Oando
Q1, 2012 Interim Update
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Contents
I
Industry Update
II
Details of Press Release
III
Profit & Loss Forecast Highlights
IV
Profit & Loss Forecast Breakdown
V
VI
VII
VIII
IX
Divisional Forecast Analysis
Sector Forecast
Operational Update for Q1 2012
Strategic Overview
Q &A
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Downstream Industry
Industry Overview
 Nigeria is the largest consumer of refined petroleum
products in Africa
 Securitized subsidy payments under a regulated market
structure
Industry Update
 January 1, 2012: Subsidy on PMS was removed by the
Federal Government resulting in the pump price increasing
from N65/liter to N141/liter.
 Subsidy: 54% of the landed price of PMS.
 Working capital efficiencies due to correction of delayed
subsidy payments
 In a potential deregulated market, NNPC market share can
be taken over by strong private players
 Negotiations with NLC and TUC carried on for a two week
period, with the Nation being brought to a stand-still during
that time frame.
 NNPC’s market share of PMS supply is currently 55%
 Opportunity for substantial supply volume increases
in all white products
 Refining capacity in the West African region is limited,
 January 16, 2012: Subsidy is partially re-instated with the
pump price reverting to N97/liter.
 Subsidy: 31% of the landed price of PMS.
creating ample opportunity for increasing supply into
countries in this region
 This will follow through on our existing footprints in
Benin, Togo, Ghana, Cote D’Ivoire, Burkina Faso and
Mali
 3 Month window for current subsidy platform
 The Federal Government plans to completely remove
subsidies in April.
Sources: (a) NNPC – conservative consumption in line with Cote d’Ivoire and potential
consumption in line with Senegal, Gabon; (b) World Bank (2008)
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Midstream Industry
Industry Overview
Industry Update
 Nigeria intends to ramp up domestic power production
 Power Sector Road Map: The power sector roadmap was unveiled
in August 2010.
 Since 2007, PHCN embarked on a robust new build
programme under the National Integrated Power Plan
(NIPP), aimed at adding at least 10,000 MW to the
national grid. Current power generation is 3,600MW.
 An estimated $15 Bn in private sector investment would
be needed to meet all Gas & Power development goals
 Gas will remain the dominant source of electricity, however
efforts are underway to explore the country’s other energy
sources
 Target is to produce at least 3,000 MW from renewable
sources including solar, wind and biogas by 2020
 Potential for coal-fired power stations is being explored in
the Kogi, Enugu and Benue areas
 Nigeria’s current electricity consumption is estimated at
137KWh/capita in comparison to:
 Egypt:
1,319KWh/capita
 SA:
4,385KWH/capita
 6 power generation and 11 distribution companies of the PHCN
are to be privatized through the sale of 51% equity.
 The Multi Year Tariff Order (MYTO) has been reviewed and the
new electricity tariff structure to be announced shortly.
 NIPP: Numerous stations with immediate 5,000 MW add on to
current National capacity. No gas supply.
 $1MM/MW (Turbine Capacity)
 The Nigerian Electricity Regulatory Commission (NERC) recently
unveiled new rules allowing State/Local governments to generate
and distribute electricity in that areas.
 Gas Infrastructure: Gas infrastructure contracts have been
awarded by the FGN to the private sector.
 The Nigerian Gas Master plan aims to grow the Nigerian
economy with gas by pursuing three strategic objectives:
 Stimulate the multiplier effect of gas in the domestic
economy
 Position Nigeria competitively in high value export
markets
 Guarantee the long term energy security of Nigeria
Source: IEA Key World Energy Statistics 2009; Business Monitor International – Nigeria Oil and Gas Report Q1 2010
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Upstream Industry
Industry Reform
Industry Overview

 Petroleum Industry Bill (PIB). The Nigerian Government has
Oil Reserves: 36bnboe
tabled the PIB with the following objectives:
(10th

largest in the world);
2nd
in Africa)
Gas Reserves: 187 Tcf
 Reform the Oil & Gas sector and regulatory bodies
 Turn NNPC into an autonomous, self-funding commercial
oil company
(8th

largest in the world;
1st
in Africa)
Current daily production of 2.18mmbpd
(Largest producer in Africa).

