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CONTENT
Notice of Annual General Meeting 5
Financial Highlights 7
Chairman’s Report 8
Group Chief Executive’s Report 10
Report of the Directors 23
Report of the Audit Committee 50
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To be the leading integrated
energy solutions provider
VisionTo be the premier companydriven by exellence
Mission
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BOARD OF DIRECTORS
Major General M. Magoro (Rtd.) OFR,PSC, Chairman, Non-Executive DirectorGaladiman Zuru
Mr. J.A. TinubuGroup Chief Executive
Mr. O. BoyoDeputy Group Chief Executive
Mr. Mobolaji OsunsanyaGroup Executive Director
Mr. A. Akinrele SANNon-Executive Director
Chief F.N Atako JPNon-Executive Director
HRM Michael A. Gbadebo, CFR,The Alake of EgbalandNon-Executive Director
Mr. Navaid BurneyNon-Executive Director
Mr. V. O. IbruNon-Executive Director
Alhaji H. Mahmud Walin MubiNon-Executive Director
Mr. O.P OkolokoNon-Executive Director
Mr. Ike OsakweNon-Executive Director
PROFESSIONAL ADVISERS:
Chief Compliance Officer
& Company Secretary
Oredeji K. Delano (Mrs.)
Chief Financial Officer,Mr. Olufemi Adeyemo
Chief Legal Officer,Mrs. Ronke Sokefun
Registered Office:2, Ajose Adeogun Street, Victoria Island, Lagos
Auditors:PricewaterhouseCoopers,252 E, Muri Okunola Street, Victoria Island,Lagos
The Registrars & Transfer Offices:First Registrars Nigeria Limited,Plot 2, Abebe Village Road, Iganmu, Lagos
Computershare Investor Services(Proprietary) Limited, 70, Marshall Street,Johannesburg, 2001, P. O. Box 61051, Marshalltown, 2107, South Africa
Investor Relations Officer (Retail):Ms. Adenike Olaniyan
BANKS
Access Bank PLC
Access Bank, UK
Afribank PLC
BNP Paribas , Paris
Citibank, UK
Citibank Nigeria Limited
Ecobank PLC
Fidelity Bank PLC
First Bank of Nigeria PLC
First City Monument Bank PLC
First Securities Discount House Limited (FSDH)
Guaranty Trust Bank PLC
ING Bank N.V London
Intercontinental Bank PLC
Kakawa Discount House Limited (KDH)
Oceanic International Bank PLC
Platinum Habib Bank PLC
Standard Chartered Bank Nigeria Limited
Standard Chartered Bank PLC, UK
StanbicIBTC Bank PLC
Standard Bank, London
Sterling Bank PLC
Union Bank of Nigeria PLC
United Bank for Africa PLC
United Bank for Africa, New York
Unity Bank PLC
WEMA Bank PLC
Zenith Bank PLC
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NOTICE IS HEREBY GIVEN that the Thirty-Second Annual General Meeting of Oando Plc(the “Company”) will be held at Akwa Ibom State Hall (Ibom Hall), Babangida Avenue, Uyo,Akwa Ibom State on Thursday, the 30th day of July 2009 at 10:00 a.m. for the purposesof:
1. Transacting the following ordinary business:
1.1 To present the annual financial statements of the Company and of the Groupfor the year ended 31 December 2008 and Reports of Directors and Auditorsthereon;
1.2 To receive the Report of the Audit Committee;
1.3 To declare the final dividend of N3.00 recommended by the directors of theCompany;
1.4 To elect members of the Audit Committee;
1.5 To re-appoint the Auditors;
1.6 To authorise the directors of the Company to fix the remuneration of theAuditors;
1.7 To re-elect the following directors who in accordance with Articles 91 and 93of the Company’s Articles of Association, retire by rotation, but are eligibleand offer themselves for re-election:
• Mr. Oboden Ibru• Alhaji Hamidu Mahmud• Mr. Onajite Okoloko
(Please refer to pages 31 to 32 of the annual report of which this notice forms partfor a brief curriculum vitae of each director).
1.8 To appoint Mr. Olufemi Adeyemo as a director of the Company.(Please refer to page 30 of the annual report of which this notice forms part for abrief curriculum vitae).
2 Transacting the following special business:
(i) To consider, and if approved, to pass with or without modification, the followingordinary resolution to fix the remuneration of the non-executive directors:
“It is hereby resolved that the fees payable to the non-executive directors ofthe Company be increased from N850,000.00 per annum for the Chairmanand N750,000.00 each per annum for all other non-executive directors toN1,000,000.00 per annum for the Chairman and N900,000.00 for all other non-
executive directors with effect from 1 January 2009; which fees are payablequarterly in arrears”.
(ii) To consider, and if approved, to pass with or without modification, the followingspecial resolutions to alter the Articles of Association of the Company:
a) “It is hereby resolved that Article 140 of the Company’s Articles of Associationbe and is hereby amended as follows:
(i) the words “and or electronic” should be inserted after the word“printed”;
(ii) the existing Article 140 be renumbered Article 140(a);
(iii) a new Article 140(b) be inserted as follows: “Electronic copy meansa method of electronic communication which includes, but is notlimited to, facsimile, electronic data message (including but notlimited to e-mail), bulletin board communications, internet websites,ms-word, excel spreadsheet, print portable document file (pdf),hypertext mark-up language (html) or similar text displayed via aweb browser, electronic data interchange (EDI), Compact Disc,memory stick and computer network communications.”
b) “It is hereby resolved that Article 108 of the Articles of Association be deletedand the following Article be adopted as the new Article 108:
“The quorum necessary for the transaction of the business of the Directorsmay be fixed by the Directors and unless so fixed shall be more than half ofthe total number of Directors at any point in time, with at least half of thenumber present being non-executive directors”.
(iii) To consider, and if approved, to pass with or without modification, the followingsub-joined special resolution:
a. That pursuant to Article 84 of the Company’s Articles of Association, theDirectors be and are hereby authorized to raise, whether by way of a publicoffering or other methods, additional capital of up to N200,000,000,000 (TwoHundred Billion Naira) through the issuance of shares, convertible or non-convertible loans, medium term notes, notes, bonds and or any otherinstruments, in such tranches, series or proportions, at such coupon orinterest rates, within such maturity periods, and on such other terms andconditions; including through a book building process or other process all ofwhich shall be as determined by the Directors, subject to obtaining the approvalsof relevant regulatory authorities”.
b. “That the Directors be and are hereby authorized to enter into any agreementsand or execute any other documents necessary for and or incidental to effectingresolution (a) above”.
NOTICE OF ANNUAL GENERAL MEETING
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c. “That the Directors be and are hereby authorized to appoint such professionalparties and perform all such other acts and do all such other things as may benecessary for or incidental to effecting the above resolutions, including withoutlimitation, complying with directives of any regulatory authority.”
(iv) To consider, and if approved, to pass with or without modification, the followingas a special resolution:
“That the Directors be and are hereby authorized to divest and/or transfer up to 49%of the Company’s shareholding in Oando Marketing Limited at such times, to suchpersons and or entities and on such terms and conditions as may be determined bythe Directors, in accordance with any applicable statutory and or regulatoryrequirements”.
Voting and Proxies
On a show of hands, every member present in person or by proxy shall have one vote, andon a poll, every member shall have one vote for each share of which he is the holder.
A member of the Company entitled to attend and vote at the annual general meeting (the“Meeting”) is entitled to appoint a proxy to attend, speak and vote instead of that member.A proxy need not be a member of the Company.
Registered holders of certificated shares and holders of dematerialised shares in their ownname who are unable to attend the Meeting and who wish to be represented at theMeeting, must complete and return the attached form of proxy in accordance with theinstructions contained in the form of proxy so as to be received by the share registrars, FirstRegistrars Nigeria Limited at Plot 2, Abebe Village Road, Iganmu, Lagos, or ComputershareInvestor Services (Proprietary) Limited, 70, Marshall Street, Johannesburg, 2001, P. O.Box 61051, Marshalltown, 2107,South Africa not less than 48 hours before the time of theMeeting.
Holders of the Company’s shares in South Africa (whether certificated or dematerialised)through a nominee should timeously make the necessary arrangements with that nomineeor, if applicable, Central Securities Depository Participant (“CSDP”) or broker to enablethem to attend and vote at the Meeting or to enable their votes in respect of their sharesto be cast at the Meeting by that nominee or a proxy.
Dividend Payment
If the dividend of N3.00 recommended is approved and declared, those shareholderswhose names appear in the Company’s Register of Members kept in Nigeria as at the closeof business on 3rd of July, 2009, shall have dividend warrants posted to them or have theirdesignated bank accounts credited directly on the 3rd day of August 2009. Dividends dueto Shareholders whose names appear on the South African Register of Members at theclose of business on the 3rd of July 2009 (certificated or dematerialized), will, on the 3rd ofAugust 2009, either be electronically transferred to shareholders’ bank accounts or, in theabsence of suitable mandates have dividend cheques posted to them, or will have theiraccounts, at their CSDP or broker credited.
Closure of Registers of Members
The Registers of Members and Transfer Books of the Company (Nigerian and SouthAfrican) will be closed between the 6th July and 10th July 2009 (both days inclusive) in termsof the provisions of Section 89 of the Companies and Allied Matters Act Cap. C20 Laws ofthe Federation 2004 (the “Companies Act”).
Nomination for the Audit Committee
In accordance with Section 359 (5) of the Companies Act, any member may nominate ashareholder as a member of the Audit Committee, by giving notice in writing of suchnomination to the Company Secretary at least 21 days before the Meeting.
Dated this 3rd day of July 2009
By the Order of the Board
Oredeji K. Delano (Mrs.)
Chief Compliance Officer & Company Secretary
Registered Office
2, Ajose Adeogun StreetVictoria Island, Lagos
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FINANCIAL HIGHLIGHTS
2008 2007
N’000 N’000
Turnover 339,420,435 185,892,083
Profit on ordinary Activities before taxation 10,742,611 6,813,727
Profit After Tax 8,343,325 5,480,415
Attributable to group 8,339,273 4,755,009
Earnings per 50 k share (Naira) 9.22 7.51
*Dividend per 50 k share- proposed (Naira) 6 6
Net Assets per 50 k share 49.60 74.92
Dividend cover 1.54 1.25
*Note N6.00 represents interim and final dividend
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CHAIRMAN’S REPORT
Highly Esteemed Shareholders,
It is with delight that I welcome you all to the thirty-second Annual General Meeting of your company.
In the year under review, we have cause to be proud of our achievements in spite of the tough global economic conditions.We recorded considerable progress and growth in our bottom line and this growth was essentially driven by the relativelysuccessful implementation of our diversification strategy across the energy value chain. Our vision of being the premiercompany driven by excellence remains resolute and is evident in our results.
Operating Environment
The Macro-economic environment:
GlobalOn the global scene, the year 2008 was a historic year in which the effect of the global economic and financial criseswas felt across the world at various levels. The financial crisis severely affected economic activity and left developed,emerging and under developed countries at unprecedented levels of recession at year-end. The effects of the crisis on theUS economy were more severe than anticipated. US GDP growth slowed to 1.2%, down from 2.0% in 2007. The EU zonehad a 2.0% growth, while Japan’s growth was at -4% down from the 1.9% of 2007. Once again, the emerging economieswitnessed most of the growth with China at 9.8%, India at 7.3% and Africa at 6%.
Crude oil prices also experienced high volatility. After hitting the record high of US$147 per barrel in July 2008, it droppedto US$30.28 per barrel in December.
Africa showed considerable growthAfrica, amongst other emerging economies managed to maintain its GDP growth at 6%. Three African countries, Angola,Equatorial Guinea and São Tomé and Príncipe featured in the list of 2008’s most buoyant economies, with Angola at thetop position. These countries have scaled the heights for two unsettling reasons: sky-high oil prices, which dominated thefirst half of the year, and a low starting-point, which suggests they have struggled of late and may not sustain theturnaround.
The Local Operating EnvironmentThe macroeconomic outcomes of the Nigerian economy in 2008 weakened slightly relative to the previous year largely dueto the global financial crisis and the attendant economic meltdown. It is a major disappointment to the downstream that thegovernment’s avowed belief in a deregulated downstream industry failed to translate into reality as price controls remainintact and the country expended in excess of N600 billion on fuel subsidies.. We believe that much needed investment inthe downstream is only possible in a fully liberalized environment and urge the Government to take steps to actualize itscommitment to a deregulated market.
As the Nigerian economy remains largely dependent on revenues from oil, falling oil prices, oil production quota cuts andprevailing unrest in the Niger Delta continued to affect Nigeria’s internal capacity to generate oil related revenues. Productionlevels fell below production quotas in 2008 and by the end of the year, crude oil production shut-in stood at 0.9mbbls/day,while the non oil sector recorded an average growth rate of 9%.
Rising inflation driven initially by high energy costs and then by high food prices, saw Year Over Year (YOY) inflation crossingthe single digit mark and hitting 14.8% by November 2008. Interest rates shot upwards from the third quarter and remainedelevated through November, but moderated in December. The Naira exchange rate was stable through October, butdepreciated sharply from then till December following increased demand pressures.
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This is largely due to the boom of commodity prices experienced mid-year, and thesubsequent slump during the last two quarters of the year. Growth is expected to dropconsiderably in 2009 due to OPEC’s decision to reduce the production quota of Africancountries in order to stabilize crude prices. The forecast is based on the presumption thatoil-producing countries will continue to depend solely on oil income. Nevertheless, therecovery of world economies hinges on the sustained growth of developing countries likeNigeria.
Real GDP growth was held back by unrest in the Niger Delta region, coupled with theglobal recession which is expected to persist through 2009-10. Although the problems inthe Niger Delta may take many years to resolve, the recovery from the global slowdownshould be quicker, yielding robust levels of growth, led by the non-oil sector.
Other economic indicesProvisional figures from the Debt Management Office (DMO) showed that the total externaldebt increased slightly to $3.7bn, up from $3.39bn in 2007. The country’s apex bank,CBN, puts Nigeria’s external reserves figure at $53bn which was a sharp contrast to $62bnduring the first half of the year, and a marginal increase over 2007 figures which stood at$52bn. The value of the Naira fell sharply towards the end of the year depreciating toN139.55 on the final day of trading.
The stock markets ended the year on a poor note as well, as market capitalisation for 213listed equities accounted for N7trn of the aggregate, down from N10.3trn in the previousyear. Also, the total market value of the 301 securities listed on the Nigerian StockExchange stood at N9.6trn, a 28% drop from N13.3trn in 2007.
Growth in non-oil output increased from 7.8% in 2007 to 9.6% in 2008, and the manufacturingsector rose marginally to 2.7% from 2.2% in 2007.
Performance ReviewIn the year under review, Oando’s drive towards excellence and becoming the leadingintegrated energy solutions provider were spearheaded by the following key initiatives:
• Talent managementIn 2008, managing the talent of the organization was the major preoccupation of theHuman Capital Management (HCM) department. In this year we launched our performancemanagement system on the Oracle platform called the Talent Management System (TMS).Oando went beyond the system requirements and implemented a competency basedappraisal system. This meant that employees were appraised not only on business objectivesbut also on their competencies.
• Hay Job EvaluationAlso in 2008, Oando implemented the Hay Job Evaluation methodology. The benefits ofthe Hay job Evaluation are numerous but amongst others, it enables Oando to benchmarkjobs across organizations. This outcome simplifies the remuneration survey process, makescomparisons more accurate thus reducing to a large extent the margin of error.
Consolidation of Shareholder AccountsI implore all shareholders and stakeholders of this company to consolidate your numerousshare accounts into a single share account to better the efficiency of the operators as wellas reduce the costs of operations experienced by quoted companies in the printing anddistribution of Accounts and notices, which will increase profits for the company. We alsorequest that all share certificates are dematerialised in order for the Central Security ClearingSystem (CSCS) to accurately capture investor positions.
The BoardIn compliance with Corporate Governance and best practices, two of our independentdirectors, Chief Felix Atako (JP) and Mr. Ikeme Osakwe who have served on the Board from9th February 2000, nine years from the date of their first election, are not presentingthemselves for re-election this year. Chief Atako was the Chairman of the Audit Committeeand a member of the Strategic Planning & Finance Committee and Nominations Committee.Mr. Ike Osakwe was the Chairman of the Strategic Planning & Finance Committee and amember of the Audit and Remuneration Committees.
On behalf of the Board, and the Company I wish to express our sincere gratitude andappreciation for the contribution Chief Felix Atako and Mr. Ike Osakwe made to the OandoGroup during their tenure. We truly value their commitment and valuable contributions tothe success of Oando and wish them the very best in all their future endeavours.
Furthermore, to ensure that the composition of the Board of Directors complies withinternational best practices, the Company has engaged services of KPMG ProfessionalServices (Executive Selection & Training Services) to identify potential independent Directorsand conclude the selection of independent Directors for the Company by the end of theyear.
The 2009 OutlookIn 2009, I am certain that we have what it takes to surpass our record of achievements. I amconfident that we are prepared to overcome the challenges of the coming year, and wehave never been stronger in the midst of challenges. With the right strategies, operationalframework and motivated manpower in place, we are poised to take charge in the years tocome.
Thank you
Major General M. Magoro (Rtd.)PSC, OFR, USAWCGaladiman ZuruChairman
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GROUP CHIEF EXECUTIVE’S REPORT
Dear Esteemed Shareholders,
I am pleased to report that our Company’s overall performance for 2008. This year was characterized by the unpredictabilityof our operating environment both locally and internationally. We experienced crude oil prices reach a historical high as wellas record low.
In accordance with our mission we experienced further growth in 2008 in all aspects and lines of our business and havebeen able to further strengthen our position as an integrated service provider. The year experienced the first dividends ofour diversification from the downstream to the mid and upstream sectors of the oil industry. Our Upstream divisioncontributed significantly to our earnings and profitability as we grew the group’s net profit from N5.48 billion in 2007 to N8.34billion in 2008 and a 52% increase in Profit After Tax (PAT).
This remarkable result is attributable to the company’s improved operational efficiency and increased trade volumes. Wealso embarked on a number of programs to ensure our success and future domination of the Nigerian oil industry.
Leadership Development ProgramIn 2008, leadership development became institutionalized with a clear definition of the organization’s LeadershipDevelopment Framework. The key elements of the framework are developing talent pool, assessing and managing thetalent of the organization, effectively putting in place a process for easy identification of outstanding performers, assuringdifferentiation in reward and upward progression within the organization. The succession planning process was furtherstrengthened with the compilation of succession plans from different entities and group/shared services functions. Our goalis to reduce the impact of unplanned exits on the organization to its barest minimum, thus creating leadership redundancyin our teams whilst ensuring that identified high achievers are appropriately mentored and trained.
