With debt under control, Oando CEO Wale Tinubu looks to increase output
Lagos — JSE-listed Nigerian oil group Oando is looking to boost crude output from next year as it breaks the back of a $2.5bn debt burden.
That debt was built up through the 2014 acquisition of oil and gas assets from US giant ConocoPhillips.
The borrowings will be almost 90% lower by the third quarter of 2019 and the company is now preparing for its next stage of development, CEO Wale Tinubu said in an interview at Oando’s Lagos headquarters.
"We have purchased enough reserves and our job should really be to exploit those reserves," he said.
Oando focused on repaying the debt after the ConocoPhillips deal to cushion the impact of the financing costs, but that came at the expense of growth, according to the CEO.
The company, listed in Johannesburg and Lagos, is now able to increase its number of rigs and reopen oil fields, he said, taking advantage of a recovery in the oil price.
Oando has more than 450-million barrels of reserves following the ConocoPhillips acquisition, and has interests in 14 oil exploration licences in Africa’s biggest crude producer.
Its Oando Energy Resources unit aims to grow production organically to 75,000 barrels a day by 2023 from 40,000 barrels now, while also seeking "acquisition opportunities" that could help it exceed that goal, Tinubu said.
Besides repaying debt, the company sold parts of the business to focus on more profitable areas, according to the CEO.
Disposals include a stake in a gas distribution and power unit to Helios for $115.8m in 2016, while Oando gave up its majority stake in a service-station and fuel-storage and supply business.
Oando remains committed to its oil trading operation, he said. "We are focused on developing that side of our business, which is really to export Nigerian crude and bring in products wholesale."
Tinubu also commented on a Nigerian government cap on petrol prices at below-market costs that has caused many private retailers to stop imports.
That has left the state-owned Nigerian National Petroleum Corporation to handle supply and effectively subsidise fuel for Nigerians.
"It’s not popular to increase petrol prices," the CEO said. "The reason we don’t have a country that is exporting petroleum products is because of subsidies.
"Our refineries were never repaired because they never had enough cash flow to fix them. That’s because they were always selling product at a discount."
Nigeria restricts pump prices to 145 naira a litre (40 US cents). That makes the country — a member of the Opec cartel — one of the 10 cheapest places in the world to buy petrol, according to GlobalPetrolPrices.com.
Tinubu and his deputy at Oando were dealt a court defeat last month as companies they own or part-own were ordered to pay $680m in a dispute over corporate shareholdings. The CEO declined to comment as the case is ongoing.
The shares have declined 17% this year, valuing the company at 62-billion naira ($171m).
On the JSE, the share last traded at 22c, giving it a market capitalisation of R2.7bn.