…As Oando blames militants for drop in profit
By Adewale Sanyaolu and Sampson Unamka
The incessant attacks on oil and gas assets have taken a turn for the worse as indigenous operators, yesterday, raised the alarm over a zero revenue and zero production recorded in the last six months.
Managing Director of Seplat Petroleum Development Company Plc, Mr. Austin Avuru, who revealed the poor performance of local oil firms at the 40th Nigeria Annual International Conference and Exhibition (NAICE) of the Society of Petroleum Engineers (SPE) with the theme, ‘‘Transparency in the Oil and Gas Business: An Imperative for Energy Security and Stability’’, held in Lagos, lamented that operators were no longer bothered by the continuous slide in oil prices since there was nothing to produce or export.
“These are pretty difficult times for our industry and for our country. Today, over 70 per cent of production from the traditional terrain in the onshore and the shallow water is locked in. A year ago, we were faced with drop in oil prices but today we are battling with zero production, zero revenue for up to five, six months now.
“Some of us no longer check the oil price because it is only relevant when you produce. This industry was undergoing a major transformation. Few years ago, we said this industry must move away from just being a primary revenue generation for the government to becoming an enabler for economic development.
“We had said that this industry will move away from domestic consumption of less than 300 million standard cubic feet (scuf) of gas per day to over 3 billion scuf per day, and in the process, transforming the economy and energising companies like Dangote so that we can become net exporter of cement and fertilizer, delivering over 300gw of electricity,” he said.
The Seplat CEO maintained that the projection, which had started over three years ago, has today met a brick wall and is being interrupted by forces the industry is afraid of combating.
According to him, the crisis in the Niger Delta has taken a new turn that has become a source of worry to all stakeholders ‘‘because when we don’t produce, our companies are destroyed, jobs are destroyed, the economy is destroyed and this whole transformation I was describing is being interrupted rudely. Unfortunately, I do not know if there is real solution in the horizon as we speak.
Meanwhile, the Group Managing Director of Oando Plc, Mr. Wale Tinubu, has blamed militants’ activities in the Niger Delta region and oil production disruptions for the company’s continued losses.
Oando’s half-year result showed a 49 per cent decrease in gross profit, from N37.1 billion in the first half of 2015 to N19 billion in the half year ending on June 30, 2016.
Turnover increased by 18 per cent from N212 billion compared to N180 billion in H1 2015, while loss-after-tax decreased by 23 per cent, N27 billion compared to N35 billion H1 2015.
Oando also recorded one-off unrealised foreign exchange losses of N28.6 billion from dollar denominated liabilities as a result of currency devaluation.
The company has been experiencing half-year losses for at least three years running, with Tinubu blaming current losses on insecurity in the Niger Delta.
“The first half of the year has attested to the deplorable state of security in the oil and gas environment in Nigeria, having experienced a 25 per cent decline in production volumes arising from the increased disruptions from militant activities,” Tinubu said.
“On a positive note, the company has benefitted from the implementation of the oil price hedge, which has helped to calm the effects of the disruption of production activities and aided in the rapid pay down of the $900 million of upstream related liabilities at the time of the Conoco Philips Acquisition, to $440 million today.
“We are pleased to have received $210 million into our downstream group representing 70 per cent of our asset disposal plans and also concluded the restructuring of our debt through the N108 billion medium term note.”
He said with the new foreign exchange policy, the company will have limited forex risk and would focus on profitability through dollar earnings.
“Now that the dollar liquidity position in the country has improved, we have limited the risk of exchange rate volatility by converting a substantial portion of our dollar denominated obligations to naira, thereby matching our dollar liabilities to our dollar generating businesses.
“We reiterate our forward looking business model of a focused upstream and export trading businesses, which will drive profitability through consistent dollar earnings.”