Graduate Trainee Program (GTP)Oando has always focused on the development of its people and in 2008; we commenced our Graduate Trainee Programwith eighteen (18) young graduates from diverse disciplines to constitute the maiden intakes for the scheme. Remainingcompetitive in our dynamic environment requires that we constantly source for newer and younger talented minds that canbe trained and mentored for leadership positions in the organization and this is essentially what we hope to achieve withthe GTP.
After a series of very rigorous assessments and interviews, the first set of graduate trainees came on board in February2009 and has successfully spent the last 6 months working in the different businesses across the Group. Effective from2009, the only means of hiring entry-level staff into Oando Plc and any of its subsidiaries will be through the GTP therebyensuring that all new and young entrants into the company imbibe Oando’s core values of teamwork, respect, integrity,professionalism & passion (TRIPP).
Recognition for Environmental ComplianceIn the year under review, we received The Ako-Eko Green Environmental Award (Apapa Terminal) and the Green RibbonAward for the Kaduna Lube Plant in recognition of our efforts to ensure we carry out our operations in an environmentallysafe and friendly manner. We also took a lead role in the “plant–a–tree” initiative of the Lagos State Government. Our goalis to ensure that we positively impact the environments in which we operate in across Nigeria.
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‘Adopt-A-School’ ProgramYour company also boosted its Corporate Social Responsibility (CSR) initiative by includingsix (6) additional schools in its Adopt-A-School scheme. These schools are situated inlocations within Oando’s operating environments.
Similarly, a total of 1,000 safety helmets were donated to okada riders in different regionsof the country in a bid to promote safety.
Our performance by division:
Oando Marketing LimitedOando Marketing Limited (OML) is the leading oil and gas marketing company with over500 retail outlets and a commercial client base that cuts across all industry sectors such asmanufacturing, construction, oil & gas and telecommunications in Nigeria and the WestAfrican sub region. OML markets and distributes a wide range of products includingPremium Motor Spirit (PMS), Automotive Gas Oil (AGO, also known as Diesel); House HoldKerosene (HHK); Aviation Turbine Kerosene (ATK); Low Pour Fuel Oil (LPFO), lubricatingoils and greases; bitumen; Liquefied Petroleum Gas (LPG, also known as cooking gas)and insecticides.
Review of 20082008 was characterised by extreme price swings for crude oil with prices surpassing $140/barrel in July and falling below $40/barrel in the December. Production at the refineries(notably Kaduna and Warri) increased by 81% in 2008 in comparison to 2007 as therefineries were in operation for longer periods. However, production was hampered bypipeline vandalism and frequent breakdown of equipment and as a result product importationwas a key factor to the success of our business.
The financial crisis triggered by the housing meltdown in the US became apparent acrossthe world in the third quarter of 2008. This had an adverse effect on the Nigerian economyas liquidity for most businesses dried up and banks increased their lending rate by up to60% in some instances. The overall effect on the business was the increase in workingcapital requirements, increase in interest expense and decrease in sales volumes acrossmost of the products, which all result in reduced profit margins.
The Federal Government, the dominant player in the Nigerian economy was affected byfalling crude prices as it had less revenue to support the economy. This affected theallocation available to the states to carry out their businesses and pay their staff as well astheir ability to pay contractors for projects being carried out within the states and localgovernments.
Despite these circumstances Oando marketing’s turnover grew in 2008 by 32% to N173bncompared to 2007, gross margin increased by 31% from N15.4bn in 2007 to N20.2bnwhile profit after tax hit N3.2bn, a growth of 22% over the previous year.
A major contributor to OML’s impressive performance is the Oracle platform which increasesoperational efficiency and enables performance monitoring of the sales teams across thenation.
Product Review
Premium Motor Spirit (PMS)PMS volumes grew by 29% and it accounted for 63% of our revenue. This was as a resultof our throughput efficiency and the newly expanded storage facility in the Port HarcourtTerminal. The unfortunate “ethanol” incident in the 1st quarter of 2008 negatively affectedour sales during that quarter but we were able to achieve budgeted volumes by half year2008 and were ahead on our unit margins by the same period.
Automotive Gas Oil (AGO)AGO contributed 22% to OML’s turnover in 2008 and 25% to OML’s profitability in the sameperiod. The product was negatively affected by supply constraints in the second quarterand this consequently had a negative impact on sales; and then a glut in the third andfourth quarters of the year which negatively affected margins. Local product supply fromthe refineries was intermittent at different times within the year further worsening theimbalance of government supply to the major marketing companies.
HHKHHK, a product that is mainly sourced locally, was able to deliver very strong margins for thecompany. Volumes were higher than last year by 12%. The growth in volume was as aresult of improvement in supply of the product.
ATKATK experienced an 8% growth in sales volume with stronger margins compared to lastyear. The company benefited immensely during the year from frequent stock out experiencedby other marketers and the industrial unrest at Texaco. These issues led to OML taking upallocations of these other marketers. Bulk deliveries to our Contractors and Brokerscontributed immensely to the sales volumes of ATK.
Other Products (Lubricants, Specialties):
LubricantsHaving been identified as a product with high potential, lubricants recorded a higher growththan was achieved last year in terms of volume and margin. The strategic focus for expansionin new non-forecourt channels enabled us to protect unit margins in a highly competitiveenvironment. Promotional activities and especially tapping into the business opportunitiesoffered by the Eastern axis boosted sales volume. A large proportion of our sales was fromthe East where new markets were identified and serviced effectively.
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SpecialtiesBitumen – Our performance was impressive as bitumen sales grew by 23% and wedelivered higher than budgeted unit margin despite the perennial issue of supply disruptionassociated with the bitumen industry. Our ability to source right was largely responsible forthis performance.
LPG - The product was characterised by very strong unit margins and restricted supply.The level of regulation was low which lead to major marketers also performing the role ofretailer to increase their margins. However, supply constraint made it possible to achievehigher margins relative to last year. In addition, LPG sales volume grew by 25% comparedto last year due to improved forecourt cylinder sales while holding firm on bulk LPG sales.
LPFO – There was a steady decline in LPFO demand as industries and factories haveswitched to natural gas for their power generation. In addition to this, a significant proportionof local product from the refineries went to independent marketers. Our strategy over thelast two years has been to ensure consistent supply to our contract customers whilecontinuing to seek cheaper sources for the product.
Looking Forward to 2009OML’s aim for 2009 is to continue to deliver quality products and services to customerswhile delivering improved value to the Group and shareholders. This is of importanceconsidering the benefits to be obtained from OML’s transition as a fully owned subsidiaryof Oando Plc to a stand-alone Public Limited Company listed on the Nigerian StockExchange.
We expect to achieve our objectives despite the continued uncertainties surroundingGovernment Policies (especially as it pertains to deregulation and the role/relevance ofthe NNPC) and the current financial crisis.
Emphasis will be placed on efficiency which will underpin our value delivery approach in2009. We will also continue to revisit our key business controls to ensure we are wellprotected against fraud, shortages, loss of products and theft of assets. The followinginitiatives will be the high points for 2009:
• Retail margin optimization;• Securing a greater percentage (80%) of our commercial business in VMI (a
scheme by which we manage customers’ inventory at their locations therebysecuring the business of a number of reputable industrial customers furtherincreasing sales performance) or supply contracts;
• Improved NFR Offering;• Exploiting LPG Opportunities – retailing of LPG at retail outlets through the
Banner Gas Initiative;
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• Reinvestment in Assets – Retail outlets and terminal;• Effective Working Capital Management through TAR and stock management.
Oando’s Trading BusinessOando Supply and Trading Limited and Oando Trading Limited (Bermuda) represent theproducts trading arm of the Oando Group. Our business activities cover trading of refinedand unrefined petroleum products to refiners, marketing and trading companies worldwide.Oando Supply and Trading is responsible for the supply of refined petroleum products intoNigeria, whilst Oando Trading is responsible for supply into other markets. Products tradedinclude gasoline, gas oils, kerosene, aviation fuel, distillates, naphtha, fuel oils, bitumen,base oils, bitumen and liquefied petroleum gas.
The business also maintains a presence in the world’s products freight market in terms ofvessels chartered on spot and time charter basis for delivery of oil and oil products tovarious customers worldwide.
Review of 2008The economic environment for the year 2008 was challenging and largely unpredictable.Unprecedented socio-economic events resulted in a series of global crises. However,unlike previous economic crises, the casualties were not isolated to specific industries orcountries; in contrast the entire global community has been hit hard.
The first half of the year was marked by the spiraling of crude oil prices to the historicalheight of $147/barrel in July, a climb of 320% over a 5-year period. The soaring cost offuel, coupled with rising inflation, led to major price upswings for all commodities andservices.
The second half of the year witnessed the birth of the downward trend experienced todayin the financial sector. Many banks and financial institutions started going bankrupt becausethey had hitherto carried “toxic assets” which they now had to write off. The loss ofconfidence in the financial community sent the market into panic, forcing massive sell-offsthereby crashing the global equities and commodities markets. In line with the othertumbling markets, crude oil prices began a dramatic free fall, depreciating at record ratesand at an unprecedented speed.
The fall in prices in the oil market created a reprieve for the company within the thirdquarter. During this period, the company was able to maximize profits thereby enabling itmeet the budget for the year.
Review of Financial PerformanceDespite the constraints of the year, the trading business delivered a remarkable turnoverof N126.36bn in 2008, a rise of 75% above 2007 turnover of N72.3bn. Profit Before Tax(PBT) also witnessed an increase of 56% over the previous year, resulting in a rise in ProfitAfter Tax to N895.95m, 54.6% higher than the previous year.
The trading business was able to achieve the above performance by taking advantage ofOando’s management of the Lister and Magcobar storage facilities. The aggressive salesof PMS out of these storage facilities enabled the company to trade substantial volumes ofthe product in 2008.
Looking Forward to 2009The company’s strategy for 2009 is to maximise supplies of PMS, AGO and HHK and tostrengthen its drive to expand market share by aggressively increasing its customer base inNigeria as well as West Africa.
Oando Gas & Power LimitedOando Gas & Power (OG&P) is responsible for Oando Plc’s gas and power businesses:Gaslink Nigeria Limited, Akute Power Limited (Akute), East Horizon Gas Company Limited(EHGC), and other gas and power Special Purpose Vehicles (SPVs) are the companiesunder that pursuit.
Gaslink Nigeria LimitedGaslink Nigeria Limited is the flag-ship company and main operating arm of Oando Gas &Power Limited. The most outstanding achievement recorded during the year under reviewwas the completion of our 38km Greater Lagos 3 expansion project. It was conceived totake gas to Tincan Island industrial complex through Creek Road and will increase thevolume of gas supplied to customers in the Apapa area. We are witnessing the connectionof several manufacturing companies located in the Apapa Industrial Cluster to the grid.
A major challenge in the past year was the issue of correct pricing of natural gas due torising and extreme volatility in crude oil, commodities and steel prices in the internationalmarket.
After a prolonged national debate involving the National Assembly, the organized privatesector and our numerous customers, natural gas prices was marginally increased by 15%.However, the LPFO prices, which is the readily available alternative fuel benchmarked inour bilateral contracts increased by over 100%. Another major challenge was gas supplysecurity due to unplanned gas outages by the Nigerian Gas Company and general insecurityin the Niger Delta area. The cumulative outages of 30 days for the year showed a markedimprovement over last year’s figure of 57 days.
The project was delayed by the complexity of construction within a built up area like Lagosand bottlenecks at the entry ports for mission critical inputs. This meant that various projectshad to be pushed back to the first quarter of 2009.
Akute Power LimitedAkute Power Limited and the Lagos State Water Corporation entered into a power purchaseagreement for power provision to its main water works at Akute. The project is the first in aseries of captive power projects that have been earmarked within the next few years. Akuteties in with our strategy of becoming a core investor in the current administrations deployment
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of the Public Private Partnership (PPP) scheme as the main development framework forsolving the country’s perennial power crisis. The outlook for the company is positive withthe guaranteed cash flow expected from operations upon completion.
In the year under review, Akute, which is over 60% complete, achieved several milestonesand is expected to pass both completion and performance tests in the first quarter of2009. The project achieved financial closure following the execution of a bankable PPAwith the project off-takers. We have also obtained all necessary regulatory approvals likeRight of Way for the gas pipeline to the power plant from both Lagos State and OgunState Governments, completed the FEED, selected EPC contractor, and took delivery ofthe generators and other accessories capable of generating 12 megawatts (MW) ofelectricity.
East Horizon Gas Company Limited (EHGC)EHGC was established as a Special Purpose Vehicle (SPV) to supply natural gas throughan 18-inch pipeline from the existing Obigbo-ALSCON line to the United Cement Companyof Nigeria Limited at its Mfamosing plant in Cross-River state; a total distance of 128KM.The Federal Government and the Nigerian National Petroleum Corporation (NNPC) hadearlier given their approval to the NGC to enter into a Build-Operate-Transfer (BOT)arrangement with EHGC for the project. With the initial approval in place, EHGC thenobtained a commitment from NNPC for the supply of 22 million standard cubic feet per day(mmscf/day) of natural gas being the required volume for the first phase of the project.
A major milestone in the project was achieved following the execution of a long-term GasSales Agreement with the off-taker-UNICEM. It is a testament of our good credit rating thatEHGC was able to secure project finance loan under the prevailing adverse and challengingfinancial environment. Other achievements include the conclusion of procurement of linepipes, completion of the Environmental Impact Assessment (EIA), granting of PipelineRight of Way by the Cross River State government, and start of construction for theproject.
With construction well in progress, the company should deliver the pipeline in the secondquarter of 2009. The next step will be in securing additional gas for the later expansionphases of the project.
West African OperationsIn a bid to take advantage of the growing business opportunities that the soon to becommissioned West African Gas Pipeline (WAGP) will provide, we have incorporatedsubsidiaries in the following West African countries: Benin Republic, Ghana and Togo toleverage our experiences in gas distribution and power generation to provide energysolutions to industries along the WAGP route. Our strategy is to partner with local companiesand the national utility companies in these markets and be the dominant player in the WestAfrican gas and power markets. Numerous delays in the final take off of the WAGP projecthave meant that we have had to delay the start-up of all our projects in these markets. Inaddition, these countries are articulating and establishing appropriate rules and regulations,
albeit very slowly. In the interim, we have spent time creating relationships with potentialpartners in these countries.
Looking Forward to 2009The outlook for 2009 is positive mainly due to the relatively predictable, constant revenuestream, discretionary capital investments and strong underlying growth in demand. This isin spite of the worsening economic conditions. While OG&P is not immune to the weakeningin the global economy, we are well positioned as a result of the restructuring that weundertook in the past few years to refocus and improve our core businesses.
The rising weighted average capital costs, extreme volatility in the commodities markets,ongoing global recession, depressed equity valuations coupled with the socio-politicaland regulatory uncertainties will be the main determinants of our outlook for 2009. Giventhe weak global economic outlook, we expect significantly reduced energy and commodityconsumption patterns which should lead to a revision in energy demand forecasts globally.However, we feel that local gas consumptions forecasts should still follow the long-termprojection pattern as the Nigerian economy is still expected to grow by over 6% and thebulk of this demand is driven by new gas power projects. In addition, less pressure on fuel,labour rates and material will lead to marginally reduced operating costs.
As in previous years, the security situation in the Niger Delta region will still constitute amajor threat to gas supply security. In addition, the National Domestic Gas Supply &Pricing Policy; the implementation of the Gas Master Plan Infrastructure Blueprint and theoperation of Multi Year Tariff Order (MYTO) (with multi-year rate freeze/cap provisions); willincrease our vulnerability to event risks related to regulatory and political reactions to rateincrease requests.
Our objective is to ensure the continued strategic optimization of our existing assets inGaslink, Akute and EHGC; search for and acquire mature assets with excellent cash flowpotentials; and aggressively look for greenfield projects in the gas & power industry toachieve the targeted minimum 50% Compounded Annual Growth Rate (CAGR) in overallPAT. The growing gas & power markets in Nigeria, and other West African countries willprovide us with the opportunities to earn revenue by:
• Establishing workable partnerships towards gas exports by utilizing newtechnologies
• Piloting a Compressed Natural Gas project within the Greater Lagos area underviable commercial terms
• Partnering with relevant stakeholders to play a dominant role in investment ininfrastructure development in the Nigerian Gas Master Plan InfrastructureBlueprint
pg15
• Actively participating and partnering with renowned utility providers to investin the power sector
• Optimizing and improving the value of our assets through fund hedging
We believe that 2009 will see the materialization of several of our projects as cash yieldingentities. We are also certain that the coming year will provide enormous opportunities andchallenges for OG&P to execute its vision of providing affordable and reliable energy to itscustomers.
2008 Financials in PerspectiveOando Gas and Power’s turnover was N6.5bn in the year under review, a 48% increaseover last year’s performance. 2008 recorded Profit After Tax of N475million, a slightdecline by 4% from N495 million in 2007. This was due to the pipeline development projectembarked upon during the year.
Oando Energy ServicesOando Energy Services’ (OES) strategic initiative for 2008 was to reposition its portfolio ofexisting businesses as well as enter into new ones. Thus focus was on sustaining andgrowing our drill bit business, realigning the drill fluids business as well starting up moreprofitable businesses and services such as the drilling rigs and drilling systems.
Drill bitsThe drill bits business experienced continuous growth during the year under review.Presently our drill bits business is second in the industry in terms of our rig market shareand third in terms of revenue. These successes came despite problems with governmentfunding of the Joint Venture Agreement as well as the Niger Delta security crises (whichhas led to a reduction in the drilling activities of a lot of our clients). We have consistentlyincreased the existing client base and deepened existing customer relationships. Wehave further consolidated on our position with major clients such as TOTAL and SNEPCOby increasing our share and providing application engineering services with the bits supplied.
In the effort to further drive our success, we focused on the recruitment of experiencedand competent staff, embarked on training programs for staff and stocked adequateproducts to service our clients and leverage on our existing network in the industry andrelationship with our clients thus increasing our competitiveness within the sector.
Drilling FluidsFor the year under review, OES consolidated on its position in the drilling fluids market byproviding value-adding Drilling fluids services to existing customers such as SNEPCO,Chevron and Exxon Mobil while increasing our contract base. We signed a new TechnicalSupport Agreement (TSA) with Baker Hughes which would enable us deliver quality mudservices to the upstream companies.
We have commenced plans to increase our capacity by growing organically as we havethe platform for quick growth because of our existing contracts. We also embarked onseveral cost reduction measures in a bid to improve efficiency.
Oil Well CementingIn 2008 we exited this line of business because it was no longer profitable to the company.
