Oando to Raise N49bn Fresh Capital via Rights Issue

Oando Plc, a leading integrated energy firm, last week announced a fresh capital raising exercise from existing shareholders through a rights issue. The company notified the Nigerian Stock Exchange (NSE) of its rights issue to raise about N48.8 billion. Specifically, the energy company is to issue about 2.217 billion ordinary shares to shareholders in the ratio of one new share for every four shares already held at N22 per share.

Shareholders had recently given the directors of the company the authorization to raise more capital to finance the firm’s asset acquisition programme.

Market analysts said equity financing of its expansion and asset acquisition programme would enhance the company’s bottom-line.
While the Oando recorded high growth in gross profit, financing charges reduced the growth in its bottom-line for the nine months ended September 30, 2014.

The company, which recently acquired Nigerian assets of ConocoPhillips(COP) to boost its operations and leadership position, posted a turnover of N338 billion, compared to N386 billion in the corresponding period of 2013. Gross profit rose by 97 per cent from N46.7 billion to N79.5 billion. However, high administration administrative expenses, financing moderated the profit after tax. Although the company reduced selling and marketing expenses from N5.2 billion to N4.2 billion, administrative expenses rose from N26.6 billion to N47 billion.

Similarly, net financing cost soared by 203 per cent from N8.612 billion to N26.137 billion. Consequently, profit after tax stood at N11 billion, showing an increase of 83 per cent compared to N6 billion posted in 2013.
Market analysts had said given the nine months results, the future was bright for the company. According to them, once the huge debt burden is over, the company would begin to enjoy the real benefits of its continuous investment in new assets. Oando recently paid a dividend of N1 dividend per share for shareholders comprising 30 kobo for the 2013 financial year and 70 kobo interim for the six months ended June 30, 2014. The shareholders of the company, who approved the dividend at the annual general meeting in Lagos, commended the board and management for the dividend.

They also expressed high hopes that the acquisition of the COP assets in Nigeria, would add more value their investments going forward. For instance, Mikail of Costance Shareholders Association of Nigeria, said: “I commend the board and management for the acquisition of those assets, which I believe have made the future brighter for shareholders of the company.”

Highlighting the impact of Oando’s $1.5 billion acquisition of COP Nigeria, which has transformed the company into Nigeria’s largest indigenous oil and gas producer, the Group Chief Executive Officer of Oando, Mr. Wale Tinubu assured shareholders of further improvements in the company’s performance. According to him, the acquisition is set to increase daily oil production exponentially by 600 per cent equivalent to 45,000 boe/d, annual revenue of over $600 million, and annual free cash flows of $150 million. “With an eye to the future, we took on our largest and most daring feat with the acquisition of COP, adding capacity to support our future growth plans. Our strategic refocus on the higher margin promises to create profitable growth for us and immense value add for our stakeholders in the near term,” Tinubu said.


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