With
the unanimous vote by the shareholders of Oando PLC expressing
confidence in the management team led by the Group Chief Executive
Officer,..
Wale Tinubu, and retaining the company’s Board of Directors at
its AGM in Uyo, Akwa Ibom State recently, Tinubu and his deputy, Mofe
Boyo, have weathered the storm stirred by two petitioners, but the war
rages as they continue in the task of consolidating the position of this
indigenous integrated energy company as a key player in the Nigerian
economy, writes Kunle Aderinokun
For
Mr. Wale Tinubu, the Group Chief Executive Officer of Oando PLC, and
his deputy, Mr. Mofe Boyo, the unanimous endorsement of their leadership
of the company and the retention of its board by shareholders at its
AGM in Uyo, Akwa Ibom State recently, was a vote of confidence in their
stewardship and capacity to continue to consolidate the position of the
company in the Nigerian economy. The stakeholders’ unanimous endorsement
came at a time two petitioners, Alhaji Dahiru Mangal and Gabriele Volpi
of Ansbury Inc., were seeking their exit from the company, a
development that put the company in the eye of the storm going by the
fact that it’s coming at a time when the oil and gas industry is not
finding it so good, given the challenges with oil pricing in recent
years. While oil prices are gradually rising now with crude sold at
$56.75 per barrel at the weekend, they had hitherto remained at their
lowest for a prolonged period and the resultant effects are still being
felt by countries of the world.
In
Nigeria, apart from the industry’s technical issues, their operations
have been hampered by low financing from banks. Banks, which have been
hugely exposed to the oil companies, are now reluctant to advance them
additional credits, especially with liquidity challenges in the economy.
Apparently
against this background, the company’s shareholders voted unanimously
for the endorsement of the team that had ensured the resilient of the
company amid the challenges that have bedeviled the global oil market,
the Nigerian economy and most recently the backlash it is receiving in
the media by the actions of the two petitioners.
On
July 14, 2017 an ongoing Securities and Exchange Commission
investigation into Oando PLC brought by the two petitioners was leaked
and aired on Channels TV. According to the TV report, the petitioners
alleged gross abuse of corporate governance and financial malpractices
in Oando and questioned the shareholding structure of the Company
following the acquisition of ConocoPhillips Nigeria.
The
first petitioner is Alhaji Dahiru Mangal a 4 per cent shareholder in
Oando PLC. In his petition to SEC, he indicated that he holds a 17.9
per cent interest in Oando. However, the company in its statement said
that, “based on its register of members maintained by, First Registrars
& Investor Services Limited, he owns approximately 4 per cent of
Oando PLC’s shares in his personal capacity. He is yet to disclose
beneficial ownership of 13.9 per cent in accordance with Section 95 of
the Companies and Allied Matters Act, Cap. C20 LFN 2004 (‘CAMA’);
failure to do so is a violation of CAMA and this has been flagged by the
Company in writing to Alhaji Mangal and the SEC since Wednesday, 24th
May, 2017”.
Alhaji
Mangal, who media reports had claimed to have had a brush with the
Economic and Financial Crimes Commission (EFCC) under the leadership of
Malam Nuhu Ribadu over allegations of smuggling, is a businessman with
interests in textile, aviation and logistics, among others.
To
date, Alhaji Mangal is yet to prove his said ownership of 13.9 per cent
additional Oando shares. Sources said his claim stems from his desire
to take over key Nigerian businesses.
The
second petitioner, Gabriele Volpi of Ansbury Inc. according to Oando,
is not a shareholder of the company, but a shareholder in a company
domiciled in a jurisdiction outside Nigeria which in turn holds shares
in a Nigerian investment company by the name of Ocean and Oil
Development Partners (OODP) that is a shareholder in Oando PLC.
Volpi
claims to have made an equity investment towards Oando’s purchase of
ConocoPhillips Nigeria assets through the holding company, OODP in the
British Virgin Islands and is currently challenging the terms of his
investment in the holding company.
Volpi,
an Italian, has over the years dominated the Nigerian oil and gas
logistics services through his company Intels. The company was granted
sole concession to operate terminals at Onne, Calabar, Eko and Warri
Ports to the dismay of other local players such as Ladol and has
allegedly been running a cartel along with powerful senior government
officials.
While
Volpi is accusing Oando CEO, Wale Tinubu, and his deputy, Mofe Boyo,
of financial mismanagement, he had been named in an Italian
investigation. An Italian newspaper Giornalistica Repubblica reported
that the investigations by Trani and Syracuse prosecutors into the
existence of an international conspiracy aiming to destabilise the
leadership of Eni, an Italian energy giant, were part of a wider
investigation into illegal trafficking of waste and precious stones.