New Product Service Line
Drilling RigsIn line with OES’ strategic initiative of entering into value adding and higher margin services,which fit into its profile, OES intends to continuously develop and grow its drilling rigbusiness. As such, OES acquired a new swamp rig known as the Constitution. It is currentlythe most sophisticated in West Africa and brings to a total of 3 drilling rigs in our assetportfolio. We expect two of our units to commence 2-year contracts before the end of Q22009 while the third one undergoes refurbishment. OES is in the final stages of acquiringtwo additional drilling units which will bring our rig count to five.
We are constantly developing our technical capacity by ensuring that we hire and retaincompetent, smart, highly motivated staff and ensure that they get adequate training. Tosupport this initiative we have entered into a technical support agreement with a reputableinternational drilling company.
Drilling Systems (Measurement and Logging while Drilling, Directional Drilling)OES, in line with its objective of becoming an integrated energy service company, hasentered into the drilling systems business. The estimated Nigeria market size is $320million.Currently, an organic growth approach is being pursued. We expect that full operations willcommence by end of the third quarter of 2009.
Looking Forward to 2009We expect to see a steady increase in drilling activity in 2009 as the current economicdownturn and the fall in oil prices stabilizes. OPEC’s decision not to further cut quotasymbolizes its confidence in the prediction that recent cuts as well as the outcome of theG20 summit will result in oil prices hovering between the US$45 and US$55 per barrel mark.
In addition to the above, it is clear that the government is also keen on playing an activerole in boosting the confidence of both local and international players in the Nigerian oil andgas industry. This is evidenced by the increased attention placed on Local Contentparticipation and the government’s assistance in resolving ongoing issues in the NigerDelta. In OES we believe an increase in drilling activity will translate into a demand forservices from strong and reputable companies.
OES is positioning itself to take advantage of these opportunities. Our focus continues tobe on providing superior service quality while maintaining safe and environmentally sound
pg16
operations at all times. We will leverage on existing technical partnerships (and seek newones) to enable us exceed clients expectations in areas of technical excellence.
In our rigs business, we are working tirelessly to ensure a seamless start up of our twocontracts in 2009 while developing our strategy to ensure we have a long term contract forour three drilling assets beyond existing contract terms.
OES intends to increase its market share and revenue in the drill bits business and expandour client base. Also we plan to increase our capacity in the drilling fluids business byacquiring or building a mud plant facility which would enable us work on deep offshoreprojects.
2008 FinancialsAs a result of the global financial crisis and concerns over security in the Niger Delta, rigactivity in Nigeria experienced a drop of over 70% in 2008 and this impacted strongly onthe service sector nationwide.
However, OES was able to achieve a turnover of N4.09bn in 2008, a decrease of 60.8%from 2007 turnover of N10.44bn. We should see much better revenues in 2009 as a resultof the newly acquired rigs.
Upstream DivisionOando upstream division comprises Oando Exploration and Production Limited (OEPL)and Oando Production Development Company (OPDC), Oando OML 125 & 134. OEPLwas incorporated to tap into the vast resources of the Niger Delta and other opportunitieswithin the Gulf of Guinea.
2008 proved to be a good year for our upstream division. As of today, OEPL has aportfolio of 7 assets namely; OPL 278 - with a 60% working interest; OPL 282 - with a 4%interest as part of a Local Content Vehicle; 45% working interest in the Obodeti/Obodugwamarginal field in OML 56 through OPDC; a 95% working interest in OPL 236 in which weact as the operator.
In the course of the year OEPL acquired a 30% interest in the Akepo field in OML 90 andfinally the 15% interest each in Shell’s stake of 2 deepwater blocks OML 125 and OML134. OML 125 experienced a daily average production of 18kbopd from its Abo Field.
Review of 2008 Blocks
Oando OML 125 and OML 134Oando acquired a 15% participating interest in OML 125 and OML 134 in 2008. Theseblocks are operated by Agip and the blocks are located in the deep offshore of Nigeria.OML 134 block is currently under development and is expected to start production in thenext 18 months.
OML 56OPDC is in partnership with Energia, the operator of the Obodeti/Obodugwa marginalfield. Obodugwa-1 was re-entered and is currently in production testing stage and thetests recovered about 4,800 barrels a day.
OML 90OEPL acquired a 30% working interest in OML 90 (Akepo) after signing a Financial,Technical and Management Services Agreement (FTMSA) with Sogenal Ltd and ExileResources Inc. This marginal field is located in the shallow marine area of Delta State.OML 90 (Akepo) is currently under evaluation and development of the field will sooncommence.
OPL 278OEPL has a 60% working interest in this asset. The block is an exploration play and iscurrently in its first phase of development. OEPL is actively pursuing rig opportunities inpreparation for the planned 2008 drilling campaign.
OPL 236OEPL has a 52.75% working interest in this block. This block is also an exploration playand is OEPL’s only gas asset. OEPL commenced preliminary work on the EnvironmentalImpact Assessment EIA and signed a Global Memorandum of Understanding with thecommunities in the catchment area.
OPL 282OEPL has a 4% working interest in this block. The Nigerian Agip Oil Company (Agip) is theoperator of OPL 282. We are focused on shooting 3D seismic in order to kick start thedevelopment program of the field.
Looking Forward to 2009Our outlook for 2009 and beyond looks very bright. Our upstream division is not anopportunistic play for us but is a platform we intend to deliberately fund and grow as itsmargins are very high and is able to deliver value to all shareholders. We will thereforecontinue to invest in this division especially in near production assets to ensure our time toproduction is short.
Over the years we have positioned ourselves to be the local content partner of choice andwe expect this to yield fruits for you, our shareholders in 2009 and beyond.
2008 Financials in PerspectiveWe achieved a turnover of N13.89bn, as a result of production from the Abo field in OML125. It is expected that the coming year will reflect the increased activity in the upstreamsector.
pg17
RefineryOando’s Refinery and Terminals (OR&T) division is charged with solving the problem of thenation’s long-term dependence on imported petroleum products. Oando’s entry into refineryand terminals sectors complete its footprints in all segments of the energy value chain tobecome Nigeria’s leading integrated energy solutions provider.
OR&T is a development organization that will quickly transition from being a user of cashto a major cash engine for the group by addressing the nation’s supply shortcomings intwo distinctive phases, short/midterm and long term.
In response to the dire delays and consequent value destruction experienced at theLagos ports (which at times account for the supply of over 80% of the nation’s petroleumproducts consumption); Oando has completed the Front End Engineering & Design (FEED)of the Apapa Capacity Expansion Initiative. This initiative will reduce the congestion in theApapa port and significantly increase the tank turns of the major marketers’ existingstorage. The first phase of this project is expected to come on stream as early as the firsthalf of 2011.
In the midterm, we will develop and operate a state-of-the-art refined products importterminal supported by the first privately operated Single Point Mooring (SPM) system inWest Africa - an SPM is an offshore system used to discharge very large carriers intooffshore tanks via a subsea pipeline. The logistics benefits of such an operation, coupledwith the world class terminal operating systems planned for the 210KT capacity facility willmake it the terminal of choice not only for OR&T’s sister company, Oando Supply &Trading but all other serious importers. The terminal, located in the Lekki Free trade Zone(LFTZ) is planned to come on stream early 2012.
Similarly, the division will take advantage of supply side opportunities that will reduce theGroup’s operating costs and enhance supply chain reliability. In this vein, the division iscurrently reviewing two significant development and acquisition opportunities in NW Europethat will complete the supply chain integration that will see Oando control product origination(from component blending ) to into-car sales.
The long-term solution will be the multi-billion dollar development of the first greenfieldrefinery development in Africa for over twenty years. The first phase of the proposed360,000 barrels per day refinery will satisfy at least half of the nation’s import requirementand enhance shareholder value with strong distillates exports to meet severe deficits inthe Atlantic Basin. Land has been secured in the LFTZ for the project and the viability ofthe project, which from a technical execution and cashflow perspective, will be muchenhanced by the prior execution of the refined product import terminal which will serve asthe finished product storage terminal of the refinery.
As the division strives to maintain focus on the highest value-delivering opportunities andshow the highest return for scarce Group cashflows committed, we have still managed to
discover value in specialty products. LPG is destined to expand into a mainstream fuel,following clear government commitment to the private sector to utilize the vast quantitiesavailable from the nation’s NLNG projects domestically. LPG use in Nigeria is six times lowerper capita relative to the West African average and has been dogged by supply interruption,a lack of shoreline storage and poor cylinder availability. Oando will participate aggressivelyalong the entire value chain to lead the rebirth of LPG use and testament to this commitmentis the plan to establish over 9,000MT of LPG storage in Apapa by the end of 2010.
In summary, the division has a tightly defined focus of infrastructure development and ourcapabilities and process enhancement will continue to ensure reliable world class deliveryof the identified projects while creating a platform to sequentially secure new opportunitiesas they arise, particularly with the government’s ongoing privatization drive.
ConclusionRecovery of the global economy in 2009 will be slow, but we are certain that these aresurmountable obstacles, and are committed to delivering on our promise to exceed yourexpectations in the coming years.
I thank you on behalf of the Management and staff of Oando Plc, for your unflinchingsupport and look forward to a successful year for the company and the shareholders.
Mr. J. A. TinubuGroup Chief Executive
pg18
BOARD OF DIRECTORS
Major General M. Magoro (Rtd.) OFR, PSC,
Chairman, Non- Executive DirectorGaladiman Zuru
Mr. J.A. TinubuGroup Chief Executive
Mr. O. BoyoDeputy Group Chief Executive
pg19
Mr. A. Akinrele SANNon-Executive Director
Chief F.N Atako JPNon-Executive Director
Mr. Mobolaji OsunsanyaGroup Executive Director
pg20
Mr. V. O. IbruNon-Executive Director
Mr. Navaid BurneyNon-Executive Director
HRM Michael A. Gbadebo, CFR,
The Alake of EgbalandNon-Executive Director
pg21
Mr. Ike OsakweNon-Executive Director
Alhaji H. Mahmud Walin MubiNon-Executive Director
Mr. O.P OkolokoNon-Executive Director
pg22
pg23
2008 2007
N’000 N’000
Turnover 339,420,435 185,892,083
Profit on ordinary Activities before taxation 10,742,611 6,813,727
Profit After Tax 8,343,325 5,480,415
Attributable to group 8,339,273 4,755,009
Earnings per 50 k share (Naira) 9.22 7.51
*Dividend per 50 k share- proposed (Naira) 6 6
Net Assets per 50 k share 49.60 74.92
Dividend cover 1.54 1.25
REPORT OF THE DIRECTORS
*Note N6.00 represents interim and final dividend
pg24
In accordance with the provisions of the Companies and Allied Matters Act, 2004, the
Directors of Oando PLC hereby submit to the members of the Company the audited
consolidated year ended 31 December 2008 accounts.
The preparation of annual financial statements is the responsibility of the Board,
which should give a true and fair view of the state of affairs of the Company.
The Directors declare that nothing has come to their attention to indicate that the
Company will not remain a going concern for at least twelve months from the date of
this report.
Legal Form
Oando commenced operations in 1956 as a petroleum marketing company in Nigeria
under the name ESSO West Africa Incorporated. It was then a subsidiary of Exxon
Corporation of the USA. On 25 August 1969, the Company was incorporated under
Nigerian Law as Esso Standard Nigeria Limited. In 1976, the Nigerian Government
bought Exxon’s interest in the Company and it was re-branded Unipetrol Nigeria
Limited (“Unipetrol”). The Company became a public limited company in 1991, when
the Federal Government of Nigeria divested 60% of its shareholding to the general
public. Its shares were listed on the Nigerian Stock Exchange in February 1992.
Ocean & Oil Investments Limited acquired a 30% stake in Unipetrol from the Federal
Government of Nigeria in 2000 and thus became the core investor.
In August 2002, Unipetrol acquired a 60% stake in Agip Nigeria Plc (“Agip”) by
winning an international bid conducted by Agip Petroli International B.V. Unipetrol’s
management team subsequently led the merger and integration of Agip with Unipetrol
and the combined entity was re-branded Oando Plc in 2003. In 2004, Oando
consolidated its affiliate and subsidiary companies into an integrated energy group.
In 2005, Oando Plc became the first African company to seek a cross-border inward
listing on the JSE Limited (JSE). The company was listed on November 25, 2005 with
the introduction of its entire issued share capital on the main board of the JSE, in the
Resources-Oil and Gas Sector.
Nature of the Business
Oando over the years has re-engineered its strategies and transformed from being
just a core local downstream oil marketing concern to becoming a leading integrated
Energy Group with business tentacles spanning not just petroleum product marketing
but also exploration & production of crude oil, international oil trading operations, gas
& power solutions, and oil services support.
Oando PLC
Oandosupply
andTrading100%
Our Group of Companies
OandoEnergy
Services100%
OandoTrading100%
OandoExploration
andProduction
100%
OandoProduction
& dev.Company
85%
OandoPH
Refinery100%
OandoLekki
Refinery100%
OandoGas &Power100%
EastHorizonGas &
Company100%
GaslinkNigeriaLimited
98%
AkutePowerLimited100%
OESRespectLimited100%
Bermuda
Oando OML125 &134
(BVI)Limited100%
OESTeamwork
Limited100%
Bermuda
OESIntegrityLimited100%BVI
OandoOML
125 & 134Limited100%
Apapa SPMLimited100%
OandoGhana82+%
OandoTogo75.3%
OandoBenin100%
OandoMarketing
Limited100%
OandoTerminals
&LogisticsLimited
pg25
Petroleum Products Marketing:
Oando Marketing Limited (OML) is the leading oil-marketing retailer in Nigeria with
over 500 retail outlets also with operations in Ghana and Togo. The company’s
product ranges from Premium Motor Spirit (PMS), Automotive Gas Oil (AGO commonly
referred to as Diesel), Dual Purpose Kerosene (DPK), Aviation Turbine Kerosene
(ATK), Low Pour Fuel Oil (LPFO), Lubricating Oils and Greases, Insecticides, Bitumen,
Chemicals and Liquefied Petroleum Gas (LPG, commonly referred to as Cooking
Gas)
Review of 2008 Operating Activities
OML has consciously moved to consolidate its position in the downstream petroleum
sector over the last few years to create value by maximising asset utilisation and
increasingly move into the higher margin product market, particularly deregulated
products.
OML had an impressive financial year posting 32% increase in revenue when
compared to last year’s performance of Oando’s downstream activities. The gross
margin in 2008 grew by 31% compared to 2007 while profit after tax grew by 22%
despite the externalities which adversely affected the business during the year under
review. Consequently, the performance in 2008 can be attributable to improved
efficiency, effective monitoring and control.
OML 2009 Outlook
The global financial crisis might lead to deregulation of the downstream sector in 2009
which might result in increased entry into the downstream business in the short run.
Margin will be affected adversely during this period until the market stabilises and the
downward trend in margin reverses. In spite of the expected uncertainty in 2009,
Oando Marketing Limited will continue to deliver quality products and services to all
its customers while delivering strong positive returns to all shareholders. We will
continue to focus on effectively managing liquidity. Emphasis will be placed on
operational efficiency which will underpin our value delivery in 2009. We will also
continue to revisit our key business controls to reduce and/or eliminate all risks i.e.
fraud, shortages, loss of products and theft of assets. The following initiatives will be
the high points for 2009.
• Probable commencement of deregulation.
• Retail margin optimisation
• Organic growth in Lubricants
• Exploiting LPG opportunities
• Improve NFR offering
• Reinvestment in assets – Retail outlets and terminals
• Increased utilisation of ERP platform
• Investment in human capabilities
Supply and Trading:
Oando Supply and Trading Limited and Oando Trading Limited (Bermuda) represent
the products trading arm of the Oando group. Business activity covers trading of
refined and unrefined petroleum products to Refiners, Marketing and Trading
Companies worldwide. Supply and Trading is responsible for deliveries into Nigeria,
whilst Trading is responsible for supply into other markets. Products traded include
gasoline, gas oils, kerosene, aviation fuel, distillates, naphtha, fuel oils, bitumen, base
oils, bitumen, liquefied petroleum gas.
The business also maintains a presence in the world’s products freight market in
terms of vessels chartered on spot and time charter basis for delivery of oil and oil
products to various customers worldwide.
S&T 2009 Outlook
The company’s strategy for 2009 is to maximise supplies of PMS, AGO and HHK and
to strengthen its drive to expand market share by aggressively increasing its customer
base in Nigeria as well as West Africa.
Support Services to Upstream E&P companies
The operating body for this business is the Oando Energy Services Limited (OES).
The nature of its business line include supply of drilling products, completion fluids,
base oils, drill bits and other input materials for oil field operations. It has currently in its
Product Service Lines (PSL), Drilling Rigs and Swamp Rigs.
Operations Review
The year 2008 was a very challenging year for oilfield services in Nigeria. It was
primarily characterized by the following
• Disturbances in the Niger Delta
• Reduction in activity either as result of the above or in response to other
opportunities. Active rig count dropped from 40 in 2007 to 33 in 2008. This
drop in rig count had a corresponding effect on services provided to clients
depending on activity type (either drilling or completions).
pg26
• Cash call problems with the Federal Government regulatory arm through Nigerian
National Petroleum Corporation (NNPC)
Given the above scenario and with a thorough assessment and understanding of
economic cycle, the strategic thrust of Oando Energy Services Limited was hinged
on three key areas:
1. Positioning the business unit to take advantage of improved business
environment
2. Ensuring that our asset acquisitions on the rigs and key service initiatives
on the drilling fluids were well positioned on the Contracting cycles of
Exploration and production company activities
3. Leveraging on alliances, particularly win-win ones. Such alliances provided
technical assistance which was responsible for sustaining our services in
areas that required high technology input towards providing solution like
the deep water drilling environment.
OES Outlook for 2009
The global economic crises of which the softening of oil prices is a major index cannot
be ignored. In Nigeria, the Exploration and Production companies will focus on
replaceable reserves despite the crash in oil prices. In order to do this exploration,
appraisal and development drilling activities will need to increase. The uncertainty
created by the Niger Delta crisis and accelerated by existing poor resource-
management has led to minimal activity in the Swamps and created a wealth of
opportunity. OES will seek to capture these opportunities and aims to be the leader
in the swamp rigs market in Nigeria. To this end, the company will in the near term:
1. Acquire additional rigs when the competitive advantage is clear and maintain
dominance in the HPHT market (High Pressure High Temperature)
2. Build its Drilling Fluids business and migrate up to service provision
3. Continue to increase market share with good margins in Drill bits business
Gas Distribution and Power
Oando Gas & Power Division
The Oando Gas and Power (OG&P) business is in the distribution of Natural Gas
and Power initiatives aimed at electricity generation in the Country.