The IOCs operate 87% of Nigeria’s production

60% of Nigeria’s production is via JV’s between IOCs and
the National Oil Company.

The IOCs have a clear financial & technological
advantage over the local Independents and control
infrastructure.
 Incorporate the main JV operations into limited liability
companies to
 Solve funding issues
 Facilitate partnerships between Nigerian
companies and foreign players
 Consolidate the various tax laws into one Act
 Local Nigerian Content
 Encourages IOCs to partner with local players in
exchange for benefits and concessions
 Provides local companies with tax incentives
 As the leading Nigerian integrated player, Oando has potential to
benefit as IOCs seek out local partners under the new regime
 Oando’s experience and existing presence in the Niger Delta
means it may be viewed as a partner of choice

Changed by the emergence of NOC’s, improved service
companies, legislation and indigenization.
 Opening of Nigeria to further international credit markets will
impact Oando and peers
 There are positive signs that the PIB will be passed this year.
Source: BP Statistical Review, Company Estimates, Wood Mackenzie
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Details of Press Release
 Following the preliminary review of the Group’s Full Year accounts for the year ended 31st December, 2011,
the Company expects to announce a reduction in is budgeted profit forecast for the year.
 This notice is driven principally by one off write-offs against earnings, including impairments of assets,
project expenses from capital raising exercises, acquisitions, and termination of technical and managerial
charges as highlighted below:
 Impairment of OES Professionalism Rig
 Termination charges of TSA/MSA
 Project Expenses
(N854 Million)
(N5.25 Billion)
(N3.52 Billion)
 Management does not anticipate further similar exceptional items in FYE 2012 and following these actions,
affirms that the Group's balance sheet and capital are in a robust position, providing a solid foundation for
the Group's future growth path.
 Turnover and Operating Profit for the year are in line with expectations, but Profit after Tax will be affected
due to the provisions stated above.
 The Group remains focused and dedicated on delivering on its promise to shareholders on value creation
and looks forward to an improved earnings position for the FY 2012 with the addition of the earnings from
newly commissioned assets.
 Furthermore, the Group anticipates a robust performance for the FY 2012, with an indicative profit before
tax of N3.6billion for Q2, 2012, which will be achieved, barring any unforeseen circumstances.
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Operational Update for Q1 2012
Midstream Division
Upstream Division
Q1 Update
Exploration &
Production
Energy
Services
Downstream Division
Gas &
Power
Supply &
Trading
Marketing
 Production volumes
 Third rig, Passion, has
 EHGC has
 OST has maintained
 3 new stations to come
have remained at
c5,000bopd
 Preparations remain on
track to commence
production on OML 90
by Q3 2012
 We maintain our target
of increasing
production in OML 56
by Q2 2012.
been deployed and is
ready for operations
 Fourth rig, Respect,
has arrived in the
United States to
commence
refurbishment
 Teamwork and Integrity
have continued to
generate revenue.
commenced supply of
gas to anchor
customer, UNICEM
 Gaslink pipeline and
Akute Power continue
to generate revenue for
the Group.
its position as the
largest indigenous
supply and trading
player in the subSaharan region
 11% market share in
private PMS
importation in 2011 is
expected to be
maintained.
on board shortly
 Refurbishment of 4
existing stations
currently ongoing
 New commercial
customers signed up
 Commenced LPG roll
out strategy.
Guaranteed Revenue Drivers for FYE 2012
• Third rig, OES Passion, has now been deployed and is ready for operations (Budgeted Revenue – N5.4
Billion).
• EHGC has commenced the supply of gas to its anchor customer, UNICEM, with other opportunities also