The
article named Volpi, “Sani Abutcha” (presumably Mohammed Abacha), and a
certain “Pesal” – a Nigerian company linked to deceased former governor
of Bayelsa State, Diepreye Alamieyeseigha. Apart from that, Volpi was
named in a United States Senate investigation into allegations of money
laundering against a former Nigerian top official.
When
in April 2015, former president, Goodluck Jonathan, gave a directive
that Intels should have exclusive control over all oil and gas cargoes
at its terminals in Onne, Warri and Calabar, other logistics companies
such as Ladol and Julius Berger, were unhappy about this directive.
Ladol, which felt the directive was against the concession agreement it
entered with the government and therefore inimical to its interest,
responded with a lawsuit against the government.
Intels
has basically held the entire ports sector to ransom, controlling and
in most cases successfully pushed out competition, in some instances,
the competition haven’t even been able to make a start because of high
market entry costs and legal restrictions. Volpi’s evident stronghold is
as a result of most cargoes in the sector being directed to his
terminals for discharge allegedly by government agencies saddled with
the responsibility of regulating port operations. Just recently, the
Nigerian Ports Authority (NPA) took a decision to break Intels’ monopoly
in the handling of oil and gas shipment.
Oando,
in a press statement faulting Volpi’s claim, clarified that Volpi via
Ansbury Inc. was not even a direct shareholder in the company. Sources
also claim he’s trying to blackmail the company by his petition which
is ruining its reputation and eroding shareholders’ value.
Volpi’s
failed attempt to stop Oando’s 40th AGM, which successfully held in Uyo
following the SEC approval, may have further proved his petitions
lacked merit as stated by the company.
While
the Tinubu led management may have won the battle with the endorsement
it received from shareholders, the war continues to rage as the two
petitioners are not resting on their oars. In fact, following this media
battle, Oando’ share price spiraled downwards leading to the
much-needed and some may argue, late intervention by the House of
Representatives Committee on Capital Market and Institutions summons of
the Director General of SEC, Malam Mounir Gwarzo.
This
begs the question, is SEC meant to be investigating Oando PLC when the
grouse is clearly between Gabriel Volpi and his business partners?
Should SEC even be investigating a petition from an indirect
shareholder? What does this mean for well-meaning shareholders?
Resilience
Notwithstanding
the ongoing crisis, Oando has delivered on its promise to bring the
company back to profitability by year end 2016. The Oando Group’s
financial results for the year end 2016, turnover increased by 49 per
cent, N569.0 billion compared to N382.0 billion in the corresponding
period of 2015. Profit after tax increased by 107 per cent, N3.5 billion
compared to a loss of (N47.6 billion) in 2015 and net debt reduced by
35 per cent N230.6 billion compared to N355.4 billion in 2015.
This
is in spite of the fact that during that year, Oando Energy Resources
(OER) recorded a 20 per cent decrease in total production to 15.9MM
barrels of oil equivalent (boe) (average 43,503 boe/day) from 19.9MMboe
(average 54,520 boe/day) in the comparative period of 2015.
Although,
the results for the 2015 financial year were uninspiring, such would
have been expected because of the situation in the global oil market,
where oil prices took a plunge and the Nigerian economy, which had not
found its footings. According to the 2015 financial results, the company
recorded 10 per cent decrease in turnover, having posted N381.7 billion
compared to N425.7 billion in 2014, and a marginal increase in gross
profit, N77.7 billion compared to N72.3 billion in 2014.
The
group’s upstream business, spearheaded by OER, saw a 118 per cent
increase in total production to 19.9 million barrels of oil equivalent
in 2015 compared to 9.1 million boe in 2014, and growth in average
production from 24,945 boe/day in 2014 to 54,520 boe/day in 2015. That
year, it also celebrated five years of continuous operations without a
Lost Time Incident (LTI) on its “OES Teamwork” swamp drilling rig and 3
years of continuous operations without a Lost Time Incident (LTI) on its
“OES Passion” swamp drilling rig.
In
the midstream, Oando Gas & Power (OGP) commenced an 8.5km pipeline
expansion for the Central Horizon Gas Company (CHGC), and signed a Sales
and Purchase Agreement (SPA) to sell the Akute Independent Power Plant.
While in the downstream, Oando signed an agreement for recapitalisation
via the injection of $210 million from a Helios / Vitol JV; it
increased its global footprint by incorporating a trading business in
Dubai; and completed the construction of a 14.4 million-litre PMS tank
in Apapa terminal.
Oando
further recorded profit in its first quarter ended March 31, 2017 and
half-year ended June 30, 2017 results, 1.7 billion and 4.6 billion naira
respectively.
Strategic Thinking
Realising
that the crisis at home and global market had been taking tolls on its
operations, the Oando Group executive management led by Mr. Wale Tinubu,
examined its business model and introduced a five-step corporate
strategy to restore the business to profitability. First, it began to
de-leverage the business and optimise its balance sheet through debt
restructuring, asset divestments and the injection of $350 million of
capital.
