Oando Energy Resources Limited , part of the giant Oando Plc has released its third quarter results that shows significant improvement over the humongous N184 billion losses incurred in 2014by Oando Plc
Although the company says 2015 continues to pose challenges in terms of the volatility of oil prices, it says it’s working hard to ameliorate the situation, by cutting production and operational costs and renegotiating its debt burden.
According to the statement published on its website, the Corporation had a net loss of $13.1 million in the third quarter of 2015, compared to net income of $89.5 million in the third quarter of 2014.
In the nine months ended September 30, 2015 the Corporation incurred a net loss of $63.5 million, as compared to a net loss of $88.0 million in the same period of 2014.
“The net loss during the third quarter of 2015 was the result of non-cash $98.9 million impairment on assets and a $15.6 million joint venture receivable impairment. During the nine months ended September 30, 2015 the net loss of $63.5 million was primarily the result of $121.2 million non-cash impairment of assets and the joint venture receivable impairment, partially offset by profitable operations at OMLs 60 to 63 and crude oil hedging gains.”
Here are the highlights of the report, prepared for shareholders outside Nigeria and which has not been filed at Nigerian Stock Exchange. Oando Plc third quarter report will surely benefit from the OER report:
- Production expenses in the third quarter of 2015 increased to $56.1 million from $35.9 million in the third quarter of 2014 and during the nine months ended September 30, 2015 production expenses increased to $172.2 million from $51.5 million in the same period of 2014. The production expense increases were primarily a result of the increase in production from the COP Acquisition. Adjusted production expenses per boe were $11.47/boe and $11.44/boe in the three and nine months ended September 30, 2015, which were consistent with the amounts for the three and nine months ended September 30, 2014 of $11.07/boe and $12.66/boe, respectively.
- General and administrative costs (“G&A”) costs for the third quarter of 2015 increased to $13.7 million from $12.2 million in the third quarter of 2014. During the nine months ended September 30, 2015, G&A increased to $49.0 million from $31.2 million in the same period of 2014. The increase was primarily due to higher employee costs and administrative expenses related to the significant growth of OER since the COP Acquisition. On a per boe basis G&A was $2.81/boe during the third quarter of 2015, compared with $3.75/boe in the same period of 2014, due to the growth in production relative to the G&A increase.
- Third quarter funds from operations increased to $78.6 million, from $39.9 million in the third quarter of 2014. The third quarter funds from operations increased by $54.8 million from $23.8 million in the second quarter, as a result of increased sales resulting from changes to customer lifting schedules for crude oil. During the first nine months of 2015 funds from operations increased to $151.8 million from $48.4 million in the same period of 2014. The increase in 2015 over 2014 was primarily a result of increased cash flow generated by the producing assets acquired on July 30, 2014.
- Capital expenditures of $22.5 million and $79.4 million were incurred during the three and nine months ended September 30, 2015, respectively. During the nine months ended September 30, 2015 the capital expenditures consisted mostly of $36.3 million at OMLs 60 to 63 and $33.6 million at OML 125.
- As at September 30, 2015, OER had a working capital deficiency of $478.3 million, compared with a working capital deficiency of $567.2 million at December 31, 2014. The improvement in working capital was primarily related to the reclassification of current borrowings to non-current borrowings as a result of meeting loan covenant requirements in 2015. During 2015, the lenders of the $450 million loan waived the current ratio requirement. At September 30, 2015 the Corporation was in compliance will all loan covenants. The current and long-term portion of the loans have been classified according to their maturity as set out by loan repayment schedules
- On July 9, 2015, a fire occurred during the inspection and repair of the Tebidaba-Clough Creek pipeline resulting in the unfortunate death of 14 contract personnel. The line was fully repaired and brought back on-stream during the quarter. The incident is currently being investigated by the operator in conjunction with OER.
- In October 2015, the corporation increased the capacity of the $450 million senior secured facility by $90.7 million; proceeds from the loan and cash on hand were used to repay the $100 million subordinated debt facility and fees of $4.4 million.
Selected Quarterly Results
The table below summarizes selected financial and operational information for the last eight quarters. The Corporation’s quarterly results have been impacted primarily by acquisitions, fluctuating commodity prices, asset impairments, gains and losses on financial instruments, and borrowing activities.
| Q32015 | Q22015 | Q12015 | Q42014 | Q32014 | Q22014 | Q12014 | Q42013 | |
| Production (boe) | 4,891,579 | 5,179,383 | 4,985,944 | 5,034,358 | 3,248,158 | 413,984 | 408,497 | 406,029 |
| Total revenue | 132,512 | 90,240 | 132,415 | 174,042 | 184,777 | 30,440 | 32,163 | 23,976 |
| Net Income (loss) for the period | (13,107) | (29,255) | (21,096) | (199,595) | 89,541 | (137,668) | (39,881) | (41,008) |
| Earnings per share | (0.02) | (0.04) | (0.03) | (0.40) | 0.12 | (0.24) | (0.14) | (0.32) |
| Diluted earnings per share | (0.02) | (0.04) | (0.03) | (0.40) | 0.12 | (0.24) | (0.14) | (0.32) |
| Capital expenditures | 22,505 | 19,127 | 37,804 | 41,206 | 52,910 | 24,355 | 42,550 | 45,573 |
| Total assets | 2,900,574 | 2,922,598 | 2,971,858 | 3,242,791 | 3,693,880 | 1,662,142 | 1,689,937 | 1,299,422 |
| Total non-current liabilities | 1,177,793 | 1,201,823 | 1,033,688 | 1,088,996 | 1,523,019 | 245,925 | 274,812 | 275,195 |
Figures in $’000 unless otherwise stated
Current Outlook
Operationally, 2015 has been a successful period for the Corporation. Production has remained steady throughout 2015 with third quarter and nine months production of 53,169 boe/day and 55,154 boe/day, respectively. The third quarter saw increased production from OML 125 and Ebendo which partially offset net production losses at OMLs 60-63 due to production constraints. The production constraint at OMLs 60 to 63 was caused by a fire at the Corporation’s non-operated Ebocha terminal at the end of June, with production being fully restored to pre-incident levels near the end of July. The restriction of production resulting from the fire was the reason for the slight decrease in production from the second quarter. Throughout the year, the Company has continued to work with its joint venture partners to execute its development program for 2015, which has been scaled back in response to low commodity prices. The current development program is focused on lower risk activities that provide short-term returns.
Financially, we expect 2015 to continue to be a challenging year for the Company and the oil and gas industry as a whole. Global crude oil prices have been volatile and are expected to remain at their current low levels for the remainder of 2015 and into 2016.
In response to the low prices, the Corporation has taken steps to improve its liquidity including pre-paying debt to reduce short-term interest and negotiating advances from joint venture partners to fund a portion of its capital program. Furthermore, in October 2015, the Corporation increased the capacity of the $450 million senior secured facility by $90.7 million using those proceeds to repay the $100 million subordinated debt facility, thereby, extending that obligation over the next 3 to 4 years through the consolidation of loans. The repayment will result in the return of $50 million which was used to as collateral to secure the letter of credit associated with the loan. Going forward, the Corporation will continue to rely on cash from producing assets and financial commodity hedges and plans to secure additional debt financing from Oando PLC in the short-term, in addition to pursuing third party debt and equity financing, as required, to execute on its business plans.
Here is the link to the full report:During the third quarter of 2015 the Corporation made $22.5 million in capital expenditures related to the development of oil and gas assets and exploration and evaluation activities, as compared with $52.9 million in the same quarter of 2014.