Oando Plc saw its stock surge by an impressive 529% in 2024, rising from N10.50 to N66, making it the second best-performing stock of the year. This followed a 163% increase in 2023.
Several factors contributed to Oando’s impressive performance, including the landmark $783 million acquisition of Nigeria Agip Oil Company (NAOC).
Analysts remain divided; some anticipate another year of exceptional gains driven by the company’s strategic positioning and growth plans, while others caution that below-expectation financial performance, market volatility, and external pressures could dampen investor enthusiasm.
Oando’s management has said it remains focused on delivering value to shareholders. However, as quarterly reports unfold, investor sentiment will be shaped by the company’s performance, ultimately influencing the stock’s trajectory in 2025.
Financial performance in 2024
Oando reported a 45% increase in revenue to N4.1 trillion in 2024, up from N2.9 trillion in 2023.
The company attributed this surge to higher crude oil volumes, increased gas prices, and positive exchange rate translation effects.
However, these gains were partially offset by lower trading volumes, reduced natural gas and NGL sales, and lower realized crude oil and NGL prices.
A key driver of revenue growth was increased production output. According to the company’s earnings press release, exit production rose by 46%, from 21,036 boepd in FY 2023 to 30,712 boepd in 2024.
Additionally, average production saw a modest 3% increase, reaching 23,911 boepd in FY 2024 compared to 23,258 boepd the previous year, while average oil production climbed by 27%, from 6,211 bbls/day in FY 2023 to 7,864 bbls/day in FY 2024.
These operational improvements highlight Oando’s ability to navigate industry challenges and capitalize on new growth opportunities.
Management’s perspective
Speaking on the results, Group Chief Executive, Oando PLC, Wale Tinubu CON, stated:
“2024 was a year of transformation for Oando, the key highlight being our successful acquisition and subsequent integration of NAOC Ltd, which significantly enhanced our production capacity, attaining peak operated production of 103,206 boepd and net entitlements of 45,000 boepd.
“Despite a challenging operating environment, we achieved a 45% increase in revenue to N4.1 trillion, reflecting the strength of our business model, and a 9% rise in profit after tax to N65.5 billion, notwithstanding the costs associated with the onboarding of NAOC.”
Profitability concerns
Despite the impressive N4.1 trillion revenue, profitability took a hit, with pre-tax profit declining by 54% to N47.78 billion.
However, post-tax profit managed to grow by 9%, primarily due to higher tax expenses recorded in 2023, which created a lower base for comparison.
The concern is also reflected in both margins and cash flows.
- Profit margin contracted by 25%, dropping from 2.12% in 2023 to 1.59% in 2024, highlighting weaker profitability.
- Operating cash flow remained deeply negative, with net cash flow from operations at -N545.5 billion, raising concerns about liquidity and overall financial sustainability.
Market reactions
Following the release of the results on January 30, the share price dropped 11% intraday, falling from N76 to N68.40.
However, the stock has since rebounded, closing at N70 on February 11, 2025, reflecting a YtD return of 6.06%.
Despite the recovery, it remains below its 52-week high of N95.50, suggesting cautious investor sentiment amid concerns over profitability and negative cash flow.
2025 strategy: Can it turn the tide?
Looking ahead, Oando is focusing on cost optimization, operational efficiency, and increased production through aggressive drilling programs.
To curb oil theft, the company is also implementing a revamped security framework with advanced surveillance technology.
On February 5, 2025, Oando announced plans to distribute N97.6 billion worth of additional shares, rewarding shareholders with one new ordinary share for every twelve held.
- The phased distribution will occur on February 14 and June 30, 2025.
- This 1.28 billion-share issuance marks the largest shareholder reward in Oando’s history, reinforcing management’s commitment to value creation.
The distribution offers shareholders a tangible benefit and an alternative form of Return on Investment (ROI) and it is aligned with Oando’s commitment to delivering value to her shareholders.
Also, it serves as a substitute for cash dividends, fostering long-term shareholder retention and confidence, particularly given the current increase in the Company’s share value.
Can Oando replicate its 2024 share price performance?
Oando’s stock has had a volatile run, with recent financial results triggering a sell-off before recovering on the back of its N97.6 billion shareholder reward announcement.
The company’s revenue growth remains impressive, but declining profitability, negative operating cash flow, and a high dependency on supply and trading (a low-margin segment) raise concerns about sustained earnings growth.
From a valuation standpoint:
- The P/E ratio of 14.14x suggests that investors are paying a premium relative to earnings.
- The price-to-book ratio of -3.10x reflects a negative equity position, signaling financial risks.
- A price-to-sales ratio of 0.20x suggests that the stock remains relatively cheap on a revenue basis.
Near-Term Outlook
The share price has already surpassed Futureview’s February 5, 2025, target price of N70.18, indicating that near-term positives may be fully priced in.
For Oando to sustain its upward momentum, two key factors will be crucial:
- Oil Prices: A favourable crude oil market could provide further tailwinds.
- Profitability & cash flow: Executing its drilling plans, cost-cutting initiatives, and security improvements will be essential to rebuilding investor confidence.
Final take: Can Oando match 2024’s 529% gain?
- In 2024, Oando delivered unparalleled returns, driven by strategic acquisitions and bullish sentiment.
- In 2025, while the company is expanding, financial and operational risks remain significant.
- Hitting 2024’s return would require stronger earnings growth and improved cash flows, both of which remain uncertain given current fundamentals.
Overall, Oando remains a stock to watch, but sustaining last year’s explosive gains will require a fundamental shift in profitability, efficiency, and cash flow generation.
While investor sentiment has improved slightly with the recent rally, the stock is still facing structural profitability challenges.
Overall, if oil prices remain strong and Oando successfully improves profitability, the stock could sustain its upward momentum.
Investors should weigh opportunities against risks before making investment decisions.
