OER blames declining oil production on infrastructural challenges

Oando Energy Resources (OER) has stated that its production in the first half of 2017 decreased by 20 per cent to 7.2 million barrels of oil equivalent MMboe to average 39,950 boe/day compared to 8.2 MMboe, average 44,892 boe/day in the first half of 2016.

The company also said it earned N3.2 billion from the optimisation of the crude oil hedge program which will be used to reduce corporate facility debt obligations.

Oando observed that the first half of 2017, the country’s production levels steadily recovered to normalcy, which it attributed to the containment of the Niger Delta unrest, and the more recent resumption of activity on the Trans Forcados Pipeline.

Largely, OER blamed the significant reductions in gas production and delivery on ruptured Gas Transmission System (GTS-4) gas line which supplies our contractual gas to the Nigerian Liquefied Natural Gas Limited (NLNG). Also, the Trans Forcados pipeline continued to suffer downtime in the first five months of the year and due to repairs and planned maintenance activities which resulted in reduced production from Ebendo.

In June 2017, the company said it successfully realised N3.2 billion in net cash from the crystallisation of the corporate facility hedges (1,590 bbls/day) via early settlement with hedging counterparties, N3.5 billion relating to settlement of hedges offset against N336.5 million representing the cost of the planned reset, which will be utilised in paying down our existing debt obligations. OER is also in the process of entering a new hedge agreement effective July 2017.

In the second quarter of 2017, the company successfully completed the sale of its interests in OMLs 125 and 134 to Nigerian Agip Exploration Limited “NAE” for a profit of N4.6 billion.

The company also said the Oando Trading (OTD) witnessed a 40 per growth in traded volumes and a commendable 147 per cent increase in turnover to N217.5 billion compared to N88.1billion the comparative period of 2016. “Our trading business lifted volumes exceeding 7.5 mmbbls of crude and imported 610,000MT of refined petroleum products. The Structured Trade Finance lines in the business increased by N76.5 billion to N214.1 billion in total, from a total of five international and African banks. This allows the company to achieve greater trading capacity and in turn more volumes,” it said.

The firm, however, expressed optimism around the approval of the Petroleum Industry Governance and Institutional Framework Bill (PIGB), which should result in a more efficiently regulated sector and a conducive business environment for industry players.

Mr Wale Tinubu, Group Chief Executive, Oando PLC said “with security concerns in the Niger Delta receding, Nigeria’s economic recovery has been buoyed by a boost in oil output, while the legislative approval of certain segments of the Petroleum Industry Bill (PIB) provides greater long-term policy certainty for the sector. Our returns underline our continued successful foray into the Upstream. Within the prevalent crude pricing regime, we remain committed to optimizing our overall production base, seeking unique profit-driven opportunities to further partner with IOCs, while firming up our balance sheet to provide greater shareholder value.”