The Chief Executive Officer of Oando, a Nigerian oil company, Adewale Tinubu said the firm plans to raise fresh capital over the next two years and repay debt used to acquire Conoco Phillips’ Nigerian assets.
Oando, which has built its growth based on debt, has transformed itself in the past few years from a fuel retailer to oil producer and now competes with multinationals such as Shell and ExxonMobil. The company purchased Conoco Phillips’ Nigerian assets for $1.5 billion in 2013, but high financing costs, coupled with lower oil prices hit profit, leaving it unable to repay its debt.
The Chief Executive Officer revealed that Oando has paid more than 77 percent of the acquisition debt and plans to pay off the rest in 12 months, which would allow it to resume dividend payments. He noted that the company would be left with total debt of $300 million.
Tinubu said the company’s growth plan is to continue to pursue acquisitions as multinational oil companies sell assets. He however added that he would take on new deals after paying down debt.
According to Tinubu, “our expectation is that over a four-year horizon we will no longer have long-term debt”.
In 2016, The Central Bank of Nigeria gave lenders a deadline to reach a deal to resolve Oando’s debt issue, leading to a 94.6 billion naira ($309 million) loan restructuring including asset sales.
Oando said it would reclassify some current liabilities as long-term liabilities to remedy its working capital by June and swap 27.5 billion naira of debt into equity. The company also plans to sell up to $200 million via a rights issue by October and cut its stake in its upstream unit to raise $275 million in 2020.
Tinubu said he was confident with the capital raising initiatives, as plans were far advanced to raise funds over the next 24 months.