We build with global stan­dards

— Wale Tin­ubu, CEO Oando Plc

Business a.m. - - FRONT PAGE -

FROM THE START, IT WAS IM­POR­TANT that we con­trib­uted in our own way to­wards chang­ing the African nar­ra­tive, es­pe­cially Nige­ria. Gi­ant of Africa we may be, but sadly con­ver­sa­tions around build­ing, sus­tain­ing and con­duct­ing busi­ness in our cor­ner of the world evokes neg­a­tive sen­ti­ments.

The first word one sees on the Oando web­site is “au­da­cious”. Why is au­da­cious part of the Oando way of do­ing busi­ness? How does Oando plan to re­main au­da­cious?

FROM THE START, IT WAS IM­POR­TANT that we con­trib­uted in our own way to­wards chang­ing the African nar­ra­tive, es­pe­cially Nige­ria. Gi­ant of Africa we may be, but sadly con­ver­sa­tions around build­ing, sus­tain­ing and con­duct­ing busi­ness in our cor­ner of the world evokes neg­a­tive sen­ti­ments. Yet the Oando story paints a very dif­fer­ent sce­nario… it shows that there are no lim­i­ta­tions when per­se­ver­ance, in­no­va­tion and a vi­sion that em­braces our unique ter­rain form the foun­da­tions of your strat­egy. Be­ing au­da­cious is just what we do…who we are… and as we con­tinue to ac­cept chal­lenges as op­por­tu­ni­ties, we will con­tinue to thrive in an econ­omy like ours. To­day, we have a suc­cess story that con­tin­ues to pos­i­tively im­pact both the sec­tor and the Nige­rian econ­omy. In the Up­stream, the lo­cal ca­pac­ity dearth within the sec­tor led us to pi­o­neer­ing indige­nous par­tic­i­pa­tion via the in­cor­po­ra­tion of our En­ergy Ser­vices busi­ness in 2005. In the same year, we be­came the first African com­pany to achieve a cross-bor­der in­ward list­ing on the Jo­han­nes­burg Stock Ex­change, mak­ing us the first African com­pany to be listed on the stock ex­changes of the two largest economies on the con­ti­nent. Two years later, we pur­chased our first two rigs and in 2008, we be­came the first indige­nous oil com­pany with in­ter­ests in pro­duc­ing deep wa­ter as­sets through the ac­qui­si­tion of two blocks. In the Mid­stream, we pi­o­neered the de­vel­op­ment of Nige­ria’s fore­most nat­u­ral gas distri­bu­tion net­work which has sub­se­quently grown to be­come the largest pri­vate sec­tor gas dis­trib­u­tor in Nige­ria, de­liv­er­ing at peak, 70 mil­lion stan­dard cu­bic feet per day (“mm­scf/d”) to over 175 in­dus­trial and com­mer­cial cus­tomers via our vast net­work of gas in­fra­struc­ture. It’s grat­i­fy­ing to know that in­dus­trial gi­ants such as Honey­well Flour, Dangote, Guin­ness and Nige­rian Brew­eries, all listed on the Nige­rian Stock Ex­change, take gas from us. Hav­ing started out in the Down­stream, we built the lead­ing oil and mar­ket­ing re­tailer in West Africa and in 2017 con­ceived and launched the La­gos Mid­stream Jetty (LMJ), West Africa’s first pri­vately owned mid­stream jetty. The $150 mil­lion jetty will save mar­keters ap­prox­i­mately $120 mil­lion an­nu­ally; in­crease re­ceipt ca­pac­ity, ef­fi­ciency in prod­uct dis­charge and re­duce ves­sel wait­ing time; ul­ti­mately elim­i­nat­ing de­mur­rage and ligh­ter­ing re­quire­ments. In 2014 we made the land­mark ac­qui­si­tion of Cono­coPhillips Nige­ria for US$1.6 bil­lion; mak­ing us the first indige­nous com­pany