Yemisi Izuora
Oando Energy Resources Inc has released its 2015 financial result showing a recognized net income of $16.1 million, compared to a net loss of $320.0 million in 2014.
The company focussing on oil and gas exploration and production in Nigeria said within the period its revenues increased by $33.5 million, to $455.0 from $421.4 million in 2014.
The impressive result is attributable to the acquisition of producing assets of OMLs 60 to 63, countered by a substantial decline in crude oil and natural gas sales prices.
In 2015, approximately 46 percent of crude oil production was hedged and by December same year 9,617 bbls/day of crude oil production was hedged at $65/bbl (average) with expiries ranging from July 2017 to Jan 2019, and further upside if certain price targets are met, which represented 43 percent of the fourth quarter production of crude oil.
The increase was primarily the result of the decrease in the non-cash impairment of assets, which was partially offset by lower commodity prices.
Pade Durotoye, CEO of Oando Energy Resources while commenting on the result said, “Despite broader macroeconomic and commodity price challenges, 2015 proved to be an operationally successful year for us as we maintained our production output and successfully reduced our debt obligations with the restructuring of our hedge instrument,” .
“2016 will be focused on maintaining our production levels through low cost rigless activities and intensifying our efforts on Cash and Cost management”.
The corporations oil production in 2015 increased to 19.9 MMboe (average 54,520 boe/day) from 9.1 MMboe (average 24,945 boe/day) in 2014.
During the fourth quarter of 2015 production decreased to 4.8 MMboe (average 52,637 boe/day), compared with 5.0 MMboe (average 54,721 boe/day) in the fourth quarter of 2014.
The increase between the annual periods is primarily as a result of the input from the Nigerian onshore and offshore assets acquired on July 30, 2014 from the ConocoPhillips Company that included substantial production from OMLs 60 to 63, significant reserves and resources, and a considerable base of development and exploration opportunities.
Gas production reduced quarter on quarter as a result of the production constraints arising from the Ebocha flowstation fire.
The company in December 2015, entered into an agreement to sell its interest in OMLs 125 and 134 to the operator for cash proceeds of $5.5 million and assumption of $84.5 million in cash call liabilities due to the joint venture.
As at December 31, 2015, OER had a working capital deficiency of $835.8 million, compared with a working capital deficiency of $567.2 million at December 31, 2014.
The increase in the working capital deficiency was due to the reclassification of non-current borrowings to current borrowings as a result of breaching a loan agreement requirement at December 31, 2015.
The Corporation had amalgamated two of its subsidiaries, one of which was a party to the Senior Secured Facility, prior to receiving lender consent which triggered a default and prompted lenders to exercise their right to restrict cash payments from lender-held cash deposits.
The default gives the lenders the ability to accelerate the maturity of the facility on demand. As of the date of these financial statements, the lenders have chosen not to exercise their acceleration rights under the loans.
As a result of this default, $268.6 million of borrowings was reclassified to current borrowings as at December 31, 2015.