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Oando Posts N1.7bn PAT, Raises Revenue By 116%

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  • Oando Posts N1.7bn PAT, Raises Revenue By 116%

The storm appears over for one of Nigeria’s oil giants, Oando Plc, as it posted N1.7 billion profit after tax (PAT) in the first quarter of the year.

A statement by the company’s Chief Strategy and Corporate Services Officer, Mr. Ainojie Irune, on Monday said the profit came on the heels of its turnover growth by 116% to N138.4 billion and gross profit by 53% to N13.4 billion compared to the first quarter of 2016.

It attributed the good performance to proactive measures taken by management to enable the company cushion the effect of the economic headwinds in the country.

“We are pleased with our Q1 2017 results, which reflect a return to normalcy and growth in spite of continued security challenges, economic headwinds and a fluctuation in crude prices,” Mr. Wale Tinubu, Group Chief Executive of the company, said in the statement, explaining that this was made possible by the successful restructuring of the company in 2016.

The result showed that the company had continued to reduce its net debt, quelling any concerns of critics. As at March 2017 it stood at N225.9 billion a 29% reduction from N316.6 billion in March 2016.

According to Tinubu, “In the upstream, production in the first quarter of 2017 decreased to 38,125 bpd compared to 49,365 bpd in Q1 2016. However, due to decreased production expenses, Oando Energy Resources (OER) recorded a profit of N4.96 billion in the first quarter of 2017 compared with a profit of N815.5 million in the prior year comparative period.

“In the midstream, following the partial divestment of Oando Gas and Power (OGP) to Helios Investment Partners, we successfully concluded the sale of Alausa IPP for a transaction price of N4.6 billion.
“In the downstream, our trading business through Direct Sale & Direct Purchase (DSDP) and Offshore Processing Agreement (OPA) yielded N115.6 billion compared to N4.4 billion in 2016.”

The Nigerian oil and gas industry and the economy had been plagued by low oil prices, production disruptions, reduced oil exports and the attendant economic recession, forcing most oil and gas companies, particularly upstream players to struggle to navigate the difficult terrain that translated to lower revenues and operating cash flows.

But the company said its strategy of growth across its business operations; deleveraged through the divestment of non-performing assets; and profitability, by focusing on dollar denominated export earnings paid off as it recorded the Q1 N1.7billion profit.

It said through its upstream subsidiary, Oando Energy Resources (OER), the company adopted a hedge mechanism that ensured the business was protected from fluctuating oil prices, saying the subsidiary, however, recorded a production shortfall due to significant reductions in gas production and delivery caused by a ruptured Gas Transmission System (GTS-4) gas line at OMLs 60 to 63.

It regretted that the Trans Forcados pipeline continued to suffer downtime, resulting in reduced production from its Ebendo field.

Oando said despite these operational challenges, OER recorded a 608% increase in profits; N4.96 billion in the first quarter of 2017 against a profit of N815.5 million for same period in 2016.

It explained that its Downstream Oando Trading (OTD) witnessed a 150% growth in traded volumes and a significant increase of 1718% in turnover to N115.6 billion compared to N4.4 billion the comparative year, adding that it also increased its secured credit lines by N76.6 billion to a total of N214.4 billion, giving it added leverage to further grow the business.

“The first quarter earnings from OER and OTD underscore our proactive decision to focus on our dollar denominated export businesses,” Tinubu said, adding: “Our resilience is evident in our capacity to grow via a diversified model, and as we continue to chart our deliberate path in this challenging business environment, we look forward to better performance in the quarters to come.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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