- Oversubscribed N54.6 billion Rights Issue Capital Raise
- Completed 5 drilling campaigns in Abo and Ebendo fields
- Delivery of 4th swamp drilling rig, with anticipated daily revenues above $100,000
- Commissioning of 2nd Independent Power Plant (IPP), 10.4MW IPP in Ikeja, Lagos
- Successful completion of Single Point Mooring Jetty in Apapa, Lagos
Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “2013 was a sacrificial year for our company as a significant burden of the cost of transiting to the higher margin Upstream business, was borne as it provided the necessary foundation. The completion of the acquisition of ConocoPhillips’ Nigeria business unit in 2014, has seen a tenfold increase in our upstream activity and contribution to the nation’s oil and gas production as well as positioning us as a leading indigenous Upstream player. Profitability in the FYE 2013 results, was heavily impacted by financing obligations, as we did not benefit from the upside of the production and cashflows, whilst awaiting regulatory approval. We look forward to a very rewarding 2014 as our strategy of building a leading indigenous upstream company is now our reality, and our next challenge is to work diligently towards extracting maximum value for our shareholders”.
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In the Upstream, OER has made significant progress in organic development during the course of the year with completed drilling campaigns for wells 9, 4 ST and 8 in the Abo field, and wells 5 and 6 in the Ebendo field (OML 56). Production from the Abo field within OML 125 averaged 3,321 bbl/d light oil (net Working Interest) in 2013 as we drilled 3 wells to maintain production levels; whilst production at the Ebendo Field averaged at 679 bbl/d, representing a 54% increase in production over 2012 due to additional well capacity and the optimisation of crude storage and injection.
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Significant progress was made in the construction of an alternative 45,000bbls/d, 51km evacuation pipeline which will provide an alternative route for crude transport from the Ebendo Field, through the Trans Forcados export pipeline; completion is expected in Q4, 2014. With the two additional wells drilled on the Ebendo field, we grew our oil production capacity within OML 56 to 7,140bbl/d (3,213 bbl/d OER Share). Export is currently constrained at 3,093 bbbl/d (1,391.85 bbl/d OER share) via the Agip operated Kwale-Brass NAOC/JV infrastructure; however, this does not pose a threat as the construction of our alternative Umugini pipeline will resolve the constraint. We continue to make substantial progress in bringing the Akepo field (OML 90) and Qua Ibo field (OML 13) to first oil.
OES took delivery of its’ fourth swamp drilling rig, Respect, in Q4 2013, which is expected to commence a $100,000 day rate contract with an IOC. The Integrity rig celebrated 4 years without Lost Time to Injury (LTI), signifying our commitment to world class operating standards, with the proactive use of our EHSSQ and operational processes.
In the midstream, we commissioned the Alausa Independent Power Plant in Q4 2013, thus growing our power generation capacity by an additional 10.4MW. We also commissioned a 5 mmscf/day Compressed Natural Gas facility in Lagos which enables us to reach commercial and industrial customers outside our existing pipeline network. Similarly, we’ve commenced execution of our Greater Lagos pipeline expansion project, which will enable customers along the Ijora and Marina axis have access to pipeline gas. This pipeline expansion will increase the pipeline’s overall capacity by 30mmscf/day. We successfully divested our 128Km EHGC pipeline in line with our strategy to maximize value from our assets, with proceeds from the sale re-invested into the business for growth in other identified value-creating areas.
As downstream players continue to battle delayed subsidy payments from the Federal Government, we are being proactive in creating value as we explore efficient channels to increase our margins and add value to the sector, with the completion of our single point mooring jetty in the Apapa port, a first of its kind in Africa. This will contribute to cost-savings as a result of a deeper berth to accommodate larger vessels, increased throughput capacity, which will increase efficiency as well as toll charges from external parties. We have also increased our product diversity and expanse across geographies, with operations and supplies into new markets, countries, and continents.
- Turnover decreased by 30%, N85.3 billion compared to N121.1 billion (Q1 2013)
- Gross Profit increased by 11%, N14.5 billion compared to N13.0 billion (Q1 2013)
- Profit-Before-Tax decreased by 101%, (N59.0 million) compared to N4.3 billion (Q1 2013)
- Profit-After-Tax decreased by 125%, (N2.7 billion) compared to N2.4 billion (Q1 2013)
- Successfully secured all debt and equity financing towards the closure of landmark upstream acquisition
- Growth in organic oil production from 334,612bbls to 407,802bbls
- Four years of continuous operations without a Lost Time Incident (LTI) on “OES Teamwork” swamp drilling rig
- Commencement of construction of 8km extension of Lagos natural gas pipeline network
- Expansion of downstream operations in Western and Southern Africa
Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “The first quarter of 2014 proved to be an eventful but difficult one for our Company, having paid a substantial $500mm deposit for the acquisition of upstream assets, and continuously incurring the significant cost of interest bearing liabilities without the benefits of the cashflows of the target company, whilst awaiting regulatory approval. The acquisition was subsequently completed post this reporting period, and the first stage in our upstream growth strategy is finally complete. We can now look forward to reaping the rewards of this groundbreaking transaction, which is already being witnessed through a significant growth in both our asset base and income streams”.