Oando’s Gas & Power division is continuing to deliver on its mandate as one of the
major drivers of growth in the Oando Group. In 2008, Oando Gas & Power division
(OGP) focused on expanding its Lagos Franchise while concluding the development
of a second gas franchise as well as a captive power plant. Presently, OGP has the
following entities as its business units: Gaslink Nigeria Limited, Akute Power Limited
and East Horizon Gas Company Limited. In addition to these there remain numerous
other projects being developed within the gas and power division.
Gaslink Nigeria Limited
Gaslink Nigeria Limited (GNL) is the flagship and main operating arm of Oando’s Gas
& Power Division. Several landmark achievements were recorded during the year
under consideration chief among which was the completion of our 38km greater
Lagos 3 expansion project. The expansion project was conceived to increase the
gas volumes being supplied to the Apapa Industrial Cluster while also extending our
gas network to Tin Can Island. Its completion has led to an improvement in our
revenue by enabling manufacturing companies located in these clusters to either
start using gas or increase their consumption of natural gas. The exercise was not
without its challenges and the lessons learned from the complexity of constructing
within a built up area like Lagos will be applied in future projects.
Natural gas pricing given its benchmark relationship to Low Pour Fuel Oil (LPFO) was
a major challenge in 2008. The high price of Crude Oil recorded during the year led
to a commensurate increase in the price of LPFO. This necessitated a significant
increase in gas prices to our consumers many of whose businesses were
subsequently threatened with collapse. After a prolonged debate involving the
organized private sector, the NNPC, the Petroleum Products Pricing and Regulatory
Agency and the National Assembly, a marginal increase of 15%, instead of the over
200% dictated by the LPFO index, was adopted.
Supply security remains a concern as unplanned gas outages from our sole supplier,
the Nigerian Gas Company (NGC) as well as general instability in the Niger Delta
continue to create concerns for our present and potential customers. The 30 outage
days for the 2008 was an improvement over the 54 days of outages recorded in
2007.
Akute Power Limited
The execution of a Power Purchase Agreement between Akute Power Limited (APL),
Lagos State Government (LASG) and Lagos Water Corporation (LWC) means that
Oando has now established a toe hold in the Nigerian Electricity Supply Industry.
This PPA provides for the installation and operation of a 12MW power plant by OGP
and the supply of electricity from this power plant to the major water works of the
Lagos State Water Corporation.
The major equipment and other long lead items have been procured and delivered to
site. It is expected that the company will begin commercial operations by the end of
the first half of the new year. Upon completion and commissioning, OGP will have
begun to achieve its short term goal of earning revenue from power projects while
supporting the government in its goal of addressing the nations power crisis.
pg27
East Horizon Gas Company Limited
East Horizon Gas Company Limited (EHGC) is presently in the construction phase of
its project to supply gas to the United Cement Plant in Calabar through a 128km
pipeline. During the last quarter of 2008, EHGC secured the commitment of NGC for
the supply of 22 million standard cubic feet per day (22mmscfd) of natural gas,
enough to fulfil the requirement for phase 1 of the Cement plant by executing a Gas
Supply and Purchase agreement for the same quantity.
It is a testament of our good credit rating that EHGC was able to secure a project
finance loan under the prevailing adverse and challenging financial environment.
Other achievements include the conclusion of procurement of line pipes, completion
of the Environmental Impact Assessment (EIA) and the granting of Right of Way by
the Cross River State Government.
With construction well in progress, the company should deliver the pipeline in the 3rd
quarter of 2009. The next challenge will be in securing additional gas for the later
expansion phases of the project.
West African Operations
In a bid to take advantage of the growing business opportunities that the soon to be
commissioned West African Gas Pipeline (WAGP) will provide, we have incorporated
subsidiaries in the following West African countries: Benin, Ghana and Togo to leverage
our experiences in gas distribution and power generation to provide energy solutions
to industries along the WAGP route. Our strategy is to partner with local companies
and the national utility companies in these markets and be the dominant player in the
West African gas and power markets. Numerous delays in the final take off of the
WAGP project have meant that we have had to delay the start-up of all our projects in
these markets. In addition, these countries are articulating and establishing their
appropriate rules and regulations, albeit very slowly. In the interim, we have spent
time creating relationships with potential partners in these countries.
OG&P Outlook for 2009
The outlook for OGP in 2009 is positive with two new subsidiaries, APL and EHGC,
projected to start contributing revenue during the period. These additional revenue
streams will ensure that OGPs growth continues apace given the readily predictable
revenue stream of the existing gas distribution business.
Rising capital costs due to the ongoing global recession, depressed equity valuations
and regulatory uncertainties are major concerns for OGP. In addition, the situation in
the Niger Delta region, our source of gas supply, continues to constitute a major
threat to gas supply security. However, local gas consumption forecasts are still
expected to follow the long term growth projection pattern given the current low
utilization rates and the government agenda for increased penetration in the domestic
market.
OGP will pursue the opportunities created by the growing gas & power markets in
Nigeria, and other West African countries and achieve our revenue targets by:
• Piloting a Compressed Natural Gas project within the Greater Lagos area
under viable commercial terms
• Partnering with relevant stakeholders to play a dominant role in investment in
infrastructure development in the Nigerian Gas Master-Plan Infrastructure
Blueprint
• Actively participating with renowned utility providers to invest in the power
sector
2009 is expected to provide enormous opportunities and challenges for OG&P to
execute its vision of providing affordable and reliable energy to its customers.
Refinery & Terminals
Oando’s Refinery and Terminals (OR&T) division is charged with solving the nation’s
long term dependence on imported petroleum products.
OR&T is a development organization that will quickly transition from being a user of
cash to a major cash engine for the group by addressing the nation’s supply
shortcomings in two distinctive phases, short/midterm and long term.
In response to the dire delays and value destruction experienced at the Lagos ports
(which at times account for the supply of over 80% of the nation’s petroleum products
consumption); Oando has completed the Front End Engineering & Design (FEED) of
the Apapa Capacity Expansion Initiative. This initiative, an ocean based Single Point
Mooring and subsea pipeline system, will reduce the congestion in the Apapa port
and significantly increase the tank turns of the Major Marketers’ existing storage. The
first phase of this project is expected to come on stream as early as the first half of
2011.
In the midterm, we will develop and operate a state of the art refined product import
terminal supported by the first privately operated Single Point Mooring (SPM) system
in West Africa. An SPM is an offshore system used to discharge very large carriers
into offshore tanks via a subsea pipeline. The logistics benefits of such an operation,
coupled with the world class terminal operating systems planned for the 210kT
capacity facility will make it the terminal of choice for not only OR&T’s sister company,
Oando Supply & Trading but all other serious importers. The terminal, located in the
Lekki Free trade Zone (LFTZ) is planned to come on stream early 2012.
pg28
Similarly, the division will take advantage of supply side opportunities that will reduce
Group operating costs and enhance supply chain reliability. In this vein, the division
is currently reviewing two significant development and acquisition opportunities in
NW Europe that will complete the supply chain integration that will see Oando control
product origination (from component blending ) to into-car sales.
The long term solution will be the multi-billion dollar development of the first greenfield
refinery development in Africa for over twenty years. The first phase of the proposed
360,000 bpd refinery will satisfy at least half of the nation’s import requirement and
enhance shareholder value with strong distillates exports to meet severe deficits in
the Atlantic Basin. Land has been secured in the LFTZ for the project and the viability
of the project, from a technical execution and cashflow perspective, will be much
enhanced by the prior execution of the refined product import terminal which will
serve as the finished product storage terminal of the refinery.
As the division strives to maintain focus on the highest value delivering opportunities
and show the highest return for scarce Group cashflows committed, we have still
managed to discover value in specialty products. LPG is destined to expand into a
mainstream fuel, following clear government commitment to the private sector to
utilize the vast quantities available from the nation’s NLNG projects domestically. LPG
use in Nigeria is six times lower per capita relative to the West African average and
has been dogged by supply interruption, a lack of shoreline storage and poor cylinder
availability. Oando will participate aggressively along the entire value chain to lead
the rebirth of LPG use and testament to this commitment is the plan to establish over
9,000 MT of LPG storage in Apapa by the end of 2010.
In summary, the division has a tightly defined focus of infrastructure development,
development that is much in demand and cash generative. Internally, our capabilities
and process enhancement has continued apace to ensure reliable world class delivery
of the identified projects while creating a platform to sequentially secure new
opportunities as they arise, out of new insight and without doubt, the government’s
privatisation drive.
Exploration and production of Crude Oil
Oando Exploration and Production Limited (OEPL) and Oando Petroleum and
Development Company (OPDC), are the Group’s vehicles for the possession of
upstream assets.
Asset profile:
OML 125 and OML 134
OML 125 and OML 134 acquired a 15% participating interest in OML 125 and OML
134 in 2008. These blocks are operated by Agip and the blocks are located in the
deep offshore of Nigeria. OML 125 block is currently producing in excess of 18,500
bbls/day. The OML 134 block is still under development and is expected to start
producing within the next year.
OML 56
In partnership with Energia, the operator of the Obodeti/Obodugwa marginal
field, OPDC re-entered the Obodugwa-1 well and retrieved the 2 tubing plugs in a rig
less operation in early May 2007. The well was re-logged in June 2007 and is currently
in production testing stage and the tests recovered about 4,800 barrels a day.
OML 90
OEPL acquired a 30% working interest on OML 90 (Akepo) after signing a Financial,
Technical and Management Services Agreement (FTMSA) with Sogenal Ltd and Exile
Resources Inc. The field is located in the shallow marine area of Delta State and was
awarded to Sogenal Ltd by NNPC in the 2003 Marginal Field Bid Round. OML 90
(Akepo) is currently under evaluation and development.
OPL 278
Activity in OPL 278 has concentrated on evaluating the potential of the block using the
available data. This data consists of 3D seismic coverage on the eastern one-third of
the block, and a sparse coverage of 2D lines.
In addition, OEPL is actively pursuing rig opportunities in preparation for the planned
2008 drilling campaign. We are in the process of pre-qualifying suppliers for Wellheads
and Oil Country Tubular Goods (OCTG’s), which are long-lead items required for
drilling. We have also secured approvals to advertise for drilling-related services
from NAPIMS and NCD.
OPL 236
OEPL obtained the award letter for the block from DPR on 25 May 2007, and we have
since then worked on the details of the PSC agreement. This agreement was recently
signed by the Minister of State for Petroleum Resources.
The company commenced prel iminary work on Community Relat ions and
Environmental Impact Assessment (EIA) last year. A full-fledged work program will
commence as soon as the PSC is signed. A Global Memorandum of Understanding
has been signed with the communities involved.
OPL 282
The Nigerian Agip Oil Company, operator of OPL 282, focused on the planned 3D
seismic acquisition as the main activity in 2007. The pre-qualification bids were opened
at the end of February, with 2 contractors qualifying for the technical stage. The
Technical “Invitation to Tender (ITT)” documents were approved by NAPIMS and
NCD, and Agip is currently awaiting the incorporation of the NAOC PSC into the
NIPEX portal in order to issue the ITT to the qualified contractors.
pg29
pg30
In accordance with Section 259(1) and (2) of the Companies & Allied Matters Act
(CAMA), 2004 and Articles 92 & 93 of the Company’s articles of association, the
following Directors, who are longest in office are retiring by rotation and will present
themselves for re-election at this meeting:
• Mr. Oboden Ibru
• Alhaji Hamidu Mahmud
• Mr. Onajite Okoloko
The Directors are proposing Mr. Femi Adeyemo, the Chief Financial
Officer, for election as a director. He holds a Master’s Degree in Finance from
the London Business School, a Master of Science in Engineering (Metallurgy and
Material Science) from the University of Lagos and a Bachelor of Science in Engineering
from the University of Ibadan. Before joining Oando PLC, Mr. Adeyemo was an
Associate Principal at McKinsey Incorporated, one of the world’s leading consulting
firms. Prior to joining McKinsey Incorporated, he was the Financial Controller/Head of
Operations at First Securities Discount House (FSDH), a leading investment house in
Nigeria; he also worked with PricewaterhouseCoopers as a Consultant/Auditor. Femi
has extensive experience in Strategic Consulting especially in areas of Mergers and
Acquisitions (M&A), operations reviews, strategy development and implementation
as well as organization redesign and financial management. He is also an Associate
member of the Institute of Chartered Accountants of Nigeria.
The names of Directors who held office during the year and at the date of this report
are as follows:
Non-executive directors
1. Major-General Mohammed Magoro (Rtd.), PSC, OFR, USAWC, Galadiman Zuru
2. Ademola Akinrele SAN
3. Chief Felix Ndamati Atako JP‡
4. HRM Michael Adedotun Gbadebo, THE Alake of Egbaland
5. Valentine Oboden Ibru
6. Alhaji Hamidu Mahmud ‡
7. Ike Osakwe ‡
8. Onajite Paul Okoloko
Looking Forward to 2009
Our outlook for 2009 and beyond looks very bright. Our Upstream division is not an
opportunistic play for us, it is a platform we intend to deliberately fund and grow as its
margins are very high and is able to deliver value to all shareholders. We will therefore
continue to invest in this division especially in near production assets to ensure our
time to production is as short as possible.
Over the years we have positioned ourselves to be the local content partner of choice
and we expect this to yield fruits for you, our shareholders in 2009 and beyond.
Dividend
The directors are pleased to recommend the payment of final dividend of N 3.00 kobo
per ordinary share of fifty kobo each held. The recommended dividend is subject to
the deduction of appropriate withholding taxes. If the dividend recommended is
approved and declared, the dividend warrants will be posted or shareholders
accounts credited directly on the 3rd day of August 2009 to those shareholders,
whose names appear in the Company’s Register of Members (Nigerian & South
Africa) at the close of business on 3rd day of July, 2009.
Any dividend payable on or in respect of an Oando share which is unclaimed may be
invested or otherwise made use of by Oando, at the discretion of the directors, until
claimed. Any dividends which remain unclaimed for a period of 12 years from the
date when such dividends became due for payment shall, if the directors so resolve,
be forfeited to the Company. No unpaid dividend shall bear interest as against the
Company.
Oando has maintained an informal dividend policy as a result of extensive growth in
its businesses. As the Company transits from its aggressive growth phase to a
consolidation phase, the directors will move to adopt a more formal dividend policy
which will balance steady dividend payments with adequate equity retention for
future growth. In the interim, the Company has not entered into any arrangements for
which future dividends have been or will be waived.
Directors
In accordance with corporate governance best practice, two of our directors, Chief
Felix Atako JP and Mr. Ikeme Osakwe who have served on the Board since 9th
February 2000, nine (9) years from the date of their first election, are not presenting
themselves for re-election. Chief Atako was the Chairman of the Audit Committee and
a member of the Strategic Planning & Finance Committee and Nominations Committee.
Mr. Ikeme Osakwe was the Chairman of the Strategic Planning & Finance Committee
and a member of the Audit Committee and Remuneration Committees.
pg31
9. Navaid Burney
• ‡ -Independent non-executive
Executive directors
10. Adewale Tinubu
11. Omamofe Boyo
12. Mobolaji Osunsanya
Brief Curriculum Vitae
Non-executive directors
1 . Major-General Mohammed Magoro (Rtd.) OFR
A retired general of the Nigerian Army. He was one time Federal Commissioner
of Transport, Minister of Internal Affairs and Member of the Supreme MilitaryCouncil.
In addition, he has served on the board of the National Maritime Authority. He
currently sits on the boards of several other companies as well as the Board of
Trustees, Peoples Democratic Party (“PDP”). He has held the position of Chairman
of Oando since 2000.
2 . Ademola Akinrele SAN
Mr. Akinrele is a partner in the law firm F. O. Akinrele & Co. He holds a Bachelor of
Laws Degree from University College, London and an LL.M from the University of
Cambridge. He is a member of the Nigerian Bar Association, a Senior Advocate
of Nigeria and a Fellow of the Chartered Institute of Arbitrators in the United
Kingdom.
3. Chief Felix Ndamati Atako J.P ‡
Chief Atako is a seasoned financial analyst and a member of the Nigerian Stock
Exchange and sits on the board of many companies. He obtained a Bachelor’s
Degree in Public Accountancy and an MBA in Finance & Investments from The
Baruch College of the City University of New York, New York, USA. He served in
various capacities both in the private and public sectors. He is also a member of
the Institute of Directors (IoD).
4. Mr. Navaid Burney
Mr. Navaid Burney is the Managing Director of Emerging Capital Partners (“ECP”),
a leading Africa-focused private equity fund manager. He runs ECP’s
Johannesburg office sourcing, transacting and monitoring investments in a number
of high-growth sectors. Mr. Burney joined ECP in September 2000 from First
Merchant Bank of Zimbabwe where he had been General Manager of Investment
Banking since 1997. From 1993 to 1997, he was Senior Investment Officer with the
International Finance Corporation (IFC) where he focused on mining finance,
completed transactions and provided advisory services in Chile, Venezuela, Peru,
Sierra Leone, Zimbabwe and Gabon. Prior to joining the IFC, Mr. Burney was an
Associate Manager with Union Carbide Corporation’s treasury and had international
banking experience from assignments in New York, Paris and Abu Dhabi. Mr.
Burney serves on the Board of Directors of Starcomms Plc, Notore Ltd, Ocean &
Oil Investments Ltd, Touch the Wild (Pty) Ltd and De Rust Olive Estates (Pty) Ltd
among others. Mr. Burney holds a B.S. in International Economics from Georgetown
University and an MBA finance and Accounting from University of California at
Berkeley.
5. HRM Michael Adedotun Gbadebo, CFR, The Alake of Egbaland
Prior to his coronation as the Alake of Egba Land in 2005, His Royal Majesty had
a successful career in the Nigerian Army culminating in his appointment as the
Principal Staff Officer to the Chief of Staff, Supreme Headquarters from January
1984-September 1985. The Alake holds a Bachelor of Arts degree from the premier
university in Nigeria: University of Ibadan and has served on the boards of several
companies including: Ocean and Oil Services Limited, and Global Haulage
Resources Limited. He was also awarded military honours such as the Forces
Service Star (FSS) and the Defence Service Medal (DSM).
6. Valentine Oboden Ibru
Mr. Ibru holds a Bachelor of Science Degree in Finance and a Bachelor of Science
Degree in Decision Sciences, from the University of San Francisco, California, as
well as a Masters Degree in Business Administration from the International Graduate
School of Management (IESE), Navarra, Spain. Mr Ibru is currently the Managing
Director/Chief Executive Officer of Oceanic Capital Limited, a subsidiary of Oceanic
International Bank PLC, where he had worked for over 15 years in various
capacities. Mr Ibru serves on the boards of Aero Contractors Nigeria Limited and
Minet Insurance Brokers amongst others.