to ac­quire an In­ter­na­tional Oil Com­pany (IOC). This strate­gic move was to shift the busi­ness into the Up­stream sec­tor although ex­posed to com­mod­ity price fluc­tu­a­tions would be dol­lar earn­ing thus pro­vid­ing a more sta­ble re­turn. This sin­gle trans­ac­tion cat­a­pulted us from a circa 4,500 bar­rels of oil per day pro­duc­tion com­pany to 50,000 bar­rels of oil per day at the time. The first of its kind for an indige­nous com­pany. Mak­ing sig­nif­i­cant progress in our sec­tor has never been enough. We have and con­tinue to build an indige­nous brand with global stan­dards, a brand that show­cases and val­i­dates why Africa de­spite its nascent and un­pre­dictable en­vi­ron­ment is in­deed the last in­vest­ment fron­tier. The African busi­ness en­vi­ron­ment is dy­namic and the only way to re­main ahead of the curve is by break­ing new ter­rain, be­ing in­no­va­tive and ul­ti­mately look­ing for op­por­tu­ni­ties to leap frog. At Oando we try to em­u­late this, we be­lieve we are en­ergy pi­o­neers with an am­bi­tion to con­sis­tently tackle risks and evolve op­por­tu­ni­ties to pos­i­tive com­mer­cial out­come while main­tain­ing global stan­dards. This is the spirit with which we have em­braced our jour­ney and we will con­tinue to im­prove our hu­man cap­i­tal by hir­ing and part­ner­ing with both lo­cal and in­ter­na­tional best in class in all fields. The good news is, there are still many parts of the en­ergy ecosys­tem es­pe­cially in Nige­ria that have been left un­ex­plored and we will con­tinue to set the tone in trans­form­ing Nige­ria and ul­ti­mately Africa’s en­ergy fu­ture. You would agree with me that a daunt­ing feat of this na­ture can­not be achieved from a place of com­fort and my DNA, the com­pany’s DNA thrives in mak­ing the un­re­al­is­tic a re­al­ity. Guided by the con­scious­ness that we are far from or­di­nary, we have re­fused to set­tle for just be­ing a com­pany that sells pe­tro­leum prod­ucts. Our ul­ti­mate goal is chang­ing the Nige­rian oil and gas land­scape and shap­ing the fu­ture of en­ergy in Africa …and I’m proud to say we are well on our way to achiev­ing that. Aside from im­proved oil prices you have iden­ti­fied en­forced cap­i­tal dis­ci­pline, in­creased pro­duc­tiv­ity, and port­fo­lio re­align­ments as con­tribut­ing to Oando’s over­all health. How have you re­aligned the port­fo­lio, and will Oando do more of this? I think it’s im­por­tant to start at the be­gin­ning; what led to this change in the way we ap­proach busi­ness and has ul­ti­mately im­pacted how all play­ers, lo­cal and in­ter­na­tional op­er­ate. The coun­try and sec­tor took a heavy blow with the global down­turn in oil prices. We had no choice but to proac­tively realign our busi­ness strat­egy to the new re­al­ity of lower oil prices for longer. At the time we had a sig­nif­i­cant deficit and a Group made up of mar­ket­ing, gas and Up­stream busi­nesses. We had to take a crit­i­cal look at our port­fo­lio and long term cor­po­rate ob­jec­tives ask­ing our­selves what are the things we need in this new era to al­low for the best re­turns and also pro­vide the best as­sur­ance of fu­tures in sta­bil­ity in terms of earn­ings. This led to the de­vel­op­ment of cor­po­rate ini­tia­tives

