Oando Plc, which last year paid $1.65 billion for ConocoPhillips’s Nigerian oil and gas assets, plans to double crude production as a hedging program cushions a slump in prices.
Output is expected to increase to 100,000 barrels per day in the next three to five years from 53,000, Pade Durotoye, chief executive officer for Oando Energy Resources, said in Lagos.
By hedging half its oil output at about $95 per barrel, Durotoye said Oando has avoided the loan repayment problems faced by other small Nigerian producers after crude plunged by 50 percent since June.
That gives the company the capacity to expand as oil majors, including Royal Dutch Shell Plc and Chevron Corp., sell fields as they scale back Nigerian operations following unrest, violence and crude theft in the Niger River delta.
“Our decision to hedge protected us on the downside and has provided us a room to grow organically or by acquisition,” Durotoye said.
“As the international oil companies divest and move to the deep-water area, it provides an opportunity for us to take over.”
The hedge has allowed Oando to repay $234 million out of about $900 million of debt arising from the ConocoPhillips acquisition, he said.
“At a time most companies are struggling with how to meet their loan obligations, Oando is thinking how to take advantage of the future,” Durotoye said. “Our technical and business development teams are looking toward further growth opportunities, organically and inorganically.”
He declined to comment further on those opportunities.
Oando started producing 2,150 barrels per day this year at the Qua Iboe field with partner, Network Exploration and Production Nigeria Ltd. Output at the Ebendo field increased to 7,500 barrels a day from 900, he said.
“The next 12 months will be exciting for us in terms of growth,” Durotoye said. “ConocoPhillips’s assets acquisition has been transformative.”
Nigeria’s daily output of about 2 million barrels of oil makes it the continent’s largest producer. Exxon Mobil Corp., Chevron, Total SA, Eni SpA and Shell pump about 90 percent of Nigeria’s oil through ventures with state-owned Nigerian National Petroleum Corp.