being explored (Budgeted Revenue - N5.0 Billion).
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Q2 P&L Forecast Highlights
Q2 2012 Forecast
NGN’ Millions
Turnover
Gross Margin
Non-interest Expenses
Other Operating Income
EBITDA
Interest Expenses
Depreciation and Amortization
191,354
20,909
(9,850)
559
11,656
(3,995)
(2,284)
Profit before Tax (PBT)
5,340
Profit after Tax (PAT)/Net Profit
3,612
Net Profit Margin
1.89%
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Profit & Loss Forecast Breakdown
Revenue
Increase in revenue is expected from the following:
• Commencement of operations of EHGC (Budgeted Revenue – N1.3 Billion)
• Revenue anticipated from third rig, OES passion (Budgeted Revenue N2.0 Billion)
• High Oil prices anticipated (Q2 average of $110/barrel)
Interest
Charges
Depreciation
Operating
Expenses
• Increased Import volumes expected
Higher operating expenses due to:
• Deployment of 3rd Rig (OES Passion): N984.5 Million.
• EHGC: N71.0 Million
OES Passion to be depreciated:
• Budgeted Amount: N181.6 Million
Interest charges on OES Passion are no longer capitalized, now expensed:
• Budgeted Amount: N703.4 Million
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Q2 2012 Major Assumptions
1
• Exchange Rate NGN/USD - Interbank
• 160
2
• Annual Consumer Inflation Rate (Y/Y%)
• 11.1%
3
• Average borrowing rate
• 17.5%
4
• Average selling price per barrel of crude
• $110/barrel
5
• Average selling price per scm of natural gas
• N31.15/scm ($5.66/mscf)
6
• Average selling price per litre of PMS
• N97/litre ($0.61/litre)
7
• Average selling price per litre of AGO
• N153/litre (0.96/litre)
8
• Average operating day rate for swamp rigs
• $101,401/day
9
• Average efficiency rate for swamp rigs
• 95%
10
• Tax Rate - Company Income Tax
• 30%
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• Tax Rate - Education Tax
• 2%
12
• Tax Rate - Petroleum Profit Tax
• 50% (Marginal Fields) - 85%
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Strategic Overview
Transformation from a downstream giant to a full value chain indigenous champion across West Africa
Midstream Division
Upstream Division
Exploration &
Production
• Enhance Production
Current
from:
• Assets (5kbopd to
10kbopd)
• Accelerate near term
and acquisition
opportunities (50mmbbls
2P))
Mid Term
• Harness preferential
resource access to
dormant acreage due to
indigenous status
• Production 20-50kbopd
• Reserves 2P: 100 – 150
Energy
Services
• Fully contract Rig
fleet to International
Oil Companies
• Fully refurbish and
deploy 4th rig into
operation.
Gas &
Power
• Commence
construction of :
• GL4
• CNG
• CHGC
• Sell 90% of current
Long Term
100kbopd
• Reserves 2P:
300mmbbls
Supply &
Trading
• Intensify white
product supply by
leveraging new
infrastructure
• Intensify new
product offerings
Marketing
• Increase
distribution
efficiency and
expansion into high
margin volumes,
Lubes & LPG
distribution
Terminals
• Development of the
Marina Jetty and
subsea pipelines in
the Lagos Port
franchise capacity
• Leverage local content
policy opportunities
• Expand product
offering (MWD, etc)
• Commence
construction of:
• EIIJ pipeline franchise
• OBOB
mmbbls
• Production 50-
Downstream Division
• Consolidation of
position as market
leader and expansion
into other countries
• Commence
construction of 1st
CPF and 2 more gas
pipeline franchise
areas in Nigeria
• Substantially increase • Secure 40% market
crude oil market share
• Increase white
products market
dominance by
leveraging new import
infrastructure.
• Increase
geographical
presence
share in sales,
storage and
distribution of LPG
• Development of a
210,000MT terminal
facility in Lekki Free
Trade Zone
• Secure leadership
position in all product
offerings
• Maintain leadership
in all product lines
• Expand white
product storage
facilities in Nigeria
Through a mixture of
organic growth and
acquisitions
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Q&A
www.oandoplc.com
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