The Group Chief Executive’s Letter to Shareholders,
Dear Shareholder,
From our humble beginnings as a downstream company to an integrated energy group today, with
investments in assets across the energy value chain, none can deny that our diversification strategy is
well on its way to a successful conclusion. Your company has, in this period, raised equity through
two capital raising exercises; N16Bn in 2004 and N21Bn in 2010 to finance the growth and
development culminating in the N30bn of Earnings before interest and tax we generate today, with
48% being derived from our Upstream businesses, 17% from the Midstream and 34% from our
Downstream operations.
To maximize shareholder value, we are entering a new frontier in our integrated business model to
increase our investments in the upstream segment of the group. This aspiration has necessitated that
we undertake a number of corporate actions to increase the amount of available capital for the
Upstream whilst retaining a conservative debt to equity ratio. The initiatives are at different stages of
maturity and include the following:
Listing of our E&P division
We now have a pure play listed subsidiary E&P company called Oando Energy Resources Inc. on the
Toronto Stock Exchange. This platform will enable us raise the much required but scarce equity to
meet the company’s immediate and future strategic objectives of growth in the upstream sector; it
also opens up the opportunity to present the company to investors with the sole appetite for
Upstream Investments.
Divestment/business combinations of the downstream company
Today we are in negotiations with a major international trading firm with the plan to create a Joint
Venture between our entities for all our downstream operations. The synergies resulting from the
combination of our operations, will lead to immediate value creation for our shareholders through
economies of scale and an increased market share, further solidifying our downstream market
leadership.
Divestment/business combinations of the Energy Services business
The company is in negotiations with reputable investment firms for an equity injection into the
Energy Services business. This will provide the company with the necessary capitalization that will
enable it increase its profitability in the short term due to reduced interest expense.
Capital Raising
We will also be embarking on major capital raising initiatives, commencing with the N35Bn Rights
Issue exercise in the fourth quarter of this year, to further enhance our capital structure, whilst also
reducing our debt position.
With the realisation of the above highlighted corporate actions, we would achieve: better
capitalization of our subsidiaries; a restructured and more robust balance sheet; and significantly
increased liquidity across the Group. We look forward to the successful conclusion of these corporate
actions, which will culminate in a strengthened company positioned for growth and increased value
creation and delivery to our shareholders.
Yours Sincerely,
Wale Tinubu
Group Chief Executive