aimed at re­turn­ing the busi­ness to prof­itabil­ity and a shift in fo­cus from the lower mar­gin Down­stream busi­ness to our higher mar­gin dol­lar earn­ing Up­stream and trad­ing busi­nesses. We com­menced an ag­gres­sive re­struc­tur­ing pro­gramme in 2016 via a strate­gic part­ner­ship with a con­sor­tium of He­lios In­vest­ment Part­ners, a premier Africa-fo­cused pri­vate in­vest­ment firm, and Vi­tol Group, the largest in­de­pen­dent trader of en­ergy prod­ucts for a US$210 mil­lion re­cap­i­tal­iza­tion of our Down­stream busi­ness. The part­ner­ship which lever­ages Oando’s sec­tor dom­i­nance, con­sid­er­able lo­cal knowl­edge and ex­per­tise; to­gether with He­lios In­vest­ment Part­ners and Vi­tol Group’s in­ter­na­tional, and tech­ni­cal ca­pa­bil­i­ties, is well on its way to rein­vig­o­rat­ing Nige­ria’s Down­stream sec­tor and in the long term I be­lieve will cre­ate one of Africa’s largest Down­stream oper­a­tions. In the same year, we com­pleted a US$115.8 mil­lion par­tial di­vest­ment of our stake in our Mid­stream busi­ness to He­lios In­vest­ment Part­ners; lev­er­ag­ing the fi­nan­cial and in­ter­na­tional ca­pa­bil­i­ties of He­lios to sup­port the ac­tu­al­iza­tion of our long term goal of mak­ing gas an af­ford­able, al­ter­na­tive and sus­tain­able en­ergy source for busi­nesses in Nige­ria. Both trans­ac­tions we were able to at­tract in ex­cess of US$300 mil­lion in in­ter­na­tional cap­i­tal in­vest­ment at a time when the Nige­rian econ­omy was re­pressed and For­eign Di­rect In­vest­ment (FDI) in-coun­try was at an all-time low. In 2014, just be­fore the crash in oil prices, we took out a size­able debt to the tune of ap­prox­i­mately US$900 mil­lion to­wards the $1.6 bil­lion land­mark ac­qui­si­tion of Cono­coPhillips Nige­ria as­sets; as at Septem­ber of this year through de­lib­er­ate cap­i­tal dis­ci­pline we have been able to re­duce this by 70% to a com­mend­able US$270 mil­lion. These num­bers are in­di­ca­tors that de­spite the con­tin­ued in­cline in oil prices we have taken les­sons from the past and re­main fo­cused on more pru­dent ways of do­ing busi­ness in or­der to cre­ate value for all our stake­hold­ers, and drive sus­tain­able growth. Hav­ing suc­cess­fully com­pleted the re­struc­tur­ing and made sig­nif­i­cant in­roads in re­duc­ing our debt we can now fo­cus on growth – growth through our sig­nif­i­cant re­serve base. To­day we have over 470 mil­lion bar­rels in 2P re­serves and the way to in­crease value is to ac­cel­er­ate the ex­trac­tion of these re­serves. We are cur­rently pro­duc­ing an av­er­age of 40,000 bar­rels a day with an ag­gres­sive drilling pro­gramme that will see this fig­ure in­crease to circa 75,000 bar­rels of oil equiv­a­lent over the next 3 to 5 years. From a growth per­spec­tive it is about build­ing the ca­pac­ity to do more - drive pro­duc­tion but also in­or­ganic growth through ac­qui­si­tions and po­ten­tially merg­ers. Strate­gic part­ner­ships, an im­per­a­tive in the high cost, high risk en­vi­ron­ment that is Up­stream will also be key in our new growth strat­egy. In the near fu­ture I don’t en­vi­sion any fur­ther re­align­ment, I be­lieve as a busi­ness we are in a much stronger po­si­tion – our busi­ness fun­da­men­tals are right, cash flow is strong, pro­duc­tion is on an in­cline and the op­er­at­ing en­vi­ron­ment is pos­i­tive. In­vestors are care­fully watch­ing Nige­ria as the coun­try moves to­ward its next pres­i­den­tial elec­tions. How will Nige­ria’s po­lit­i­cal cli­mate af­fect the oil and gas sec­tor? Or will it? Look­ing at our na­tional track record, I don’t be­lieve the elec­tions should be an area for con­cern for ei­ther in­vestors or the pri­vate sec­tor. Since 1999, Nige­ria has held five con­sec­u­tive, hitch free elec­tions and it is un­likely that this is go­ing to change now. To­day what is be­com­ing more preva­lent across the con­ti­nent is an im­proved democ­racy so it’s in­con­ceiv­able that Nige­ria the gi­ant of Africa would buck this trend. I be­lieve the Gov­ern­ment and peo­ple are poised for a pos­i­tive out­come. There is also no hard ev­i­dence to sug­gest that Nige­rian elec­tions have had or will have a neg­a­tive im­pact on the oil and gas sec­tor. Although not rep­re­sen­ta­tive of the whole coun­try, data from our Joint Ven­ture (JV) oper­a­tions show that just be­fore an elec­tion there is usu­ally a de­cline in sab­o­tage and bunker­ing, in­creased speed to push through poli­cies for an im­proved busi­ness en­vi­ron­ment to name a few. It’s a tran­si­tional pe­riod for us as a coun­try, ex­pec­ta­tions are high, as the po­lit­i­cal de­ci­sions we make as a coun­try will have a sig­nif­i­cant im­pact on ev­ery busi­ness sec­tor, oil and gas in­cluded. For­eign di­rect in­vest­ment is fun­da­men­tal to the con­tin­ued de­vel­op­ment of the na­tion; my be­lief is that ir­re­spec­tive of the Gov­ern­ment they will con­tinue to de­velop and im­ple­ment frame­works that are en­abling for in­creased in­vest­ment and the good of the na­tion as a whole.

We are cur­rently pro­duc­ing an av­er­age of 40,000 bar­rels a day with an ag­gres­sive drilling pro­gramme that will see this fig­ure in­crease to circa 75,000 bar­rels of oil equiv­a­lent over the next 3 to 5 years

Tin­ubu

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