proven to be an unprecedented year for the global economy due to the impact of the novel COVID-19 pandemic. The oil and gas industry has been no exception as the year s proved to be one of the toughest years in its history as we witnessed the lowest oil prices since our time in Nigeria’s upstream sector in 2008 which negatively impacted our revenue during the period. This required us to write down some of the goodwill on our balance sheet to ensure that the carrying value of our assets accurately reflected the environment we operated in. In addition, funding the second tranche of the settlement of a prolonged and disruptive shareholder issue contract led us to record a new impairment on a category of our financial and non-financial assets.Despite these challenges, our hedging policy and our long-term offtake contracts have our cash flows not to be severely constrained during this period.
In an uncertain operating environment, the company’s operating performance remained on track as it increased upstream production by 5%, while downstream traded volumes of crude oil and refined products increased by 13% and 53% respectively.
However, these results are retrospective, more than 2 and 1 year behind respectively, so more attention should be paid to the company’s current results, especially the 2021 FYE and 2022 quarters, as they accurately reflect the latest company financial information. status and prospects. Based on recent initiatives announced by the company, as well as the external operating environment, Oando is still very much up and running with highlights that speak to a viable future, including its announcement in 2021 of an expansion of its portfolio. of activities to include renewable energy, a recently signed Memorandum of Understanding with Lagos State for the deployment of electric transit buses and electric vehicle infrastructure across the state and the high prices and oil-backed stocks that the market is relying on to translate into more optimistic financials in 2022.