OANDO PLC - Oando Plc Announces Fye 2014 Results, Posts N425.7 Billion Top Line Revenue

Oando Plc Announces Fye 2014 Results, Posts N425.7 Billion Top Line Revenue

Oando PLC
(Incorporated in Nigeria and registered as an external company in South Africa)
Registration number: RC 6474
(External company registration number: 2005/038824/10)
Share Code on the JSE Limited: OAO
Share Code on the Nigerian Stock Exchange: OANDO
ISIN: NGOANDO00002
("Oando" or the “Company")



PRESS STATEMENT: OANDO PLC ANNOUNCES FYE 2014 RESULTS, POSTS N425.7
BILLION TOP LINE REVENUE

Lagos, Nigeria – Oando PLC (referred to as “Oando” or the “Group”), Nigeria’s leading indigenous
energy group listed on both the Nigerian and Johannesburg Stock Exchange, today announced
audited results for the twelve months period ended 31 December, 2014, with the following
highlights:

Financial Highlights:

   -   Turnover decreased by 7%, N425.7billion compared to N457 billion (2013)
   -   Gross Profit increased by 17%, N69.8billion compared to N59.4 billion (2013)
   -   Profit-Before-Tax decreased to (N176.2) billion compared to N7.7 billion (2013)
   -   Profit-After-Tax decreased to (N183.9) billion compared to N1.4 billion (2013)

Operational Highlights:

Upstream:

   -   Oando Energy Resources (OER): 500% increase in total production to 9.1 million boe in
       the 2014 as compared to 1.5 million boe 2013.
   -   OER realized $234 million by resetting its crude oil hedge floor price from an average
       $95.35 per barrel to $65.00 per barrel on 10,223 bbls/day of oil production until July 2016
       and 1,553 bbls/day for a further 18 months until January 2019.
   -   OER completed its 45,000bbls/day throughput volume, 52km Umugini alternate
       evacuation pipeline for the Ebendo Field.
   -   Oando Energy Services achieves 4 years of continuous operations without a Lost Time
       Incident (LTI) on “OES Teamwork” swamp drilling rig.

Midstream:

   -   Oando Gas & Power commenced construction of the 9km expansion project of the Greater
       Lagos Pipeline Phase IV.

Downstream:
   -   Oando Downstream successfully completion of the construction of the Midstream Jetty in
       Apapa, Lagos

2014 was a year of extreme volatility in the oil and gas industry. The year commenced with crude
oil prices as high as $110 per barrel with the year exiting as low as $60 per barrel registering the
lowest price in a 5 year period as a result of a supply shift from the non-conventional oil types that
the high oil price regime promotes. Turmoil in the industry for both oil companies and service
companies, ensued as they had to adjust to the new reality of low oil prices, increased supply and
competition. Projects which were once economically viable were reclassified and postponed till a
higher oil price regime emerges. As such the industry and all companies are experiencing asset
write-downs totalling billions of dollars and are reducing their subsequent investments.


Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “the global industry
clearly shaped our financial outcome as a company in 2014. We thrived in our operational
achievements, with a 5 fold increase in total production over 2013, but this was adversely
countered by the slump in global crude oil prices. In this new pricing reality we have provisioned
for a number of write-downs as a result of reduced activity in the service sector as well as the
value of reserves in our legacy portfolio. We see this period as a time for prudent consolidation
and will be focusing our energies on creating value through optimization of resources, via
efficiency in our operations, deleverage and risk management - as demonstrated with our hedging
instruments that yielded $234 million in proceeds, whilst, seeking the right opportunity to
substantially expand our reserve and production base”.

Although the weak oil price environment may minimize our operational achievements, it is still
imperative we acknowledge that 2014 was a transformational year for the company. We evolved
from a predominantly downstream company to a leading indigenous upstream company,
consistent with our growth strategy. We are delighted with the development in our upstream
business as evidenced by the increase of production from ~5,000 boepd in 2013 to ~51,000 boepd
by the end of 2014 as well as an increase in our 2P reserves from 18.9 mmboe to 430 mmboe in
the same period.

Nevertheless, the year turned out to be a challenging year for the industry as well as for the
company as we witnessed a sharp decline in global crude oil prices of over 30%.

