Fuel retailer blames government inefficiency for losses

Oando — listed on both the JSE and the Nigerian Stock Exchange — has stated an intention to become a leading African diverse energy company by expanding its gas distribution network throughout the continent, while boosting its oil production to 100000 barrels a day by 2013. But it had a difficult period last year, as turnover fell to US$2,28bn from $2,69bn in 2008.

This was due in part to the weakness of the Nigerian naira — devalued by the government to compensate for falling state oil revenues. At an average of 147 to the dollar, the naira was about 20% weaker than in the previous year.

But Oando said the decline in revenue was mainly due to “uncertainties in the government policies about deregulation of (the) downstream sector of the petroleum industry”, coupled with a delay in the payment of the official petroleum subsidy. The latter problem resulted in increased financing costs, indirectly causing product supply shortages to Oando's marketing arm.

Yet the company still saw marginal growth in its bottom line, helped by “increased gas volume arising from additional capacity” from the commissioning of new projects, and the deployment of one of its rigs into drilling operations.

Net profit grew from $74,58m to $74,92m, with headline earnings per share up from 8,24c to 8,39c.

Upstream revenue generation was provided only by Oando's Oil Mining Lease (OML) 125 and 134 fields. The company said in November it expected two other fields, OML 56 and 90, to start production within the following two quarters.

The upstream portfolio was further strengthened last year by the $21,2m purchase of Equator Exploration, which explores and develops oil and gas projects in the Gulf of Guinea, and owns assets in the Niger Delta and the joint development zone of Sao Tome and Principe.

Oando would “continue to collaborate with relevant partners to quickly bring these assets into income generation mode”.

The drive to increase upstream revenue reflects CEO Wale Tinubu's stated intention to increase its contribution to 90% of group revenue and profit, from 5% in 2007.

Source: Business Day