OANDO Plc, an Indigenous oil firm, has increasingly sunk deeper into debt, the company’s five-year financial reports indicate, raising concerns over growing liabilities.

An analysis of the reports reveals that Oando steeped into debt in 2020 and, since then, has been unable to crawl out of the obligation but rather widening its indebtedness.

A cursory look at Oando’s financial statements shows that in 2020, the company reported a negative equity balance of N67,68 billion after its total liabilities of N1.46 trillion exceeded its total assets of N1.39 trillion.

A negative equity on a financial statement indicates that a company’s liabilities are greater than its assets. It is a situation where a company has more debt than it can cover with its assets, thereby wiping out its shareholders’ funds.

In 2021, Oando’s total liabilities of N1.13 trillion exceeded its total assets with N129.02 trillion and the debt obligation further widened in 2022 to N197.21 trillion after its liabilities of N1.45 trillion exceeded its assets.

Despite returning to a positive bottom-line profit in the last two years, its financial position remains negative.

In 2023, Oando posted a N60.28 billion end-of-the-year profit. However, its debt obligation worsened to N267.18 trillion as total liabilities of N2.94 trillion were higher than its total assets.

Its unaudited 2024 financial statements released on January 30 also show that the indigenous oil firm’s indebtedness rose to N273.03 trillion as total liabilities of N7.78 trillion exceeded its total assets, despite reporting N65.49 billion profit.

Put simply, assets are resources that a company owns, while liabilities are obligations it has, and the difference is its equity.

A further check on the company’s financial position shows that current liabilities also exceeded current assets in the years under consideration.

Current assets are short-term assets that a company can liquidate within a year, while current liabilities are short-term debts that a company expects to pay within a year.

Financial analysts say when current liabilities exceed current assets, the current ratio will be less than one. In that situation, the company might have problems meeting its short-term obligations.

Investors worry

The national president of New Dimension Shareholders, Patrick Ajudua, expressed worries that Oando has been posting negative equity since 2020 as a result of humongous debt exposure, which arose in the course of doing business.

He asserted that high interest rates on loans, foreign exchange losses as a result of the devaluation of the naira, oil theft, and pipeline vandalism contributed to accumulated losses the company recorded over time.

He noted that in the past two financial years, Oando has reported improved financial performance brought about by renewed vigour in getting more oil mining licenses, as seen in its acquisition of Agip Oil.

“This is leading to improvement in production capacity, the prospect of refinery business in Trinidad and Tobago, oil licence and mining in Angola. Also, current efforts by a strong management team led by Wale Tinubu in debt restructuring with the consortium of the bank have provided the financial breathing needed by the company.

“Don’t also forget the recent phase distribution of shares to shareholders by the board of Oando. All this is aimed at addressing the negative equity,” Ajudua said.

According to him, shareholders are unwavering in their confidence in Oando’s board and management in addressing the negative equity in the shortest possible time.

He pointed out that the rapid movement in the company’s share price on the floor of the Nigerian exchange market indicates a 52-week high of N89.

“This is a demonstration of investors’ confidence in the company, and we are hopeful if the above measures are well implemented, the company will be in a position to pay dividends to its ever-enduring shareholders,” Ajudua maintained.

In September 2023, The ICIR reported how the independent auditor of Oando, BDO Professional Services Chartered Accountants, expressed worries over the company’s ability to continue as a going concern.

“As stated in the notes, these conditions, together with other matters, indicate the existence of a material uncertainty that may cast significant doubt on the company’s and the group’s ability to continue as a going concern and, therefore, may be unable to realise its assets and settle its liabilities in the ordinary course of business,” the independent auditor, specifically stated.

2024 financial performance

Commenting on the company’s 2024 results, the group chief executive, Wale Tinubu, highlighted that Oando achieved a 45 per cent increase in revenue to N4.1 trillion, a nine per cent rise in profit after tax to N65.5 billion, despite a challenging operating environment.

He said the company’s acquisition and subsequent integration of Nigerian Agip Oil Company Ltd (NAOC Ltd), significantly enhanced its production capacity, attaining peak operated production of 103,206  barrels of oil equivalent per day (boepd) and net entitlements of 45,000 boepd.

He hinted that in 2025, the company will prioritise driving cost optimisation, and operational efficiency, streamline processes, enhance procurement, and leverage technology to improve productivity across our operations.

It will also intensify efforts to boost production through the dual approach of rig-less and workover initiatives while executing an aggressive drilling program across three rig lines.

“Simultaneously, in collaboration with other stakeholders, we are proactively tackling above-ground security challenges by implementing a revamped security framework that integrates advanced surveillance technology and intelligence-driven initiatives to curb the perennial, unnecessary, and unjustifiable theft of oil to ensure the long-term integrity of our vast network.

“As we look ahead to an exciting and successful 2025, we recognize that achieving our goals requires the unwavering support of our host communities and partners. Through extensive engagement, we will foster a collaborative ecosystem that not only secures our operations but also drives shared prosperity and sustainable development for all,” Tinubu said.