   -   Consequently, upstream players have been forced to record significant reductions in the
       fair value of their asset portfolios. Oando is no exception to this global trend, which has
       led us to recognize about N76.9 billion of impairment charges in our exploration and
       production business. This impairment is as a result of lower oil prices leading to a reduced
       valuation of certain exploration and appraisal assets…
   -   We prudently booked an additional N16.9 billion write down on under-lift receivables and
       Production Sharing Contract receivables in our exploration and production business. The
       arbitration case was awarded in favour of Oando and NAE.
   -   Our energy services business realized impairments of N37.1 billion, as the current oil price
       environment has brought about reduced drilling activity and in turn reduced day rates
       accruable to our rig assets, as well as a weaker market outlook.

In addition to the decline in oil prices there was a 8.4% devaluation of our local currency (Naira)
which has generated significant foreign exchange loss in our downstream business. The nature
of the business makes us extremely vulnerable to foreign exchange risks as we import in dollar
denomination and recover our costs in Naira. The delay of payments of subsidies from the Federal
Government has served to increase this vulnerability and led to a realization of N7.3Bn in foreign
exchange losses.

We have braced ourselves for this new world order of low prices, reduced investments and
industry shrinkage by implementing effective cost cutting initiatives, disciplined capex investments
towards maintaining production levels and growth through M&A deals that create immediate
value.

Operational Update

In the Upstream, Oando Energy Resources increased production by over 500% from 2013, largely
due to a full 5 month contribution from OMLs 60 – 63 which were acquired in July 2014. OER
made significant progress in organic development during the course of the year with completed
drilling campaigns for 3 wells in the Abo field, maintaining a production average of 3,303 bbl/d
(OER share). Ebendo 7 well was drilled, completed and tested, growing the Ebendo field
production capacity to 7,140boepd (3,052 boepd OER share). OER participated in the completion
of the 51km Umugini evacuation pipeline (45,000bbls/d throughput capacity) which will provide
an alternative route for crude transport from the Ebendo Field, through the Trans Forcados export
pipeline. Following the completion of the evacuation pipeline, oil production capacity was
increased within OML 56 to 7,140bbl/d (3,052 bbl/d OER Share). Export had been constrained at
3,093 bbbl/d (1,322 bbl/d OER share) via the Agip operated Kwale-Brass NAOC/JV infrastructure.
The newly constructed pipeline will allow the company maximize the production and
transportation of crude on OML 56. The Company successfully realized $234 million by resetting
its crude oil hedge floor price from an average of $95.35 per barrel to $65.00 per barrel on 10,223
bbls/day of oil production till July 2016 and another 1,553 bbls/day for a further 18 months until
January 2019. The proceeds, in addition to $4 million cash on hand, were used to prepay $238
million of certain loan facilities.

OES Teamwork rig celebrated 4 years without Lost Time to Injury (LTI). LTI measures injury
sustained on the job that can directly obstruct a worker from performing or continuing with a task
or resulting in downtime in operations. This signifies our commitment to world class operating
standards, with the proactive use of our EHSSQ and operational processes.

In the midstream, Oando Gas and Power commenced execution of the 9km Greater Lagos
pipeline expansion project, which will enable customers along Ijora and Marina axis have access
to gas; this expansion will increase the pipeline’s overall capacity by 30mmscf/day. We also
entered into an agreement with General Electric Nigeria to engage in various initiatives to develop
power generation projects, Compressed Natural Gas facilities and mini Liquefied Natural Gas
projects.

The downstream industry remains in need of immediate regulatory reform. Despite the
challenges, Oando stays focused on increasing our footprint and diversifying our product mix. In
line with increasing our presence and dominance across Africa, Oando Marketing completed the
construction of the Island Jetty.


For further information, please contact:

Tokunboh Akindele
Head, Investor Relations
2, Ajose Adeogun Street,
Victoria Island,
Lagos, Nigeria.
Tel: +234 (1) 2601290-9, Ext 6396
aakindele@oandoplc.com


Sponsor: Sasfin Capital (a division of Sasfin Bank Limited)

26 October 2015

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