By
June 2016, it had successfully restructured its debt through a N94.6
billion Medium Term Note with lower capital costs of about 15 per cent
and a renewed five-year tenor, a feat many thought impossible due to
banks’ reluctance in lending to oil and gas companies. When the first
quarter results were published, Tinubu insisted that the target to
return the business to profitability by the end of 2016 was still
achievable.
As
part of its strategy to ensure financial efficiency, Oando took a
number of prudent steps in Q1 2016, one of which included delisting
Oando Energy Resources from the Toronto Stock Exchange (TSX). The reason
was simple: it had not realised any aggregate returns or fresh capital
from the cost of listing the business and running its operations in
Canada. As a result, it succeeded in improving its general and
administrative costs from $3.70/boe in Q1 2015 to $3.19/boe in Q1 2016.
Also,
in that quarter, Oando Gas & Power successfully divested from the
Akute Independent Power Plant, a 12.15MW power station servicing the
Lagos State Water Corporation.
The
end of the year saw the completion of two key corporate actions that
would change the structure of Oando’s business. The first was the
$210million recapitalisation for a 60 per cent share of its downstream
operations to Helios Investment Partners a premier Africa-focused
private investment firm and the Vitol Group, the world’s largest
independent trader of energy commodities. As a result a new company was
formed – OVH Energy. The second was the partial divestment of its
midstream business subsidiary, Oando Gas & Power Limited to Helios
Investment Partners.
In
Q1, 2017 Oando concluded the sale of Alausa Power Plant for a
transaction price of N4.6 billion. Alausa Power Plant is a
Public-Private Partnership project (Oando Plc and the Lagos State
Government) developed in response to the need for stable and cost
effective electric power supply to the Lagos State Government
Secretariat in Alausa, Ikeja and its affiliate surrounding agencies.
Commissioned in 2013 it is a 10.6MW capacity plant.
Both
Akute and Alausa IPPs sales, analysts reason, are a testament of
Oando’s legacy of building successful pipeline businesses, generating
returns and transferring on operatorship.
Impact
Oando’s
impact on the economy cannot be over-emphasised. Apart from being a
household name in the Nigeria’s oil and gas industry, it has become a
force in the matters of development in the country. The company is
influencing the way Nigerians live as it has been reported that one in
five cars – around 2.3 million cars daily – on Nigerian roads drives on
Oando’s fuel.
Oando
Group pioneered the development of gas infrastructure to power
industry. Through its natural gas distribution network, it has been
enhancing the global competitiveness of local industries by supplying
gas to key clusters and infrastructure across Nigeria.
Apart
from successfully building the largest gas pipeline network in Nigeria –
264km across Nigeria, Oando also pioneered the development of West
Africa’s midstream jetty, saving the country $120million in demurrage
annually. The facility, which has a half-kilometre subsea pipeline, and a
16” 3km onshore line, will provide a more efficient platform for
product receipt to all marketers currently using the MOMAN jetty. It is
capable of delivering over 3 million tonnes a year.
More
importantly, through its upstream business it is harnessing the
country’s natural resources to generate wealth for the nation.
On
job creation, the group is positively impacting the lives of over
25,000 Nigerians. As a fully indigenous integrated energy company, its
core staff base consists of a 98 per cent indigenous workforce. It
directly and indirectly employs over 2,000 Nigerians.
As
at June 2017, there were 168 companies listed on the Nigerian Stock
Exchange with a market capitalisation of N19 trillion. Of the 168
companies Oando is amongst the top 30 most capitalised with just over 12
billion shares outstanding. As at June 2017 Oando was 17.5 per cent
(N115billion) of N654.65billion total oil & gas capitalisation on
the Nigeria Stock Exchange.
In
2016, at the height of the recession when Foreign Direct Investment
(FDI) into Nigeria had dropped by about 49 per cent over a period of 2
years, specifically oil and gas investments into Nigeria was at a record
low, Oando brought in the largest foreign capital inflow (Foreign
Direct Investment) via its partnerships with Vitol the world’s largest
commodity trading company and Helios a premier Africa focused private
investment company. Through its partnership with Helios and Vitol, it is
positioned to become the largest downstream operator in Africa.
While
it is on record that, Oando is the first African company to have a
cross-border listing on the NSE and JSE, the two largest stock exchanges
in Africa, it is also the first indigenous company to acquire an
international oil company (IOC).
With
regards to social enhancement, through its cleaner and affordable
cooking options, Oando has, by its downstream operations, reduced
greenhouse gas emissions by 50 per cent.
The
group’s foundation supports the federal government in achieving its
education development goals through its signature ‘Adopt A School’
initiative. In fact, through its foundation, Oando says it is educating
Africa’s next generation of future leaders. To date the foundation has
positively impacted over 200,000 Nigerians.
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