Auditor: Oando’s future uncertain as liabilities balloon

Oando is facing serious financial difficulties, with its independent auditor raising concerns about the company’s ability to stay afloat.

The oil company’s 2022 financial report, released Tuesday, showed Oando’s liabilities outweigh its assets, pushing its shareholder equity into negative territory.

The company reported assets worth N1.3 trillion, liabilities of N1.5 trillion, and a negative shareholder equity of N197 billion.

Accumulated losses and debt left the company with a funding gap of N3 trillion, which it now requires to clear outstanding debt and inject into its business.

Adding to concerns, the company recorded negative operating cash flows, an indication its day-to-day operations are using up more cash than they are bringing in, making it difficult for it to earn profit.

“Material uncertainty”

While Oando plans to refinance its debt and expects better revenue by the end of 2024, the auditor warned there is a “material uncertainty” regarding the company’s ability to operate as a “going concern”, which raises doubts about Oando’s ability to maintain future.

“A material uncertainty, therefore, exists that may cast significant doubt on the company’s and group’s ability to continue as a going concern, thereby resulting in the company’s and group’s inability to realise the assets and settle the liabilities in the ordinary course of business at the amounts recorded in these consolidated and separate financial statements,” said independent auditor BDO Professional Services.

Folorunso Adeleye, team lead internal audit and compliance at Lagos-based commercial printing company Superflux International, told Premium Times, the auditor’s comment “is a major sign of business collapse, meaning that their liabilities are far more than the assets.”

Debt and measures

The oil firm’s most pressing debt is N686.6 billion, which was due within the last 12 months of the period under review. The company’s debt to trade partners and other payables climbed by more than half to N705.8 billion.

Oando plans to stabilize its finances by raising N1 trillion in bonds (debt) from investors to partially address the N3 trillion funding gap. It said it has appointed a rating agency to analyze the bonds.

Repaying those loans and interest, and returning to profit, will rely on cash flow from its operations, particularly from its recent acquisition of the Nigeria Agip Oil Company (NAOC) from the Italian giant, Eni, the company hinted.

However, that plan may be problematic since the NAOC transaction has yet not been concluded.

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Eni agreed last September to sell its local onshore unit, NAOC, which contains the oil field OML 60 – 63, partly owned by the government-run NNPC, to Oando. The NNPC Limited claimed Eni failed to obtain its consent for the deal with Oando, stalling the transaction.

Onado’s share price in Lagos declined 20.9% in the last one month. The firm is also listed on the Johannesburg Stock Exchange.