Oando Plc yesterday secured a N94.6 billion facility from nine local banks to enable it restructure its debt positions and improve earnings.
The financing, coordinated by the mandated Lead Arranger, Access Bank Plc, is a five-year Medium Term Note (MTN) given at the Nigeria Interbank Offered Rate (NIBOR) plus 200 basis points, to assist the company meet its financial obligations in the low crude oil price environment.
In a statement, Oando Plc said it has substantially reduced its debt profile in the last 24 months, and the new loan facility would enable key restructuring of its remaining debt.
Group Chief Executive of Oando Plc Wale Tinubu said: “In a bid to return to profitability in 2016, I am happy to announce the successful completion of the restructuring our overall debt profile into a N94.6 billion Medium Term, five-year consolidated facility, with a three-year moratorium on principal. This is the pivotal leg in our group restructuring plan of growth; via the upstream business, deleverage; via the disposal of $350 million in assets’ value in 2016, and our return to profitability in 2016, driven by our dollar earning oil export and trading activities”.
Continuing, he said the company now stands diversified with higher weighted dollar denominated earnings, an optimised and restructured balance sheet with lower cost of capital and longer tenors. “With the upturn in global oil prices to levels above $50 per barrel, we now look forward to the successes of 2016, having ridden out the storm”.
Other banks in the financing deal include Diamond Bank, Ecobank, First City Monument Bank, Fidelity Bank, Stanbic IBTC Bank, United Bank for Africa Plc, Union Bank and Zenith Bank.
Speaking on behalf of the participating banks, the GMD/CEO of Access Bank Plc, Herbert Wigwe said Medium Term Loan (MTL) facility would allow Oando to optimize its balance sheet towards greater efficiency.
“As we all know, Oando is the largest indigenous oil and gas player in the Sub Saharan Africa and this MTL facility would allow it to optimize its balance sheet towards greater efficiency and improve its working capital. This combined with the synergy of Investment by HVI into its downstream operations, will see Oando’s growth and development really take off,” Wigwe said.
Oando has pledged to continue to exercise strong financial discipline, and the transaction further signifies the steadfast commitment from local banking institutions to support the sustained growth and development of the Nigerian oil and gas sector in spite of the rigid economic climate.
Oando has navigated the ups and downs of the cyclical market by adapting quickly and being fiscally innovative to enable its business operations run as normal.
In the Upstream, Oando posted a profitable first quarter 2015 in spite of the crude downturn, reinforcing investor confidence in its operations and asset portfolio. It also achieved significant operational milestones. The company’s Proven and Probable Reserves have increased from 420.3 Million Barrels of Oil Equivalent (mmboe) to 445.3 mmboe and maintained net output at 54,520 barrels of oil equivalent per day (boepd) and the commencement of production at Qua Iboe.
Additionally, proactive fiscal measures resulted in a cash windfall of $283 million from the reset of oil hedges. The hedge adoption effectively ensures Oando Energy Resources (OER) receives income approximately pegged to a pre-agreed price until 2019, and enables it to conveniently service its debt obligations, which are denominated in both naira and Us dollar, regardless of oil prices and without foreign exchange exposure.
In the Midstream, Oando Gas & Power (OGP) posted a N5.1 billion Profit After Tax last year and recently announced the development of a multi-billion Naira mini-LNG facility in Ajaokuta, Kogi to serve industrial clusters in the North.
The company which provides gas and power solutions to over 170 industrial and commercial customers is also concluding the 10km Ijora to Marina expansion of its Greater Lagos pipeline network to increase supply capacity, while providing a cheaper power solution for industries and commercial enterprises along the axis.
OGP inaugurated its expanding Compressed Natural Gas (CNG) programme in 2013, and is also spearheading several long term projects including a 400km South-West to North-West gas pipeline and a Central Processing Facility (CPF) which will serve as the primary gas gathering and processing hub in the Niger Delta.
In cooperation with the Rivers State Government, OGP is constructing a 8km build out of the Central Horizon Gas Company pipeline franchise within the Trans-Amadi area in Port Harcourt ensuring cost-savings across board, economic development, and environmental awareness.
Together with Helios and Vitol (HV Investments), Oando will soon conclude a strategic partnership to potentially create Africa’s largest Downstream company. HV Investments’ equity buy-in into Oando’s Downstream business will be for a consideration of $276 million, and will vastly increase Oando’s Downstream operations and retail footprint.
Already the largest indigenous supply and trading player in the sub-Saharan region, Oando has increasingly focused on efficacy in the reception of products at its newly completed jetty in Apapa, Lagos.
The jetty will allow 45,000 DWT vessels to berth and discharge their products without lightering and demurrage, and will enable cost-savings across the industry in excess of $120 million per annum and lead to higher margin volumes with an estimated $36 million expected annually in revenue.
The novel infrastructure, the sector’s first in decades, will provide a more efficient and timely platform for product receipt to all marketers via its half-kilometer subsea pipeline, and a 16″ 3km onshore line capable of delivering over three million tonnes a year.
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