7. Alhaji Hamidu Mahmud‡
He is the principal partner in the law firm of Mahmud Ahaneku & Co. Holds a
Bachelor of Laws Degree from the Ahmadu Bello University, Zaria and is a member
of the Nigerian Bar Association. He served on the board of the Gongola State
Broadcasting Corporation from where he was appointed to the Gongola State
Executive Council. Alhaji Mahmud was a director of the Securities & Exchange
Commission and a former Senator of the Federal government of Nigeria. He is also
a member of the Institute of Directors (IoD).
pg32
8 . Ikeme Osakwe‡
Mr. Osakwe is a Chartered Accountant as well as a Financial and Management
Consultant. He holds a Bachelor’s and a Masters Degree in Chemistry from the
University of Oxford, England and is an associate Member of the Institute of
Chartered Accountants for England and Wales. Ike Osakwe has worked in various
audit and consultancy firms and has carried out extensive management systems,
operational and accounting review assignments within Nigeria and internationally.
He currently serves as chairman of Thomas Wyatt Nigeria Plc and sits on the
boards of Notore Chemical Industries Ltd, and Leadway Pensure PFA. He has
previously served on the boards of Fedex (Red Star Express) Limited, and also
as the Chairman of UBA Trustees Limited.
9. Onajite Paul Okoloko
He was the Managing Director and Chief Executive Officer of Oando Energy
Services Limited from 2001 to 2006. Mr. Okoloko was one of the founding members
of the Ocean and Oil Group and focused on the trading and energy services
business lines. He holds a Bachelor of Science Degree in Economics from the
University of Benin. He started his career working with Bounty Alarms, an
independent marketer of AT&T security systems in the United States of America,
where he rose to the position of Sales Training Manager. Mr. Okoloko is currently
the Managing Director of Notore Chemical Industries Limited.
‡ - Independent non-executive
Group Executive Directors
10. Adewale Tinubu
Mr. Adewale Tinubu is the Group Chief Executive, Oando Plc. He holds a Bachelor
of Laws Degree from the University of Liverpool and an LLM from the London
School of Economics. He commenced his career with the law firm K. O. Tinubu &
Co. and was one of the founding members of the Ocean and Oil Group, where he
was responsible for the strategic expansion of that group. Prior to assuming his
present position, he served as Oando’s Executive Director, Finance and
Administration. Mr. Tinubu is currently the Chairman of the boards of Gaslink
Nigeria and Tilca Nigeria Limited and sits on the boards of several other companies
in the Oando Group. He is the Chairman of the CEOs of the major oil and marketing
companies meetings and a member of the Institute of Directors of Nigeria.
11. Omamofe Boyo
He is the Deputy Group Chief Executive. He obtained his Bachelor of Laws
Degree from Kings College, University of London. He started his career with
Chief Rotimi Williams’ Chambers, a leading Nigerian law firm, where he specialised
in shipping and oil services and worked on several joint venture transactions
between the Nigerian National Petroleum Corporation and major international oil
companies. He is one of the founding members of the Ocean and Oil Group,
where he developed and managed the operations department before his
appointment in July 2001 as Executive Director, Marketing of Oando. Mr Boyo
serves on the boards of companies in the Oando group
12. Mobolaji Olatunbosun Osunsanya
He is the Chief Executive Officer of Oando Gas & Power Limited. He holds a First
Class bachelors degree in Economics from the University of Ife and a Masters
degree, also in economics, from the University of Lagos. He previously worked
as a consultant with Arthur Andersen Nigeria (now KPMG professional services)
with experience in the banking, oil & gas and manufacturing industries. Prior to
joining Oando in August 2001, he was an assistant General Manager at Guaranty
Trust Bank Plc and later an Executive Director at Access bank PLC. Before his
appointment as CEO, Gaslink Nigeria, he was the Chief Marketing Officer,
Commercial, for Oando Marketing.
Corporate Governance & Statement of Compliance
Oando is dedicated to the protection and promotion of shareholders’ interest thus
regularly updating and reviewing its structures and processes in order to have the
best business practice at all times and in turn exhibiting a value based performance.
The Company recognises the importance of adoption of best practice principles, its
valuable contribution to long-term business prosperity and accountability to its
shareholders. The Company is managed in a way that maximises long-term
shareholder value and takes into account the interests of all of its stakeholders.
Oando believes that full disclosure and transparency in its business operations are
in line with good corporate governance and best practise principles and has applied
principles set out in the Code of Corporate Governance issued by the Securities and
Exchange Commission, Nigeria, Code of Corporate Practice and Conduct contained
in the 2002 King report and the Combined Code on Corporate Governance (2006)
issued by the Financial Reporting Council, UK.
Compliance Office Initiatives
To demonstrate Oando’s fervent commitment to best business practice culture in line
with the with the highest international standard, even where Oando is not obligated to
do so, has implemented several Policies and Strategies in-house as outlined below:
• ALL staff and Directors have been trained, certified and re-certified on the salient
provisions of the Company’s Code of Business Conduct & Ethics using a web
based training facility. Ethics training is also part of the induction on-boarding
process for new staff.
pg33
All staff and Business partners will continually be enlightened and or trained on
the importance of the implementation of the best business practices.
• Training for Business Partners on the Code of Business Conduct &
Ethics is ongoing.
• The Company strongly believes in ensuring that it abides by the principles of
Corporate Governance and the institutionalization of best practice principles.
Insupport of this belief the Company embarked on the formulation and
implementation of the following policies, which were approved by the Board of
Directors:
• Gifts and Benefits Policy
Designed to inform employees on the Company’s position regarding the
giving and acceptance of gifts and benefits from persons or entities that
deal directly or indirectly with Oando Plc. All staff are expected to declare
all gifts received from business partners using a gift declaration form
available on the intranet.
• Related Party Transactions Policies
Designed to provide clear guidelines on related party relationships and
transactions and to ensure that Oando employees and Directors fully
understand their responsibilities and obligations in respect of disclosures
regarding related parties and related party transactions. All staff and
directors are required to declare all related party transactions &
relationships as soon as such occurs using the related party form available
on the intranet.
• Whistle Blowing Policy
Designed to enable staff, business partners and all stakeholders make
confidential reports about any unethical business conduct involving the
company or any of its staff or directors.
To facilitate this process, the Company has engaged the services of an
independent consultant KPMG Forensic Services to provide and operate
an Ethics Hotline to enable staff and other stakeholders make confidential
and anonymous reports of unethical conduct involving the company or
any of its staff or directors. Staff and Business partners are presently
being trained on the importance and the use of the ethics hotline facility.
• The Compliance and Ethics Office Publishes a monthly bulletin called the
“Ethics Watch” to sensitize staff on the importance of ethical conduct.
Board of Directors’ Governance Structure
The Board of Directors of the Company is responsible for setting the strategic direction
of the company and for overseeing and monitoring its business affairs. The Board
ensures that the company is fully aware of its responsibility to all relevant stakeholders
in the conduct of its operations. The Board is responsible for the development and
implementation of a sustainable policies, which reflect the company’s recognition of its
responsibility to all stakeholders who are affected by the company in the performance
of its operations which include, customers, employees, shareholders, communities
and the environment.
The Oando Board of Directors Oando recognises the importance of best corporate
governance principles, its valuable contribution to long term business prosperity and
accountability to its shareholders.
Board Performance Evaluation
The Board undertakes, annually, a formal and rigorous evaluation of its own performance
and that of its Committees and individual Directors. This serves to continuously stimulate
a high level of performance, identify the strengths and weaknesses of individual
Directors and articulate ways to bridge identified gaps thereby leading to further
strengthening of the Board. The result of the evaluation is presented to the whole
Board for consideration and adoption.
In 2008, the Board completed a full assessment of its performance and that of its
Committees for the 2008 financial year. In addition, a Director Peer Appraisal exercise
was conducted. The Board enlisted the services of an external consultant, KPMG
Professional Services, to carry out these appraisals.
The findings of the external consultants were considered by the Board and certain
actions have been noted for implementation.
Feedback on the performance of the Board as a whole and that of its Committees was
shared with the Board, while the feedback on individual Directors was discussed with
the Chairman. The Chairman then held private meetings with each Director to discuss
the results and agree on an action plan.
The Board’s Authority
The Board of Directors scope of authority are set forth in the Company’s Delegation of
Authority in conformity with relevant legislation and best practice recommendations.
pg34
There is a formal schedule of matters reserved for the decision of the Board, which is
reviewed regularly. This includes (inter alia):
• strategy and objectives;
• business plans and budgets;
• changes in capital and corporate structure;
• accounting policies and financial reporting;
• internal controls;
• major contracts;
• capital projects;
• acquisitions and disposals;
• communications with shareholders; and
• Board membership.
Board’s Composition and Independence
The Board of Directors has a broad range of expertise that covers the oil sector, the
Company’s main business and the geographical areas. Each individual Director has
experience knowledge, qualifications, expertise and integrity necessary to effectively
discharge the duties of the Board of Directors.
The Company believes that experienced Directors with diverse industry background
are essential for the provision of successful and strategic direction for the Company.
The composition, competencies and mix- of -skills are adequate for its oversight
duties and the development of the corporate vision and strategy.
The Board of Directors through its Corporate Governance Committee establishes
which members are independent and it also recommends the appropriate size of the
board. The size of the Board is predetermined by the Article 78 of the Company’s
Articles of Association.
Re-election of Directors
A maximum of one third of the Directors, who are the longest in office since their last
appointment are required to retire by rotation and are eligible for re-election.
Board’s Duties & Responsibility
Directors act in good faith, with due care and in the best interests of the Company and
all its shareholders – and not in the interests of any particular shareholder – on the
basis of relevant information. Each Director is expected to attend all Board of Directors
meetings and applicable committee meetings.
The Company shall not prohibit its Directors from serving on other Boards of Directors.
Directors are expected to ensure that other commitments do not interfere in the
discharge of their duties. Directors shall not divulge or use confidential or insider
information about the Company.
The Board in discharging its duties adopts the best practice principles, some of
which are highlighted thus:
• The Company believes that the Chairman of the Board should be a non executive
director.
• To maintain balance of interest and ensure transparency and impartiality, a number
of the Directors are independent. The independent Directors are those who have
no material relationship with the Company beyond their Directorship.
• Directors abstain from action that may lead to conflict of interest and are to ensure
they shall comply with the Company’s Policy on Related Party Transactions.
Training and access to Advisers
The Company has a set induction programme for new directors on the company’s
business and other information that will assist them in discharging their duties effectively.
The Company believes in and provides continuous training and professional education
to its Directors. The Board of Directors and Board Committees have the ability to
retain external counsels to advice on matters, as they deem necessary.
Working Procedures .
The Board of Directors meets according to a fixed schedule, set at the beginning of
each year, which enables it to properly discharge its duties. As a rule, the Board of
Directors meets at least five (5) times a year.
Non-executive Directors are required to meet separately from executive members
at least once a year.
All Directors are expected to be provided with a concise but comprehensive set of
information by the Company Secretary in a timely manner, concurrently with the
notice of the Board meeting, no less than fourteen (14) days before each meeting.
This set of documents is to include:
• an agenda;
• minutes of the prior Board meeting;
pg35
• key performance indicators, including relevant financial information prepared
by management, and clear recommendations for action.
The Board of Directors through the Company Secretary keeps detailed minutes of its
meetings that adequately reflect Board discussions, signed by the Chairman and
included voting results on an individual basis where decisions are not unanimous.
The Company keeps recordings of important Board decisions, such as the approval
of extraordinary transactions.
Remuneration.
The remuneration of non-executive Directors is competitive and is comprised of an
annual fee and a meeting attendance allowance. The remuneration package shall,
however, not jeopardize a Director’s independence. Executive Directors are not paid
fees beyond their executive remuneration package. The Board of Directors shall,
through its remuneration committee, periodically review the remuneration paid to
Directors. The Company publicly discloses the remuneration of each Director on an
individual basis. The Company will not provide personal loans or credits to its non
executive directors. Further, the Company shall not provide stock options to its non-
executive Directors unless approved by shareholders in general meeting.
The Company Secretary is responsible to the Board, and is also available to individual
Directors for advice and services.
Oando’s exemplary standards of corporate governance has been commended by
the Nigerian Stock Exchange with the “Quoted Company of the Year Award” and the
“Best in the Downstream Petroleum Sector” for several years consecutively since
2003. The latest was the year 2007 award by the as the Nigerian Stock Exchange as
“Best Company in the Downstream Petroleum Sector”.
The current composition of the Board and its Committees is as follows:
Attendance at board meetings during the year ended 31st December
2008
Board Committees
Director Audit Nomination Remuneration Strategic Corporate Environment,
Planning & Governance Health & Safety
Finance
M. Magoro OFR
J. A. Tinubu
O. Boyo �
M. Osunsanya �
A. Akinrele SAN � � �
F. N. Atako JP � � �
N. Burney � �
HRM M.A. Gbadebo CFR �
H. Mahmud � �
V. O. Ibru � � �
O. P. Okoloko � � �
I. Osakwe � � �
pg36
Director 10-04-08 27-05-08 25-07-08 31-10-08 16-12-08
(109th ) (110th) (111th) (112th) (113th)
M. Magoro OFR � � � � �
J. A. Tinubu � � � � �
O. Boyo � � � � �
M. Osunsanya � � � � �
F. N. Atako JP � � � � �
A. Akinrele SAN � � � � �
N. Burney - - � � �
HRM M.A. Gbadebo � � � � �
H. Mahmud � � � � �
V. O. Ibru � � � � �
O. P. Okoloko � � � � �
I. Osakwe � � � � �
* Mr. N. Burney was elected at the Annual General Meeting of the Company held on 27 May 2008.
The board has established six formal committees as outlined below:
• Strategic Planning and Finance Committee
• Corporate Governance Committee
• Remunerations Committee
• Audit Committee (a statutory Committee with shareholder members)
• Nominations Committee
• Environmental Health & Safety Committee
All the Committees have terms of reference which guides them in the execution of their
duties. Each Committee reports to the Board of Directors. Each Committee provides
draft recommendations to the Board on matters that fall within the Board’s ambit.
Strategic Planning & Finance Committee members:
Mr. I. Osakwe (Chairman)
Chief F. Atako JP
pg37
Mr. N. Burney
Mr. O. Ibru
Mr. O. Okoloko
Strategic Planning & Finance Committee assists the board of directors in performing
its guidance and oversight functions effectively and efficiently, by specifically defining
the Company’s Strategic Planning & Finance Committee assists the board of directors
in performing its guidance and oversight functions effectively and efficiently, by
specifically defining the Company’s strategic objectives, determine its financial and
operational priorities, making recommendations regarding the Company’s dividend
policy, and evaluating the long-term productivity of the Company’s operations. The
committee met on 5 (Five) occasions in 2008.
Attendance at meetings during the year ended 31st December 2008
Corporate Governance Committee members:
Mr. A. Akinrele SAN (Chairman)Director 09-04-08 17-07-08 29-10-08 01-12-08 02-12-08
I. Osakwe X � � � �
F. Atako JP � � � � �
N. Burney - � � � �
O. Ibru � X � � �
O. P. Okoloko X X � x x
Director 24 July 2008
A. Akinrele �
H. Mahmud �
O. Ibru �
Director 13th February ‘08
I. Osakwe �
A. Akinrele �
O. Ibru �
Alhaji H. Mahmud
Mr. O. Ibru
The corporate governance committee assists the Board of Directors in performing its
guidance and oversight functions effectively and efficiently, and is specifically charged
with the development of, compliance with, and periodic review of the Company’s
corporate governance policies and practices. The Committee further monitors and
reviews policies concerning shareholder rights, conflict resolution, ethics, disclosure
and transparency, evaluation, and the Company ’s internal documents (organisation
and process). The committee is chaired by a non-executive director and comprises
of two non-executive directors, one of whom is an independent director. Even though
the Committee held one meeting in the financial year ended 31 December 2008, there
were various “virtual” meetings in which it reviewed various Policies electronically.
Attendance at meetings during the year ended 31st December 2008
Remuneration committee members:
Mr. I. Osakwe (Chairman)
Mr. A. Akinrele SAN
Mr. O. Ibru
The remuneration committee is chaired by an independent director and comprises of
the Chairman and two non-executive directors. It assists the Board of Directors in
performing its guidance and oversight functions effectively and efficiently, the committee
is specifically charged with ensuring the Company’s remuneration policies and practices
support the successful recruitment, development, and retention of directors and
managers, and thus help the company realise its business objectives and sustainable
economic development. Whilst the committee may meet whenever and as often as
necessary to properly carry out its functions and duties in a timely manner. The
committee held meeting once in 2008.
Attendance at meetings during the year ended 31st December 2008
Nominations committee members:
Alhaji H. Mahmud (Chairman)
Mr. A. Akinrele SAN
pg38
Chief F. Atako JP
The nominations committee assists the Board of Directors in performing its guidance
and oversight functions effectively and efficiently, and is specifically charged with
identifying qualified directors and senior executives. It is to ensure the company’s
policies support the successful recruitment, development, and retention of directors
and executives and thus help the company realise its business objectives and
sustainable economic development. The committee is chaired by an independent
director and comprises of two independent directors and one non-executive director.
The Committee held one meeting in year ended 31st December, 2008.
Attendance at meetings during the year ended 31st December 2008
Director 29 th February ‘08
A. Akinrele �
F. Atako �
H. Mahmud �
Statutory Committeeò:
Audit Committee members:
Chief Felix Atako JP (Chairman)
Chief Atako JP obtained a Bachelor’s Degree in Public Accountancy and an MBA in
Finance & Investments from The Baruch College of the City University of New York,
New York, USA. Chief Atako is a seasoned financial analyst, who served in various
capacities both in the private and public sectors. He is a member of the Nigerian
Stock Exchange and Institute of Directors Nigeria, (An Affiliate of the Institute of
Directors – UK.) Chief Atako also sits on the Board of many companies.
Mr. I. Osakwe
Mr Osakwe is a Chartered Accountant as well as a Financial and Management
Consultant. He holds a Bachelor’s and a Masters Degree in Chemistry from the
University of Oxford, England and is an associate Member of the Institute of Chartered
Accountants for England and Wales. Ike Osakwe has worked in various audit and
consultancy firms and has carried out extensive management systems, operational
and accounting review assignments within Nigeria and internationally. He currently
serves as chairman of Thomas Wyatt Nigeria Plc and sits on the board of Leadway
Pensure PFA. He has previously served on the boards of Fedex (Red Star Express)
Limited, and also as the Chairman of UBA Trustees Limited.