Higher oil production and reduced crude losses in our upstream business had an overall positive impact on the performance of the Group. OER grew its oil production by 22% as a result of a reduced shut in period and lower crude oil losses on OML 56. In addition, OML 125 experienced improved production efficiency as its producing wells achieved 98% optimisation.
In January 2014, Oando Energy Services achieved four years of continuous operations with a Zero Lost Time Incident (LTI) on one of its four rigs, “OES Teamwork”. It further signifies our commitment to world class operating standards, with the proactive use of our EHSSQ and operational processes.
In the midstream, our Gas & Power business entered into a construction contract to extend the company’s natural gas distribution network by 8km from Ijora to the Marina business district in Lagos state. The project is expected to have a positive environmental impact as natural gas displaces diesel and low pour fuel oil (LPFO) as the primary fuel source in industries and power generation plants in areas the pipeline covers. The pipeline when completed will increase our capacity in Lagos from 85mmscf/day to 115mmscf/day, positively growing revenue and profitability.
In the downstream, we continue to expand our footprint across the African continent, with retail outlet upgrades within West Africa, as well as the expansion of our trading arm into Southern Africa. We also commenced groundwork for the upgrade of our Apapa Terminal Facility, increasing white product capacity from 29 million litres to 84 million litres. Upon completion, the project is expected to increase the efficacy of the Apapa Single Point Mooring Jetty, by eliminating 3rd party throughput spends, and generating income for the company via throughput storage fees.
- Turnover decreased by 31%, N194.6 billion compared to N280.3 billion (H1 2013)
- Gross Profit increased by 67%, N50.5 billion compared to N30.2 billion (H1 2013)
- Profit-Before-Tax increased by 104%, N12.5 billion compared to N6.1 billion (H1 2013)
- Profit-After-Tax increased by 110%, N8.9 billion compared to N4.3 billion (H1 2013)
- OML 125 production increased by 17% to 651,000 bbls, while the Ebendo Field (OML 56) production increased by 30% to 171,000bbls compared to prior comparative period
- 4 years of continuous operations without a Lost Time Incident (LTI) on “OES Teamwork” swamp drilling rig
- Construction of 8km extension of Lagos natural gas pipeline network
- Completion of Apapa Single Point Mooring (ASPM) Jetty, with expected demurrage cost savings and additional income streams
Commenting, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said: “In July 2014, we achieved an unprecedented milestone in concluding the $1.5 Billion acquisition of one of the largest oil and gas players in Africa. The acquisition of ConocoPhillips’ Nigeria business has significantly increased the scale of our upstream operations, adding four producing onshore licenses (OML 60 to OML 63), two non-producing offshore licenses (OML 131 and OML 145) and approximately 45,000 boe/d of net working interest production to our growing portfolio. In the space of 18 exciting months, we have secured our status as a leading indigenous player in the E&P space, whilst maintaining our leadership position in the other spheres of the oil and gas value chain. We are extremely excited about the future of our company, and look forward to reporting our future robust financials, which will evidently show the growth our company has experienced from our underlying assets and a snapshot of our future potential”.
The legacy assets have also made tremendous progress during the course of the year so far. In the Ebendo marginal field, substantial progress has been made in the construction of a 45,000bbls/d, 51km evacuation pipeline which will provide an alternative route for crude transport from the Ebendo Field, through the Trans Forcados export pipeline. We successfully completed the fiber optic cable laying and pipeline construction milestones associated with the pipeline and delivery of the project remains on track for December 2014. In the Abo field, production grew by 17% compared to prior year largely due to improved well optimisation. We also made significant capital expenditures in Abo 8 and Abo 12 drilling activities, as well as Abo 3 flow line remedial works. Oil production from the Qua Ibo field’s D5 reservoir is expected to commence in the fourth quarter of 2014 after the commissioning of a crude processing facility which is currently under construction and should be finalized in the third quarter of 2014
Oando Energy Services achieved four years of continuous operations without a Lost Time Incident (LTI) on its “OES Teamwork” rig, showing the company’s devotion to ensuring safety in the services sector of the upstream business.
In the midstream, we are extending our natural gas distribution network by 8km from Ijora to the Marina business district in Lagos state, ideally positioning us to benefit from the growing demand for gas and power infrastructure in the country. The pipeline extension guarantees us growth of capacity within Lagos from 85mmscf/day to 115mmscf/day.
Downstream operational challenges remain. However, we tackled it head on with another unprecedented milestone following the completion of our Apapa Single Point Mooring (ASPM) Jetty. The Apapa ASPM is the first of its kind in Africa and will impact our industry with improved efficiency through substantial cost savings on imports. Lagos currently receives over 80% of white products into Nigeria, and at the moment has only 2 terminals. The ASPM jetty was conceived to bypass the infrastructure bottlenecks experienced in the Apapa axis, thus eliminating the lightering and demurrage charges currently being incurred by marketers. The jetty is expected to be commissioned in the fourth quarter of 2014.