Oando PLC’s Q3 2024 results reveal a company balancing on the edge of challenges and opportunities.
While grappling with a 5% production decline caused by sabotage and theft-related shut-ins, the company posted an impressive 36% growth in revenue to N3.2 trillion, signaling the effectiveness of its recent restructuring efforts and strategic pivots.
These numbers highlight a dual narrative for the Nigerian energy giant.
On the one hand, operational disruptions have hampered production, with average daily output dropping to 20,560 boe/day compared to 21,529 boe/day a year earlier.
On the other hand, the acquisition of the Nigerian Agip Oil Company (NAOC) has provided a lifeline, boosting Oando’s post-acquisition production by 40% to 30,675 boe/day.
Wale Tinubu, Group Chief Executive, described the NAOC deal as transformative, emphasizing its potential to enhance efficiency and operational scale.
This acquisition underpins Oando’s strategic focus on upstream assets, marking a decisive shift away from downstream operations where volatility has often dictated performance.
Revenue climbs but profits take a hit
Despite operational headwinds, revenue growth reflects the company’s ability to capitalize on exchange rate gains and increased crude oil liftings. However, the story becomes more complex when examining profitability.
- Profit After Tax (PAT) fell sharply by 31% to N76.3 billion, driven by foreign exchange losses and higher finance costs. Operating profit also dropped 23% year-on-year, hampered by rising administrative expenses linked to macroeconomic pressures.
- These results reflect a broader theme of resilience under pressure. Oando’s ability to sustain growth amid pipeline vandalism and crude theft highlights the critical balance between operational setbacks and strategic wins.
Trading volumes under pressure
Oando’s trading segment remains a weak spot. Crude oil volumes fell by 47% year-on-year, while traded refined petroleum products plummeted by 56%.
- The declines highlight challenges in global market dynamics and underscore the company’s reduced reliance on trading as it pivots toward a production-focused model.
- This strategic shift, while prudent, demands careful execution. Capital expenditure on oil and gas development fell to $12.7 million in the nine months ended September 2024, a sharp contrast to the $47.4 million spent in the same period last year.
- While reduced spending signals caution, it raises questions about the pace of asset optimization in a competitive sector.
A long-term play in the upstream sector
Oando’s pivot to upstream operations appears well-timed. The NAOC acquisition not only adds immediate production capacity but also lays a foundation for sustainable growth.
- Management’s focus on “quick-win strategies” to improve efficiency and extract value from its expanded portfolio positions the company for long-term success.
- Yet, the risks remain clear. Sabotage and theft in the Niger Delta continue to threaten operational stability. For Oando, mitigating these risks will require a mix of enhanced security measures, government collaboration, and innovative technologies.
- The challenges facing Oando are significant, but the company’s proactive response offers a glimmer of hope.
- By doubling down on its upstream pivot, securing new production capabilities, and maintaining focus on operational efficiency, Oando has charted a path that could redefine its role in Nigeria’s energy sector.
- While uncertainties surrounding profitability and operational risks linger, Oando’s latest results suggest a company that is not only surviving but finding ways to thrive.
Investors and stakeholders may still need patience, but the company’s trajectory signals that the light in the tunnel is real and steadily growing brighter.