Mr. Peter EyanukuĠ
Mr. Peter Eyanuku studied Mechanical Engineering and has served in various
organizations in different capacities and has also served with the National Directorate
of Employment, Lagos as well as the Lagos State Health Management Board. He was
a Member of the Audit Committee of the United Bank for Africa PLC and is presently
also a Member of the Audit Committee of Airline Services & Logistics PLC.
Chief (Mrs.) E. Fadayomi Ġ
Chief (Mrs.) Fadayomi is the principal partner in a firm of Solicitor and Advocates –
Eniola Fadayomi & Co. She holds a Bachelor of Laws Degree from the University of
Lagos, Nigeria. She is a member several professional associations including the
Nigerian Bar Association, the Institute of Directors and the International Federation of
Women Lawyers. She has served as the Chairman on the board of several companies
including Afribank Nigeria Plc, Millennium Harvest Ltd and Telegraphique. She also
served as a member of the board of directors in May and Baker.
She was formerly the Attorney General & Commissioner for Justice in Lagos State,
Commissioner for Establishment, Training and Pensions and First Commissioner for
Women Affairs and Poverty Alleviation on the Lagos state cabinet.
Mr. Job Onwughara Ġ
Mr. Onwughara holds a Master of Science degree in Banking and Finance from the
University of Ibadan, Nigeria. He is a fellow of the Chartered Institute of Bankers,
London/Nigeria, an Associate of the Institute of Credit Management, London and
Member of the British Institute of Management. He has served at various Managerial
levels at Savannah Bank and Crown Flour Mill Limited.
The audit committee of the Company is chaired by an independent director of the
company and, in addition, comprises of another independent director and one non-
executive director together with the three shareholder members as required by the
Companies and Allied Matters Act, 2004. The Audit Committee members meet at least
three times a year and the meetings are attended by appropriate company executives,
including the group chief financial officer and the internal control & audit manager. The
committee’s duties include keeping under review the scope and results of the external
audit, as well as the independence and objectivity of the auditors. The committee also
keeps under review internal financial controls, compliance with laws and regulations
and the safeguarding of assets. It also reviews the adequacy of the plan of the
internal audit and reviews its audit reports.
The committee held three meetings in financial year ended December 31, 2008.òThe Companies and Allied Matters Act, 2004’s requires that every public company
have an audit committee and stipulates that a number of shareholders equal to the
director members of this committee must be members of the audit committee.
pg39
ƒ Shareholder members
* ceased being a member on May 27, 2008† elected member on May 27, 2008
Attendance at meetings during the year ended 31st December 2008
Member 09 April ‘08 17 July ‘08 29 Oct ‘08
F. Atako � � �
I. Osakwe X � �
P. Eyanuku - � �
E. Fadayomi � � �
M. Mar’afu* � - -
O. Okoloko X X �
J. Onwughara � � �
Directors declarations
None of the directors have:
– ever been convicted of an offence resulting from dishonesty, fraud or
embezzlement;
– ever been declared bankrupt or sequestrated in any jurisdiction;
– at any time been a party to a scheme of arrangement or made any other form
of compromise with their creditors;
– ever been found guilty in disciplinary proceedings by an employer or regulatory
body, due to dishonest activities;
– ever been involved in any receiverships, compulsory liquidations or creditors
voluntary liquidations;
– ever been barred from entry into a profession or occupation; or
– ever been convicted in any jurisdiction of any criminal offence or an offence
under any Nigerian or South African legislation.
Directors’ shareholdings
The holdings of ordinary shares by the directors of Oando at 31 December 2008, being the end of Oando’s immediately preceding financial year, are set out in the table below:
Director Share Total No shares (as of share capital)
Maj- Gen Magoro (RTD),OFR,PSC,USAWC FSS - -
Galadiman Zuru
Jubril Adewale Tinubu - -
Mr. Omamofe Boyo - -
Mr. Mobolaji Osunsanya 35,999 0.00
Mr. Ademola Akinrele 38,604 0.00
Chief Felix Atako JP 55,201 0.01
Mr. Navaid Burney - -
HRM Oba Adedotun Gbadebo, 15,000 0.00
CFR, The Alake of Egbaland
Mr. Oboden Ibru 151, 369 0.02
Alhaji Hamid Mahmud Wali Nubi 8,347 0.00
Mr. Onajite Okoloko - -
Mr. Ike Osakwe 74,317 0.01
Changes in the holdings of Oando ordinary shares by the directors which occurred in 2008 were as a result of the Bonus issue declared in 2007.
pg40
Interests of Oando’s directors in terms of the equity incentive scheme
The executive directors stand to benefit from the employee equity incentive scheme.
See paragraph titled Staff equity participation scheme below for details of the
scheme.
Directors’ interests in transactions
None of the directors had a direct material interest in any transactions that were
effected by Oando during:
- the current or immediately preceding financial year; or
– any preceding financial year and remain in any respect outstanding or
unperformed.
However, some of the directors hold directorships in other companies or are partners
in firms with which Oando had material transactions during the current financial year,
as summarised below:
1 . Avante Capital Partners Limited (“Avante Capital”)
Avante Capital is an investment advisory firm based in Lagos, Nigeria. Oando’s
directors who are also directors of Avante Capital Partners are Mr. Wale Tinubu,
Mr. Jite Okoloko and Omamofe Boyo.
2 . F. O. Akinrele & Co.
F. O. Akinrele & Co. is a law firm based in Lagos, Nigeria, whose services are
employed by the company. Mr. Ademola Akinrele SAN is a partner at F. O. Akinrele
& Co and a director of Oando.
3 . Oceanic Bank International Plc (“Oceanic Bank”)
Oceanic Bank is one of Nigeria’s leading financial institutions, whose financial
services are employed by the company. Mr. Oboden Ibru is an executive director
of Oceanic Bank Plc as well as a director of Oando.
4 . Ocean and Oil Holdings (Nigeria) Limited (“OOH”)
OOH is a diversified principal investment holding company with an indirect
controlling stake in Oando held through Ocean and Oil Investments Limited.
Oando’s directors who are also directors of OOH are Mr. Adewale Tinubu, Mr.
Omamofe Boyo and Mr. Onajite Okoloko.
The holdings of ordinary shares by the directors of Oando as at 4 June 2009, being the date the 2008 Audited Accounts were approved are set out in the table below:
Director Share Total No shares (as of share capital)
Maj- Gen Magoro (RTD),OFR,PSC,USAWC FSS - -
Galadiman Zuru
Jubril Adewale Tinubu - -
Mr. Omamofe Boyo - -
Mr. Mobolaji Osunsanya 35,999 0.00
Mr. Ademola Akinrele 38,604 0.00
Chief Felix Atako JP 55,201 0.01
Mr. Navaid Burney - -
HRM Oba Adedotun Gbadebo, 1,230 0.00
CFR, The Alake of Egbaland
Mr. Oboden Ibru 151, 369 0.02
Alhaji Hamid Mahmud Wali Nubi 8,347 0.00
Mr. Onajite Okoloko - -
Mr. Ike Osakwe 74,317 0.01
pg41
The day-to-day operational management of the Group’s activities is delegated to the
Group Chief Executive, who has direct responsibility for all operations and activities.
He is supported in this by the Deputy Group Chief Executive and the Group
Leadership Council which comprises, in addition to them, the Chief Executive Officers
of the operating subsidiaries, plus the Chief Financial Officer, Chief Human Resources
Officer, the Company Secretary & Chief Compliance Officer, the Chief Legal Officer
and the Chief, Corporate Services Officer.
Internal control and risk
The Directors have overall responsibility for ensuring that the Group maintains a
sound system of internal controls to provide them with reasonable assurance that all
information used within the business and for external publication is adequate, including
financial, operational and compliance control and risk management, and for ensuring
that assets are safeguarded and therefore that shareholders’ investment is protected.
There are limitations in any system of internal control and, accordingly, even the most
effective system can provide only reasonable, and not absolute, assurance against
material misstatement or loss.
In line with past practice, the Company has an Internal Audit unit that carries out
routine and random checks on the company’s operations, including fixed assets and
stocks. The unit is also responsible for investigating frauds and misuse or
misappropriation of the company’s assets.
The company also has an Internal Control Unit, which lays down and tests the controls
and processes to ensure that the assets of the company are safeguarded. The Unit
is currently headed by a manager with vast control and processes experience.
The key procedures that the Board has established and which are designed to
provide effective internal control for the Group are:
• The Board sets out the Group authority procedures which are adopted by all the
subsidiary companies.
• The issue of a Group accounting and procedures manual which sets out the
Group’s accounting practices, revenue recognition rules, accounting under NASB
and IFRS and bid approval processes.
• The application of a rigorous annual budgeting process following a detailed
entity and Group strategy review. All budgets are subject to approval at Board
level.
• The Group Leadership Council is responsible for reviewing the operational
results, communicating and application of Group-wide polices and procedures
and strategy on operational matters which are communicated both to the Board
and down to the operating units.
The formal monthly operational review by the Executive Directors together with
the divisional management teams to assess the financial and operating
performance and discuss the ongoing development of each business unit and
the comparison of detailed monthly management reports against budgets,
forecasts and prior years. In addition the Group Chief Executive and Chief
Financial Officer prepare a quarterly report for the Board on key developments,
performance and issues in the business.
• The identification and mitigation of major business risks is the responsibility of
operating company management. Each operating company maintains internal
controls and procedures appropriate to its structure and business environment,
whist complying with Group policies, standards and guidelines.
• Insurance cover is maintained to insure all the major risk areas of the Group
based on the scale of the risk and the availability of cover in the external market.
• The use of external professional advisers to carry out due diligence reviews of
potential acquisitions.
Relations with shareholders
Communications
The Board considers effective communication with its investors, whether institutional,
private or employee shareholders, to be of uttermost importance.
The Company reports formally to shareholders four times a year, with the quarterly
results announcement and the preliminary announcement of the full-year results.
Shareholders are issued with the full-year Report and Accounts in May. These reports
are posted on the website.
The Company also makes other announcements from time to time, which can be found
on the website.
Members of the Group Leadership Council meet institutional investors on a regular
basis, providing an opportunity to discuss, in the context of publicly available
information, the progress of the business. Institutional investors and analysts are also
invited to attend briefings by the Company following the announcements of the full-
and quarterly results. Copies of the presentations given at these briefings are posted
on the website.
Constructive use of the Annual General Meeting
The notice of meeting is sent to shareholders at least 21 working days before the
AGM. The Directors encourage the participation of private shareholders at the AGM,
and are available, both formally during the meeting and informally afterwards, for
questions. The Chairmen of the Audit, Remuneration and Nomination Committees are
all available to answer questions at the AGM.
Compliance statement
The Company has complied with the Code of Best Practice throughout the financial
year ended 31 December 2008.
pg42
Shareholder Range Analysis as at December 31, 2008
No of Holders % of Holders UNIT % Holding CUM TOTAL
1 - 1,000 209,877 80.47% 61,196,274 6.76 61,196,274
1001 - 10,000 45,852 17.58% 114,388,369 12.64 175,584,643
10001 - 100,000 4,742 1.82% 107,676,494 11.90 283,261,137
100001 - 1,000,000 298 11.00% 76,422,286 8.45 359,683,423
1000001 and Above 57 2.00% 545,201,205 60.25 904,884,628
260,826 100.00% 904,884,628 100.00%
DISTRIBUTION OF SHAREHOLDERS
BANKS/INSURANCE 86 0.03 9,022,580 1.00 9,022,580
CLOSE CORPORATION 51,210 19.63 34,163,408 3.78 43,185,988
INDIVIDUALS 205,712 78.87 274,509,100 30.34 317,695,088
NOMINEES & TRUST PUBLIC COMPANIES 916 0.35 144,844,967 16.01 462,540,055
PUBLIC COMPANIES 2,902 1.11 442,344,573 48.88 904,884,628
260,826 100.00 904,884,628 100.00
CONTROL ACCOUNT 261,112 904,884,628
PUBLIC/NON-PUBLIC SHAREHOLDERS
NON-PUBLIC SHAREHOLDERS 8 0.00 310,105,127 34.27 310,105,127
(DIRECTORS& ASSOCIATES OF THE COMPANY)
PUBLIC SHAREHOLDERS 260,818 100.00 594,779,501 65.73 904,884,628
260,826 100.00 904,884,628 100
BENEFICIAL SHAREHOLDERS WITH 2% OR MORE
NIGERIAN CONTROL ACCOUNT 260,826 99.89 893,989,975 99 893,989,975
SOUTH AFRICAN CONTROL ACCOUNT 286 0.11 10,894,653 1 904,884,628
TOTAL 261,112 100.00 904,884,628 100
OCEAN AND OIL INVESTMENT LIMITED 309,726,290 34.23
pg43
2008 Corporate Social Responsibility Report (CSR)
In 2008, Oando PLC continued its commitment in sustainable development by
embarking on a number of community based projects.
Educat ion
Oando PLC empowers communities where they operate through the provision of
education. They intend to contribute towards the achievement of the Millennium
Development Goals (MDGs), with a keen interest on achieving universal primary
education by ensuring that in 2015 children everywhere, boys and girls alike will be
able to complete a full course of primary schooling.
The Oando community based projects include:
Adopt – A - School
In 2004, Oando commenced the adoption of Bundu Ama Community Primary School
with the renovation of the ‘A’ wing, with the view to providing an environment conducive
for learning.
In a bid to taking Oando’s commitment to education further, the Adopt–A–School
project was formally initiated in April, 2007 in partnership with the Ministry of Education
as an avenue for Oando to support the growth of primary education in communities
where they operate.
The project aims at supporting the development of selected schools for an agreed
period of time through the renovation of facilities, provision of teaching aids and
books.
Currently the following Government Primary schools have been adopted:
1. Metropolitan Primary School, Orile-Iganmu, Lagos
2. Government Primary School, Ekorinim, Calabar, Cross River State
3. Daura Primary School, Daura, Katsina
4. Bundu Ama Primary School, Bundu, Rivers State
5. Model Primary School, Ekara, Onne, Rivers State
6. QIC Central Primary School, Ikot Akpa Nkuk, Akwa Ibom State
7. Central Primary School Udubo, Damaha, Bauchi State
8. Nasarawa Pimary School, Katsina, Katsina State
9. Clementina Ajigbeda Primary School, Lagos State
Date Authorized (N’000) Issued and fully paid (N’000) Considerat ion
Increase Cumulat ive Increase Cumulat ive
1969 0 4,000 0 4,000 Cash
1978 3,000 7,000 2,100 6,100 Cash
1987 43,000 50,000 33,900 40,000 Cash
1991 10,000 60,000 0 40,000 -
1993 40,000 100,000 10,000 50,000 Bonus (1:4)
1995 0 100,000 12,500 62,500 Cash
1998 0 100,000 15,625 78,125 Bonus (1:4)
1999 0 100,000 0 78,125 -
2000 0 100,000 0 78,125 -
2001 50,000 150,000 0 78,125 -
2002 150,000 300,000 70,129 148,254 Scrip, ICLS and Agip Conversion
2002 0 300,000 14,825 163,079 Bonus (1:4)
2003 0 300,000 40,770 203,849 Bonus (1:4)
2004 0 300,000 82,301 286,150 Cash
2005 100,000 400,000 0 286,150 -
2007 100,000 500,000 90,885 377,035 Scheme of Arrangement – OOI and 12 identified Shareholders of Gaslink
2008 500,000 75,407 452,442 Bonus issue (1:5)
Share Capital History
pg44
Scholarships
Oando has been actively involved in scholarship projects with a view to promoting
education for youths in Nigeria, with focus on primary and secondary schooling for
less privileged children. These projects include:
• Providing scholarships for 12 secondary/primary school children in the Bundu
and Onne communities in Rivers state.
• Sponsorship of 100 out-of-school children from communities where Gaslink
operates in Lagos.
Economic Empowerment/Employment
In recognizing the global paradigm shift to sustainable development, Oando has
literarily adopted the saying: Give a man a fish and you feed him for a day, teach a
man how to fish and you feed him for a lifetime.
For Oando, each community has its uniqueness and intricacies. What goes across
board however, is the need to empower individuals within the communities to be
financially stable and gainfully employed. To this end, Oando has made it a part of
their staffing policy to recruit skilled, semi skilled and unskilled labour from host
communities to fill suitable positions.
Social Development
Oando is actively involved in the provision of social amenities and improving the
quality of life in their host communities. In doing this, Oando recognizes the need to
drive development from inside out i.e. development should be based on identified
pressing needs of the community as against the practice of instituting projects based
on the perceived needs of communities. To this end Oando has embarked on a
number of projects based on the social needs of the communities.
Sponsorsh ips
In addition to sponsoring various youth’s competitions, programmes and activities,
golf sponsorships, etc. Oando has also been actively involved with the sponsorship
of Mohammed Muazu (a youth golfer).
Mohamed Muazu
Mohammed Muazu was discovered at Ikoyi Club in 2005, where he was nursing the
dream of becoming a professional golfer. Oando has been supporting him through
sponsorship of golf matches, provision of golf kits and pre-University exams funding.
He has since been a force to be reckoned with in amateur golfing, through his
numerous victories. Oando intends to continue sponsoring Mohammed Muazu in the
area of furthering his education in Golf and creating opportunities for him to compete
at professional golf tournaments.
