Oando’s upstream resurgence drives profit rebound as liquidity strains

By Seun Ibiyemi

Oando Plc’s performance for the first nine months of 2025 depicts a company at a strategic crossroads, shaped heavily by sweeping changes in the global energy industry and the evolving landscape of Nigeria’s oil and gas sector.

While the energy group has delivered a sharp rebound in profitability driven by upstream expansion and accounting reversals, its recovery is clouded by weak cash flows, declining trading revenues, and severe liquidity pressures. The results underscore a distinct narrative: Oando has moved beyond the fight for immediate survival, yet financial stability remains elusive.

The global oil and gas services industry in 2025 remains caught between volatility and transition. Crude prices have fluctuated between $65 and $80 per barrel amidst geopolitical tensions and OPEC+ discipline, while capital increasingly flows toward energy companies with credible decarbonization strategies. Against this backdrop, global upstream consolidation has accelerated, providing the strategic context for Oando’s consolidation of the Nigerian Agip Oil Company (NAOC) joint venture assets. This move positions the firm within a global shift toward fewer but stronger operators. Locally, while Nigeria saw upstream output stabilize around 1.60 million barrels per day, operators continue to face margin pressure from currency volatility and rising costs.

Furthermore, the government’s energy transition plan has expanded the strategic mandate for indigenous firms, placing Oando in a critical role as international majors divest onshore assets.
Oando’s operational performance mirrors these industry shifts, with the upstream segment emerging as the primary growth driver.

Daily production climbed 59 per cent to 38,121 barrels of oil equivalent following the NAOC asset consolidation, supported by a 60 per cent rise in crude output and a massive 500 per cent surge in natural gas liquids. Operational uptime also reached a robust 82 per cent.

In stark contrast, the midstream and trading segment struggled under global market pressures. Segment revenue declined by 20.32 per cent despite an increase in crude cargo liftings, highlighting a divergence where production volumes are growing while trading revenues contract.

Beyond hydrocarbons, the company is actively pursuing diversification into renewables and mining, ranging from electric buses in Lagos to a planned 1.2GW solar project and mineral exploration in Kebbi State. International ambitions are also evident in its bid for the Guaracara Refinery in Trinidad. However, these ventures remain in nascent stages; with no immediate positive cash flow contribution, the group’s near-term earnings remain heavily reliant on traditional upstream operations.

Financially, the period presented a mixed picture. Revenue fell by 20.32 per cent to N2.54 trillion due to weaker trading volumes and softer commodity prices, leading to a 41.85 per cent decline in gross profit. While pre-tax profit dropped significantly, profit after tax surged to N201.31 billion—up from N76.30 billion in the prior year propelled largely by tax credits, impairment reversals, and reduced administrative expenses.

Consequently, earnings per share rose to N16.00, marking a turnaround from previous losses. However, the reliance on non-recurring items to boost the bottom line raises valid concerns regarding the quality and sustainability of these earnings.

Despite the headline profit, cash flow remains a critical weakness. Net cash used in operations remained negative at N234.98 billion, and financing inflows contracted sharply, signaling reduced access to debt funding. Liquidity ratios deteriorated further, with current and quick ratios reflecting acute short-term funding stress.

Moreover, shareholders’ equity remains in negative territory, keeping return on equity negative despite improvements in asset returns.

Investor sentiment has reflected this complexity, with the share price exhibiting high volatility before settling below its 200-day moving average, a bearish technical signal. Oando now stands at a pivotal point in its evolution.

While the upstream turnaround and integrated strategy indicate meaningful progress, the combination of extreme liquidity weakness and reliance on one-off gains poses material risks. To secure durable value creation, the company must prioritize strengthening working capital and stabilizing cash flows. Until these fundamentals improve, Oando remains a high-risk proposition offering potential upside, yet burdened by vulnerabilities that investors cannot ignore.