Oando explains N183.9b loss in 2014

THE controversy surrounding Onado’s N183.9billion loss for the year 2014 continued at the weekend unabated.
In its full-year ending 2014, the company last Friday declared loss after tax of N183.9billion compared to a profit after tax of N1.396billion in 2013.
Also in its half-year unaudited results for 2015, the company recorded another loss after tax of N35.12 billion from a profit after tax of N8.980 billion in the corresponding period in 2014.
Commenting on the result, Oando, in a statement blamed the loss on the global challenges in the oil and gas sector.
The company said: “The world’s big energy groups have also shelved $200 billion of spending on new projects in an urgent round of cost-cutting as pricing volatility is sustained.
“To curb the global oil downturn’s effect on the mono-resource driven Nigerian economy and to counter mounting currency pressure, the Central Bank of Nigeria (CBN) moved to shore up foreign exchange and prevent further depletion of the country’s reserves.
“The CBN has in effect devalued the naira by 22 per cent since November 2014, and the key interest rate has remained at an all-time high of 13 per cent with cash reserve requirements at 31 per cent.
“With oil prices plummeting by nearly 60 per cent, the domino effect of the global slump has seen Nigeria’s oil export receipts decline dramatically, and indigenous firms have faced a scale-back in proposed joint ventures with IOCs, deeper cuts to capital spending, finding new markets to counter US reluctance to buy, investor wariness, and critically, higher lending local terms due to a weakened naira.
“As much-needed foreign investment stays away, another key implication of the CBN’s action, local banks have also significantly reduced transactions with indigenous oil firms to curtail non-performing loans in the sector and fiscal challenges in meeting vast funding demands.”
Oando said it scored significant operational highlights by increasing its 2P net reserves by 82 per cent from 230.6 millions barrels of oil equivalent (MMboe) to 420.3 MMboe and growing average production from 4,531 boe/day in H1 2014 to 55,399 boe/day in H1 2015.
Giving details during a visit to the Nigerian Stock Exchange (NSE), Mr. Wale Tinubu, Group Chief Executive of Oando, said: “Our nation is experiencing change, as witnessed from the tone of redirection in the oil and gas industry, which will lead to improved accountability and operational efficacy in all governmental agencies in this sector.
“Our business is also experiencing this change with the sale of 60 per cent of our downstream business in line with our strategic goals, placing fundamental growth expectations on the upstream division, as already evidenced in the 11-fold increase in production and 82 per cent increase in 2P reserves.
“The cash proceeds of the divestment will be utilised towards further optimisation of our balance sheet.”
He also explained that it recorded losses in 2014 due to impairments of N76.9 billion (41.8 per cent) in exploration and production, N16.9 billion (9.2 per cent) in under-lift and JV receivables loss, N37.1 billion (20.2 per cent) in its rig business impairment, and N7.3 billion (3.9 per cent) in foreign exchange losses. 75.1 percent of the impairments have been declared as non-cash related.
“Appropriate consolidation of Oando’s subsidiaries’ accounts and painstaking due diligence undertaken as a result of the magnitude of impairments have been cited as the primary reasons behind the delay of the year-end statements,” Tinubu stated.
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