Donat ions
Oando has been involved in donating various Items to charities across Nigeria. Some of which are listed below:
DESCRIPTION AMOUNT
1 Sponsorship for the 2008 NUGA games – NUGA UNN FRC 10,000,000
2 A modern mammy boat (market women boat) – Abissa community in Akuku-Toru LGS of Rivers State 2,897,600
3 NYSC Lodge – Bille community Degema LGA of Rivers State 3,550,000
4 Passenger boat – KE community Degema LGA of Rivers State 1,830,000
5 Back-to-school Scholarships 100 children in Lagos (1st term 2008/9 session) 1,672,370
6 Lagos State communities – Agidingi, Omole, Keke Ogba, Wasimi-Maryland, Ikosi, Ojota, Oko Iya-Alaro, Ilupeju,
Ijora, Oshodi, Orile Iganmu, Apapa, Obanikoro, Onipanu, Jibowu, Ojuelegba, TIncan and Isolo 1,136,200
7 Sponsorship of a chair in University of Ibadan – Aret Adams Foundations 1,000,000
8 Institute of Directors 1,500,000
9 Donation to International Women Society Day Nursery at Herbert Macaulay, Yaba, Lagos 1,000,000
10 75HP Yamaha Engine – Abissa community in AKuku-Toru LGS of Rivers State 1,000,000
11 Supply of plastic chairs, canopies and tables – Abissa community 1,000,000
12 Renovation of principal’s quarters of Governemnt Secondary School (GSS) KE 1,000,000
13 Back-to-School Scholarships 100 children in Lagos (3rd term 2007/8 session) 989,455
pg45
14 Back-to-School Scholarships 100 children in Lagos (2nd term 2007/8 session) 975,165
15 12 Secondary School scholarship payout for students at Bundu Ama and Onne community 960,000
16 Donations towards the NWIA skills acquisition – Nigerian West Indian Association 500,000
17 Donations for CAMCAM 2008 training programme 500,000
18 Sponsorship of the 3rd era nationals wheelchair championship – Nigerian Tennis foundation 500,000
19 Heritage Homes 482,000
20 Little Saints 307,200
21 Renovation of Daura Pry Sch – release of retention 269,105
22 Sponsorship – Medical Women’s Association of Nigeria 250,000
23 Donation for construction of NECA house – Nig Employment Consultative Association 250,000
24 Renovation of Metropolitan Pry Sch, Orile Iganmu, Lagos (phase 1), (Retention) 250,000
25 Donations for end of the year party at adopted schools 230,000
26 Financial Support towards the installation of the transformer at Port Harcourt warehouse community locality 150,000
27 School for handicapped, Epe garage, Ijebu Ode 50,000
28 Ogun State Hospital Management Board-hansens disease centre 50,000
29 Gwagwalada Motherless Babies Home, Abuja 50,000
30 Family Care Eduvision, Plot 114, Ebitu Ukiwe Street, Jabi, Abuja 50,000
31 Edo Orphanage Home, Benin 50,000
32 Oronsaye Orphanage Home, Benin 50,000
33 Motherless Babies Home Calabar 50,000
34 Motherless Babies Home Uyo 50,000
35 Golden Heart Orphanage, Enugu 50,000
36 Little Saint Orphanage, Enugu 50,000
37 Ibadan Home for Motherless Babies, beside Dental Clinic, UCH Ibadan 50,000
38 Christian Mission School for the deaf, Onireke, Ibadan 50,000
39 Handicapped, Kulende Area, Ilorin 50,000
40 Motherless Babies Home, Gakanbi Street, Ilorin 50,000
41 Gidam Bege, Zaria Rd, Jos 50,000
42 Rafiki Foundaion, Jos 50,000
43 Bethcorey Home, Zaria or Adonai Children Home, Kaduna 50,000
44 Arewa Orphanage, Kaduna 50,000
45 Torrey Homes Shahuchi, Kano 50,000
46 Torrey Homes at Tudun Maliki, Kano 50,000
47 Torrey Homes Nassarawa, Kano 50,000
48 Nassarawa Children’s Home, Kano 50,000
pg46
49 Beth Torrey Home, 160 Kirikiri Road, Olodi, Apapa, Lagos 50,000
50 Red Cross Orphanage Home, Ebute Metta, Lagos 50,000
51 SOS Children’s Orphanage, Lagos 50,000
52 Lagos State Rehabilitation Centre, Owutu, Ikorodu, Lagos 50,000
53 Old Peoples Home, Onike, Yaba, Lagos 50,000
54 Maiduguri Children’s Home, Maiduguri 50,000
55 Beneishek General Hospital, Maiduguri 50,000
56 Mama Ambayo Orphanage Makurdi 50,000
57 Bega Orphanage Home or Elshadal Orphanage Home, Makurdi 50,000
58 Handef Society for the Handicapped, Akure 50,000
59 Orphan and You Charity, Akure 50,000
60 Sisters of the needy Motherless Babies Home, Owerri 50,000
61 Owerri Motherless Babies Home, Owerri 50,000
62 Chesire Home, Creek Road PHC 50,000
63 School of the Less Priviledge, Trans Amadi or Elders’ Home, Harbour Road PHC 50,000
64 Sokoto State Orphanage Home, Sokoto 50,000
65 Ministry of Social Welfare Sport & Culture, Sokoto 50,000
66 Our Lady of Mercy Orphanage Home, Enerhen Road, Warri 50,000
67 Buwa Orphanage Home, Commercial Avenue, Sapele or Oreme Motherless Home, Ughelli 50,000
68 Yola Children Home, Yola 50,000
69 Motherless Babies Home, Gombe 50,000
70 Rilwan Abiodun (a blind boy) @ Society for the Blind School, Lagos 80,000
71 Nigerian Red Cross Society Abandoned and Motherless Babies Home, Adekunle, Lagos 50,000
36,479,395
Donation of Ethanol testing Equipment
Oando in its bid to ensure that the right petroleum products are sold in Nigeria, has
donated a state of the art Ethanol Testing Equipment known as “Varian CP-
3800 GC’ to the Department of Petroleum Resources(DPR).
The Varian CP-3800 GC testing machines meet the 21st Century analytical requirements
with practical solutions for simple and complex applications to determine the level of
all the chemical components present in fuel.
Developments & Initiatives for Oando Human Capital
In 2008 the following are the developments and initiatives of the Human Capital by the
Company:
Talent Management
Talent Management is the management of the talent of an organization. Talent
encompasses employees’ skills, knowledge, cognitive abilities, potential, values and
work habits amongst others. In 2008, managing the talent of the organization was the
major pre-occupation of the HCM department.
Performance Management – There is no credible organisation that can manage its
talent successfully without a best practice approach to performance management.
2008 was the year we launched our performance management system on the Oracle
platform. It is called the Talent Management System (TMS). Oando went beyond the
system requirements and implemented a competency based appraisal system.
Competencies look at the knowledge, skills and attitudes employees require to perform
in their job functions. This meant that employees were measured not only against
pg47
business objectives but on their competencies. The competencies are Organizational,
Managerial, Leadership, Behavioural and Functional.
The TMS tool also assisted in defining the Corporate objectives with a functionality to
share and align objectives company wide. This means that all objectives are cascaded
to the lowest level in the organisation and full employee buy in and involvement are
assured. The TMS tool is designed to run in two major performance cycles. We have
the mid and end year appraisal cycles. Specific scores are assigned to a merit rating
and it then becomes quite convenient to ensure differentiation in overall performance
and help drive an equitable reward system.
Hay Job Evaluation
Job evaluation in simple terms is concerned with ensuring a process is put in place
to determine the relative worth of every job in the organization. Hay Job evaluation
looks at the job irrespective of the performance of the job holder or the environment
in which the job is being performed. This strict emphasis on the job requirements
alone makes the Hay methodology stand out as a best practice tool. The need to
determine the relative worth of every job cannot be over emphasised. Firstly, it helps
to determine the hierarchy, which births the organisational structure. Secondly, it
presents an objective platform to assign rewards in an equitable and fair manner.
Thirdly, it aids succession planning and the high potential identification process.
Lastly, it is the critical tool in achieving a manpower plan for the organization.
In 2008, Oando implemented the Hay job evaluation methodology. The methodology
has two dimensions. For typical management positions, it employs the Hay guide
charts. The charts are considered granular and the closest to a level of precision.
This is so because the process of job evaluation itself is not scientific in the real sense
but adopts an art form. Judgment is applied based on practice and jobs are
benchmarked across organizations. Thereafter, the results of the evaluation are
subjected to internal and external validation. The Hay guide chart has been in use for
upwards of seventy (70) years and is the tool of choice for over 7000 blue chip
organizations worldwide. The Decision Tree approach is used for typical non
management positions. It is less granular and computer based, incorporating the
immediate feedback of the job holder and his/her supervisor. It addresses the
concerns of the job holder at this level in the organisation and is considered transparent.
The benefits of the Hay job evaluation are numerous but amongst others, the ability to
enable the organization benchmark jobs across organizations and different industries
stands out. This outcome simplifies the remuneration survey process and makes
comparisons more accurate reducing to a large extent the margin of error.
Leadership Development Framework
In 2008, leadership development became institutionalised with a clear definition of the
organisation’s leadership development framework. The key elements of the framework
are developing a talent pool, assessing and managing the talent of the organisation
effectively, putting in place a process for easy identification of outstanding performers,
assuring differentiation in reward and upward progression within the organisation,
focused and beneficial training and development activities to grow the talent pool and
a structured coaching, mentoring and feedback process.
The Succession planning process was further strengthened with the compilation of
succession plans from the different entities and Group/ Shared Services functions.
These plans were discussed at the Group Leadership council, gaps identified and
action plan put in place to bridge them.
Closely related to the succession planning process is the Accelerated Development
pool. The pool employs a pseudo formal approach to identifying the high potential
employees in the organisation. Entity, Group and Shared Services heads are asked
to nominate employees into the pool. Nomination is purely based on merit and consistent
performance. The pool itself is subject to consistent audit and challenge at the group
leadership council level and continuous membership has to be maintained based on
clear performance parameters. In addition to the other tools used in managing talent,
this enables the organization to focus on candidates who are in line to lead and chart
the direction of the organization in the near future. Candidates benefit from an
accelerated growth in their career, are assigned mentors and have their training and
development interventions strictly tailored to their identified potential.
Graduate Trainee Programme
In December 2008, the organisation took the bold step of selecting nineteen (19)
young graduates in diverse disciplines to constitute the maiden intakes for the Oando
Graduate Trainee programme (GTP). The candidates, who were taken through a
thorough recruitment and selection process involving written aptitude tests, oral
interviews and an assessment centre, will become part of the Oando talent pool.
Recruiting young graduates and putting them through a detailed training programme
covering all the functional areas of the organization is the best practice approach to
achieve home grown talent. They grow with a clear understanding of the ethos of the
organization and become the champions of the culture and behaviours the organization
would like to see entrenched. The GTP will be for a period of twelve (12) months
culminating in a Group Chief Executive’s interview at the end of the training period. It
is only success at this final stage that guarantees the trainee a position in the
organisation.
Training and Development
The Individual Development Plan (IDP) was implemented in the first and second
quarters of 2008. Once the process is concluded between employee and supervisor,
it becomes the main input in determining training and development interventions in
the Company. It also helps to ensure that training and development execution has
relevance to the needs of the employee and the organisation. The IDP assists in
pg48
mapping out a career path for the organization. The conversation between the
employee and supervisor is considered a critical part of the IDP process. It is an
additional opportunity to manage expectations and define clear career goals.
The Company continues to invest heavily in the training and development of her
employees. Employees have access to a trove of information on the Oracle learning
platform online to choose diverse course covering a myriad of functional areas locally
and overseas.
Staff Equity Participation SchemeVetiva Capital Management Limited was appointed as Trustee to the Oando Staff
Equity Incentive Scheme. A formal application was sent to the Securities and Exchange
Commission (“SEC”). SEC registered the securities on the 10th day of November,
2008. Further to SEC’s approval we submitted an application for the listing of the
shares on the Nigerian Stock Exchange (“NSE”) and approval was granted on 12th
day of March, 2009 to list the 40,000,000 shares in tranches after each Scheme
Cycle. In the first Cycle which ended in 2008, a total of 8,000,000 shares were offered
to eligible employees, both as options and awards. Due to the current market price
of N86.05 (as at 18th May, 2009), employees entitled to receive options under the
Scheme have not exercised their Options.
Equal Opportunity EmployerOando has a long-standing commitment to the principles of equal employment
opportunity. In keeping with this commitment, the company continues to recruit,
employ, compensate and set terms, conditions, and privileges of employment of
qualified persons without regard to gender, race, age, sex, religion, ethnicity, national
origin, disability, status or sexual orientation.
This commitment ensures that the company conducts all its employment practices in
a non-discriminatory manner. Employees are given fair consideration and are judged
solely on their job-related aptitude, training, skills, and performance.
Staff strength
The Oando Group staff strength as at December 31, 2008 was 431(Four Hundred
and Thirty One). The Group continues to show strong commitment towards the support
of various Industrial Training efforts as well as the mandatory National Youth Service
Scheme.
Management Staff Senior Staff Junior Staff Execut ive
Management
100 322 7 2
Conclusion
It would be apt to describe 2008 as a watershed year in the sense that most of the
plans that had been conceptualised were finally executed and the direct benefits of
their implementation became visible to the organisation.
Environmental Health Safety and Quality
This report highlights Environmental Health Safety and Quality (EHSQ) activities for
2008; it gives an overview of our Environment Health Safety and Quality achievements
as a company in line with our EHSQ Business plan.
In 2008 we achieved zero fatality in our facilities, made a significant progress in
boosting our awareness campaigns and trainings. In addition, the company received
various awards on environmental compliance from government agencies. We were
successful in carrying most of our EHS-MS audits/MFIs as scheduled in our EHSQ
business plan for 2008, with an immense commitment from management from
participation in management facility inspection and other events.
We experienced an increase in the reporting of hazard identification reports (HIRs)
amongst staff and a decrease in incidents those resulting in injuries (LTI). Some
members of staff were commended for their prompt reporting of EHS issues during
our EHSQ week.
Oando has continuously demonstrated through its Quality Management System that
it is able to meet the quality needs of its clients. Oando Quality Management System
has been effective with increased productivity and understanding of the processes,
reduction in errors and re- work. Quality improvement initiatives during the year
included customer survey response feedback, quality audits (both internal and
external) review of quality documents and processes as well as management review
meetings. Trainings were conducted for internal quality auditors, appreciation courses
and internal quality auditors’ course for intending auditors were performed during the
year under review.
Oando has consistently provided superior quality service delivery thereby enhancing
customer satisfaction through its laboratories. Quality service delivery included
product analysis before product receipt and before product loading both at our
terminal and 3rd party locations. Daily product-in-tank analysis, facility inspections
and prompt response to customer complaints were other activities carried out by the
EHSQ team.
Nevertheless, we still experienced a series of road accidents from third party
contractors and in spite of increased awareness campaigns carried out.
Amongst all, most of our key achievements are listed below:
• Successful EHSQ Week
• World Aids Day Commemoration
pg49
• Conducted EHS case for most of our facilities KLP1, Apapa 1 & 2,Onne and
AGI
• Supported Lagos government green environment project by participation in
plant a tree exercise
• EHS –MS Audits, Management facility Inspection and follow up audits
• Achieved series of awards for Environmental Compliance
• Ako- Eko Green Environmental Award (Apapa terminal)
• Green Ribbon Award (Kaduna Lube plant)
• Deployment of the Drug and Alcohol policy.
• Trained 1774 staff/contractors: Trainings such as Managing Safely, Directing
Safely, Defensive Driving for drivers, Advanced Fire Fighting for Fire Marshals,
ISO 14001 Environmental Management System and EHS Level 1, 2 & 3
trainings were conducted.
• Carried out Environmental Evaluation Reports (EERs) for most of our service
stations
• Built up a good relationship with our regulatory bodies
The figure below illustrates the Oando PLC EHS Performance for 2008.
OANDO PLC EHS ’08 PERFORMANCE REVIEW
Acquisition of Own Shares
The Company did not acquire its own shares in year 2008.
Awards
Oando was in year 2008 awarded the Nigerian Stock Exchange Presidential Merit
Award for “Best Quoted Company in the Downstream Petroleum Marketing
Sector” in 2007.
The Nigerian Stock Exchange (NSE) award brings to five the number of times Oando
has won the award. It won in 2001, 2003, 2004, 2006 and 2008. In 2003 and 2004 the
Company also won the coveted Best Quoted Company” by the NSE.
The NSE award underpins the degree of professionalism and significance the Company
commits to corporate governance.
On the International scene, Oando was awarded the “Most Outstanding
Independent Energy Firm” at the 15th African Upstream Conference in Cape
Town, South Africa.
The international upstream award recognised Oando’s fast growing portfolios in the
different areas of the Upstream Sector.
Market Value of Fixed Assets
Substantial interest in shares
Ocean & Oil Investments Limited is the highest single shareholder in the Company,
holding 309,726,290 units representing 34.23% of the issued shares. No other
shareholder holds 5% and above of the issued share capital of the Company.
Audi tors
PriceWaterhouseCoopers, have indicated their willingness to continue in office as the
Company’s auditors in accordance with Section 357(2) of the Companies and Allied
Matters Act, 1990.
By Order of the Board
Oredeji K. Delano (Mrs.)
Company Secretary
• Participated in national and international organized environmental programme.
• Retention of the ISO 9001:2000 Certification for Oando Marketing
• Pre-assessment ISO audit for Oando Gas & Power
The attainment of the Environmental awards has spurred our pursuit into achieving
ISO 14001 Certification for Environmental Management system come 2010.
pg50
In compliance with section 359 (6) of the Companies and Allied Matters Act 1990, wethe members of Oando Plc Audit Committee have, on the documents and informationmade available to us:
a. Reviewed the scope and planning of the audit requirementsb. Reviewed the external Auditors’ Management Controls Report for the year
ended December 31, 2008 as well as the Management response thereto,
And can ascertain that accounting and reporting policies of the company for the yearended December 31, 2008 are in accordance with legal requirements and agreedethical practices.
Dated this 17 day of June 2009
Chief Felix N. Atako J.PChairman, Audit Committee
REPORT OF THE AUDIT COMMITTEE
pg51
Report of the Auditors 52
Statement of Directors Responsibilities 53
Balance Sheet 54
Profit and Loss Accounts 55
Statement of Cash Flows 56
Notes to the Financial Statement 57
Value added Statement 87
Five Year Financial Summary 88
Statement of Unclaimed/ReturnedDividend Warrants 89
Proxy Form 91
Admission Card 93
pg52
PricewaterhouseCoopersChartered Accountants252E Muri Okunola StreetVictoria IslandP.O.Box 2419Lagos, Nigeria
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF OANDO PLC
Report on the consolidated financial statements
We have audited the accompanying financial statements of Oando Plc (the Company) and itssubsidiaries (together, the ‘Group) which comprise of the consolidated balance sheet as of 31December 2008 and the consolidated profit and loss account and consolidated cash flowstatement for the year then ended and a summary of significant accounting policies and otherexplanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and fair presentation of these financial statementsin accordance with Nigerian Statements of Accounting Standards and with the requirements ofthe Companies and Allied Matters Act. This responsibility includes: designing, implementing andmaintaining internal control relevant to the preparation and fair presentation of financial statementsthat are free from material misstatement, whether due to fraud or error; selecting and applyingappropriate accounting policies; and making accounting estimates that are reasonable in thecircumstances.
Auditor’s responsibility
Our responsibility is to express an independent opinion on the financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform our audit toobtain reasonable assurance that the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’sjudgement, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the company’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by the directors, as well as evaluating theoverall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.
Opinion
In our opinion the accompanying financial statements give a true and fair view of the financialaffairs of the group and of the company at 31 December 2008 and of the profit and cash flowsof the group and of the company for the year then ended in accordance with the NigerianStatement of Accounting Standards and the Companies and Allied Matters Act.
