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Trouble looms at Tinubu-led Oando, as oil firm on brink of bankruptcy

Oando Plc, an oil firm, is currently facing significant financial challenges which have pushed it to the brink of insolvency or bankruptcy.

For several years, the company has been delaying the release of its financial statements, prompting worries about its financial health.

The recently published 2022 financial statement reveals that Oando’s total liabilities surpass its assets.

This imbalance indicates a state of technical insolvency or bankruptcy for the company.

Moreover, with a debt ratio of 1.2, Oando has been relying heavily on borrowing rather than equity from investors, a concerning trend according to financial analysts.

Damning independent auditors’ report

Oando’s investors should pay close attention to the independent auditors’ report on the company’s future, as BDO highlighted potential challenges that could impact the firm’s survival.

The company reported a significant total comprehensive loss, with current liabilities surpassing current assets by a large margin.

This indicates difficulty in meeting short-term obligations and suggests possible inefficiencies in utilizing assets for revenue generation.

Failure to pay off outstanding loans also poses a risk. The auditors stressed the importance of taking bold steps, such as refinancing debts, to address the funding gap and achieve revenue targets for a successful turnaround.

“As stated in the note, if the planned actions are successful, it will only address 32% of the Group’s projected funding gap. Management has additional plans to address the 68% funding gap shortfall but there are currently no written agreements in place for such funding plans and there can be no assurance that such will be available in the immediate future,” the auditors said.

Issues facing Oando

In 2017, two shareholders petitioned the Securities and Exchange Commission (SEC) of mismanagement and infractions, leading to the suspension of the oil firm’s annual general meeting (AGM) in 2019. The company moved to court to challenge the suspension.

In April 2021, SEC said that its action against Oando Plc was due to the company’s “severe breaches of capital market regulations,” noting that some of the breaches were criminal in nature.

Due to conflicting judgments in several courts, SEC said in April 2021 that “parties and relevant stakeholders are enjoined to maintain status quo, which includes the suspension of the Annual General Meeting, pending the determination of the cases and the appeals.”

CEO bets on Agip

Oando announced in September 2023 that it had entered into an agreement with ENI for the 100 percent acquisition of Nigerian Agip shares. This appears to be a potential lifeline for the oil firm.

“The transaction increases Oando’s current participating interests in OMLs 60, 61, 62, and 63 from 20% to 40%,” Oando’s statement signed by Chief Compliance Officer & Company Secretary, Mr Ayotola Jagun, said.

The deal also raised Oando’s ownership stake in all NEPL/NAOC/OOL joint venture assets and infrastructure, including 40 discovered oil and gas fields, of which 24 are currently producing; approximately 40 identified prospects and leads; 12 production stations; approximately 1,490 km of pipelines; three gas processing plants; the Brass River Oil Terminal; the Kwale-Okpai phases 1 & 2 power plants (with a total nameplate capacity of 960MW), and associated infrastructure, the company noted.

CEO defends poor financial results

While reacting to the release of its 2022 annual reports, Group Chief Executive, Oando Plc, Mr Wale Tinubu, said heightened militancy and pipeline vandalism within the Niger Delta region dealt a substantial blow to the firm’s upstream operations, resulting in a marked reduction in the crude production volumes due to the protracted shut-ins for repair following each incident

“This was further compounded by a major gas plant fire incident which also necessitated a lengthy downtime,” he said.

“Furthermore, a rise in our net interest expense due to increased interest rates on several of our major facilities in line with global rates increases also contributed to our Loss after Tax position.

In response, we have put in place definitive measures to bolster our production and cash inflows towards ensuring a speedy return to profitability by collaborating with our partners to institute a comprehensive security framework aimed at permanently curbing the persistent pipeline vandalism whilst concurrently exploring inorganic growth opportunities to increase our reserves and production capabilities.

We have also implemented a strategic restructuring of our key facilities to ensure they align with our cash flow dynamics.”

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