Report on other legal requirements
The Companies and Allied Matters Act requires that in carrying out our audit we consider andreport to you on the following matters. We confirm that:
i. we have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit;
ii. in our opinion proper books of account have been kept by the Company and theGroup, so far as appears from our examination of those books;
iii. the Company and the Group’s balance sheet and profit and loss account are inagreement with the books of account.
Chartered AccountantsLagos, Nigeria
17 June 2009
pg53
i. Responsibilities in Respect of the Financial StatementsThe Companies and Allied Matters Act requires the directors to prepare financialstatements for each financial year that give a true and fair view of the state offinancial affairs of the Company at the end of the year and of its profit or loss. Theresponsibilities include ensuring that the Company:
(a) keeps proper accounting records that disclose, with reasonable accuracy, the fi-nancial position of the Company and comply with the requirements of the Compa-nies and Allied Matters Act;
(b) establishes adequate internal controls to safeguard its assets and to prevent anddetect fraud and other irregularities; and
(c) prepares its financial statements using suitable accounting policies supported byreasonable and prudent judgments and estimates, and are consistently applied.
The directors accept responsibility for the annual financial statements, which havebeen prepared using appropriate accounting policies supported by reasonable andprudent judgments and estimates, in conformity with Nigerian Accounting Stan-dards and the requirements of the Companies and Allied Matters Act.
The directors are of the opinion that the financial statements give a true and fairview of the state of the financial affairs of the Company and of its profit or loss. Thedirectors further accept responsibility for the maintenance of accounting recordsthat may be relied upon in the preparation of financial statements, as well as ad-equate systems of internal financial control.Nothing has come to the attention of the directors to indicate that the Companywill not remain a going concern for at least twelve months from the date of thisstatement.
ii. Responsibilities in Respect of Corporate GovernanceIntroductionOando Plc is committed to the principles and implementation of good corporategovernance. The Company recognises the valuable contribution that it makes tolong-term business prosperity and to ensuring accountability to its shareholders.The Company is managed in a way that maximises long term shareholder value andtakes into account the interests of all its stakeholders. Oando Plc believes that fulldisclosure and transparency in its operations are in the interests of good gover-nance. As indicated in the statement of responsibilities of directors and notes tothe financial statements the business adopts standard accounting practices andensures sound internal controls to facilitate the reliability of the financial statements.
The Board of DirectorsThe Board is responsible for setting the Company’s strategic direction, for leading
and controlling the Company and for monitoring activities of the executivemanagement. The Board presents a balanced and understandable assess-ment of the Company’s progress and prospects. The Board consists of theChairman, eight non-executive directors and three executive directors. Thenon- executive directors are independent of management and free from anyconstraints, which could materially interfere with the exercise of their indepen-dent judgment. They have experience and knowledge of the industry, mar-kets, financial and/or other business information to make a valuable contribu-tion to the Company’s progress. The Chief executive officer is a separateindividual from the Chairman and he implements the management strategiesand policies adopted by the Board. They meet at least four times a year.
The Audit CommitteeThe Audit Committee is made up of six members - three directors (all of whom arenon-executive) and three shareholders. The Committee members meet at least thricea year.Its duties include keeping under review the scope and results of the externalaudit, as well as the independence and objectivity of the auditors. The AuditCommittee also keeps under review internal financial controls, compliancewith laws and regulations and the safeguarding of assets. It also reviews the ad-equacy of the plan of the internal audit and reviews its audit reports.
Systems of Internal ControlOando Plc has well-established internal control systems for identifying, managingand monitoring risks. These are designed to provide reasonable assurance that therisks facing the business are being controlled. The corporate internal audit functionof the Company plays a key role in providing an objective view and continuing as-sessment of the effectiveness of the internal control systems in the business. Thesystems of internal controls are implemented and monitored by appropriately trainedpersonnel and their duties and reporting lines are clearly defined.
Code of Business EthicsManagement has communicated the principles in the Company’s Code of Conductto its employees in the discharge of their duties. This code sets the professionalismand integrity required for business operations which covers compliance with thelaw, conflicts of interest, environmental issues, reliability of financial reporting, brib-ery and strict adherence to the principles so as to eliminate the potential for illegalpractices.
Director Director
Statement of Directors’ Responsibilities as at31 December 2008
pg54
BALANCE SHEET AS OF 31 DECEMBER 2008N N’0000
31-Dec-08 31-Dec-07NOTE Group Company Group Company
Non-current assetsProperty, plant and equipment 4 89,903,189 1,539,035 40,318,614 26,039,055Intangible assets 5 22,350,513 597,334 22,464,771 9,699,814Long term Investments 6 2,000 32,131,055 10,000 16,844,848Deferred tax asset 13 1,044,162 - - -Long term receivable 7 14,544,777 44,368 11,138,446 318,391
Current assetsInventories 8 16,068,840 33,942 24,729,531 10,191,326Debtors and prepayments 9 93,702,949 121,366,073 46,813,296 30,294,251Deferred tax asset 13 1,179,580 - - -Bank and cash balances 48,981,689 26,776,003 17,209,397 11,494,703
159,933,058 148,176,018 88,752,224 51,980,280Current liabilitiesCreditors and accruals 10 45,242,536 74,011,951 41,409,519 20,906,936Dividend payable 1,249 1,249 1,910 1,910Deferred tax 13 437,329 - - -Current income tax liabilities 27 3,355,327 613,514 1,308,107 1,020,443Borrowings 11 142,347,242 48,349,488 52,634,682 28,223,938
191,383,683 122,976,202 95,354,218 50,153,227
Net current (liabilities)/assets (31,450,625) 25,199,816 (6,601,994) 1,827,053
Non-current liabilitiesBorrowings 11 41,861,113 25,382,404 17,730,352 7,925,558Other non-current liabilities 12 934,458 - 726,853 673,734Deferred taxation 13 7,482,795 910,683 889,405 849,344Retirement benefit obligation 14 - - 141,671 141,671Provision for other liabilities & charges 15 1,236,917 - 425,279 425,279
51,515,283 26,293,087 19,913,560 10,015,586Net Assets
44,878,733 33,218,521 47,416,277 44,713,575Capital and Reserves attributable to equity holdersShare capital 16 452,442 452,442 377,035 377,035Share premium account 17 29,716,870 29,716,870 29,877,741 29,877,741Revaluation reserve 18 7,215,257 217,242 10,652,936 10,652,936Retained earnings 19 7,343,127 2,831,967 6,321,140 3,805,863
44,727,696 33,218,521 47,228,852 44,713,575Minority interest 20 151,037 - 187,425 -Total Equity 44,878,733 33,218,521 47,416,277 44,713,575
The financial statements and notes on pages 54 to 88 were approved by the Board of Directors on 4 June 2009 and signed on its behalf by:
DIRECTORS:
pg55
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2008
N’00031-Dec-08 31-Dec-07
NOTE Group Company Group Company
Turnover 21 339,420,435 6,837,741 185,892,083 131,007,169Cost of sales (299,810,537) - (164,443,490) (115,595,914)Gross profit 39,609,898 6,837,741 21,448,593 15,411,255Selling and marketing costs (7,144,126) - (5,722,171) (5,722,171)Administrative expenses 22 (17,420,675) (1,104,004) (10,958,316) (7,280,183)Interest received 23 4,548,759 4,308,339 871,336 507,155Other operating income 24 1,816,444 365,029 2,471,002 1,707,933Operating profit 21,410,300 10,407,105 8,110,444 4,623,989Interest payable and similar charges 25 (10,667,689) (3,895,439) (1,296,716) (906,793)Profit before taxation 26 10,742,611 6,511,666 6,813,728 3,717,196Taxation 27 (2,399,286) (168,099) (1,333,313) (1,045,714)Profit after taxation 8,343,325 6,343,567 5,480,415 2,671,482
Attributable to:Equity holders of the company 19 8,339,273 6,343,567 4,755,009 2,671,482Pre acquisition profit 701,370Minority interests 20 4,052 - 24,036 -
8,343,325 6,343,567 5,480,415 2,671,482
Earnings per share for profit attributable to equityholders of the company during the year:
Basic earnings per share (kobo) 28 922 701 751 422
Diluted earnings per share (kobo) 28 922 701 751 422
The accounting policies and notes on pages 57 to 86 form an integral part of these financial statements.
pg56
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2008
N’00031-Dec-08 31-Dec-07
NOTE Group Company Group CompanyCash flows from operating activitiesNet cash flow from operating activities beforechanges in working capital 29 22,689,041 5,315,467 7,912,509 5,092,426Net decrease in working capital 30 (34,210,938) (19,219,815) (2,723,127) (4,716,816)Decrease in pre-operational expenses - - 450,122 -Income tax paid 27 (2,105,695) (583,836) (678,656) (567,057)Staff gratuity paid 14 (141,671) (141,671) (120,764) (120,764)
Net cash (used in)/generated from operating activities (13,769,263) (14,629,855) 4,840,084 (312,211)
Cash flows from investing activitiesPurchase of property plant and equipment (51,771,163) (572,179) (13,001,030) (755,389)Purchase of software (67,957) (64,595) (722,652) (682,072)Investment in subsidiaries - (43,780) - -Additional consideration in subsidiary undertaking - - - (550,147)Payments relating to pipeline construction 7 (5,037,374) - (7,657,559) -Pipeline construction costs recovery 7 1,737,170 - 1,125,944 -Payment to acquire exploration rights in marginal fields - - (1,106,377) (1,106,377)Investment in exploration activities - - (1,480,211) (125,094)Proceeds from sale of property plant and equipment 250,812 - 1,711,094 1,693,083Interest received 4,548,759 4,308,339 871,336 507,155
Cash (used in)/generated from investing activities (50,339,753) 3,627,785 (20,259,455) (1,018,841)
Cash flows from financing activitiesRepayment of long term loan (2,099,921) (6,929,875) (720,332) (135,000)Proceeds from long term loans 28,136,372 23,545,000 20,377,121 11,048,500Repayment of import finance facilities (1,754,643) (27,691) (2,134,438) (4,537,438)Share issue expenses (160,871) (160,871) (226,019) (226,019)Proceeds from finance lease 103,899 17,060 204,680 204,680Repayment of finance lease (247,407) (340,043) (506,833) (506,833)Proceeds from other short term loans 74,575,348 28,046,662 11,708,985 7,246,333Increase/(decrease) in bank overdrafts 15,129,673 (6,728,717) (169,268) (1,198,414)Dividend paid (7,242,717) (7,242,717) (2,289,203) (2,289,203)Interest paid (10,640,046) (3,895,439) (1,273,646) (883,723)
Net cash from financing activities 95,799,687 26,283,369 24,971,047 8,722,883Net change in cash and cash equivalents 31,690,671 15,281,300 9,551,676 7,391,831Cash and cash equivalent at the beginning of the year 17,209,397 11,494,703 7,605,153 4,102,872Exchange difference 81,621 - 52,568 -Cash and cash equivalents at end of the year 48,981,689 26,776,003 17,209,397 11,494,703
Cash at year end is analysed as follows:Cash at bank and in hand 16,947,560 1,719,086 6,949,679 4,279,932Fixed deposits 32,034,129 25,056,917 10,259,718 7,214,771
48,981,689 26,776,003 17,209,397 11,494,703
The accounting policies and notes on pages 57 to 86 form an integral part of these financial statements.
pg57
1. General information
Oando Plc (formerly Unipetrol Nigeria Plc) was registered by a special resolu-tion as a result of the acquisition of the shareholding of Esso Africa Incorpo-rated (principal shareholder of Esso Standard Nigeria Limited) by the FederalGovernment of Nigeria. It was partially privatised in 1991 and fully privatised inthe year 2000 following the disposal of the 40% shareholding of Federal Gov-ernment of Nigeria to Ocean and Oil Investments Limited and the Nigerianpublic. In December 2002, the company merged with Agip Nigeria Plc followingits acquisition of 60% of Agip Petroli’s stake in Agip Nigeria Plc. The Companyformally changed its name from Unipetrol Nigeria Plc to Oando Plc in Decem-ber 2003.
Oando Plc (“the Company”) and its subsidiaries (together “the Group”) havetheir primary listing on the Nigerian Stock Exchange (NSE) and its secondarylisting on the JSE (Jobrog Stock Exchange). The Group has marketing anddistribution outlets in Nigeria, Ghana and Togo and other smaller markets alongthe West African coast. During the year, Oando Plc transferred its petroleummarketing business and equity interests in other marketing companies to a newfully owned subsidiary, Oando Marketing Limited. The Group has 100% inter-ests respectively in two trading companies, Oando Trading (Bermuda) andOando Supply and Trading (Nigeria). These entities mainly supply petroleumproducts to marketing companies and large industrial customers.
The Group provides energy services to Exploration and Production (E&P)companies through its fully owned subsidiary, Oando Energy Services. TheGroup also operates in the E&P sector through Oando Exploration and Pro-duction Limited (100%), Oando Production and Development Company (95%)and, recently, OML 125 & 134 Limited. Other subsidiaries within the Group andtheir respective lines of business, including Gas and Power, are shown in note 34.
2. Summary of significant accounting policies2.1 Basis of preparation
The financial statements are prepared in compliance with Nigerian State-ments of Accounting Standards (SAS). The financial statements are pre-sented in the functional currency, Nigeria Naira (N), rounded to the nearestthousand, and prepared under the historical cost convention as modifiedby the revaluation of certain property, plant and equipment.
The preparation of financial statements in conformity with generallyaccepted accounting principles requires the use of estimates and as-sumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses dur-ing the reporting period. Although these estimates are based on theDirectors’ best knowledge of current events and actions, actual resultsultimately may differ from those estimates.
2.2 Consolidation(a) Subsidiaries
Subsidiaries include all entities (including special purpose entities) overwhich the Group has the power to govern the financial and operatingpolicies generally accompanying a shareholding of more than one halfof the voting rights. The existence and effect of potential voting rightsthat are currently exercisable or convertible are considered when as-sessing whether the Group controls another entity. Subsidiaries arefully consolidated from the date on which control is transferred to theGroup. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisi-tion of subsidiaries by the Group. The cost of the acquisition is mea-sured as the fair value of the assets given, equity instruments issuedand liabilities incurred or assumed and the date of exchange plus costsdirectly attributable to the acquisition. Identifiable assets acquired andliabilities and contingent liabilities assumed in a business combinationare measured initially at their fair values at the acquisition date irrespec-tive of the extent of any minority interest. The excess of the cost ofacquisition over the fair value of the Group’s share of the identifiable netassets acquired is recorded as goodwill. If the cost of acquisition is lessthan the fair value of the net assets of the subsidiary acquired, thedifference is recognised directly in the equity as capital reserve onconsolidation.
All balances and unrealised surpluses and deficits on transactions betweengroup companies have been eliminated. Where necessary, accounting poli-cies for subsidiaries have been changed to ensure consistency with thepolicies adopted by the Company. Separate disclosure (in equity) is made ofMinority Interests.
(b) AssociatesAssociates are all entities over which the Group has significant influencebut not control, generally accompanying a shareholding of between 20%and 50% of the voting rights. Investments in associates are accounted forby the equity method of accounting and are initially recognised at cost. TheGroup’s investment in associates includes goodwill (net of any accumu-lated impairment loss) identified on acquisition.
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2008
pg58
The Group’s share of its associates’ post-acquisition profits or lossesis recognised in the income statement, and its share of post-acquisitionmovements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of theinvestment. When the Group’s share of losses in an associate equalsor exceeds its interest in the associate, including any other unsecuredreceivables, the Group does not recognise further losses, unless ithas incurred obligations or made payments on behalf of the associate.Unrealised gains on transactions between the Group and its associ-ates are eliminated to the extent of the Group’s interest in the associ-ates. Unrealised losses are also eliminated unless the transaction pro-vides evidence of an impairment of the asset transferred.
The accounting policies of the associates are consistent with the poli-cies adopted by the Group.
All subsidiaries and associates have uniform calendar year ends.
2.3 Segment reportingA business segment is a group of assets and operations engaged inproviding products or services that are subject to risks and returnsthat are different from those of other business segments. A geographi-cal segment is engaged in providing products or services within aparticular economic environment that are subject to risks and returnsthat are different from those of segments operating in other economicenvironments.
2.4 Foreign currency translation(a) Transactions and balances
Transactions in foreign currencies during the year are converted intothe functional currency, Nigeria Naira, using the exchange rates pre-vailing at the dates of the transactions. Foreign exchange gains andlosses resulting from the settlement of such transactions and from thetranslation at year-end exchange rates of monetary assets and liabili-ties denominated in foreign currencies are recognised in the profit andloss account.
(b) Group companiesIn accordance with the Statement of Accounting Standards (SAS 7) thefinancial statements of foreign entities, prior to consolidation, are trans-
lated into Naira using the Closing Rate Method as follows:(a) assetsand liabilities, both monetary and non-monetary are translated at theclosing rate;(b) income statement items are translated at the closingrate; (c) the exchange differences resulting from translating the open-ing net investment in the foreign entity at an exchange rate differentfrom that at which it was previously reported is taken to a CapitalReserve Account.
2.5 Property, Plant and EquipmentAll categories of property, plant and equipment are initially recorded at cost.Buildings and freehold land are subsequently shown at market value, basedon triennial valuations by external independent valuers, less subsequentdepreciation for buildings. All other property, plant and equipment is statedat historical cost less depreciation.
Subsequent costs are included in the asset’s carrying amount orrecognised as a separate asset, as appropriate, only when it is prob-able that future economic benefits associated with the item will flow tothe company and the cost of the item can be measured reliably. Allother repairs and maintenance are charged to the profit and loss ac-count during the financial period in which they are incurred.Increases in the carrying amount arising on revaluation of land andbuildings are credited to revaluation reserve in shareholders’ equity.Decreases that offset previous increases of the same asset arecharged against fair value reserves directly in equity; all other de-creases are charged to the income statement. An asset’s carryingamount is written down immediately to its recoverable amount if theasset’s carrying amount is greater than its estimated recoverableamount.
Gains and losses on disposals are determined by comparing pro-ceeds with carrying amount. These are included in the income state-ment. When revalued assets are sold, the amounts included in revalu-ation reserves are transferred to income statement.
DepreciationDepreciation is calculated using the straight-line method to allocate theircost or revalued amounts to their residual values over their estimated use-ful lives, as follows:
pg59
%
Building 2 - 5Bulk Plants, Terminal and Equipment 5 - 121/2Motor Vehicles 20 - 25Other Assets and Equipment 5 - 331/3
2.6 Upstream activitiesThe “full cost” concept is applied in accounting for all oil and gas explora-tion and development activities. All exploratory drilling and developmentcosts are capitalised pending evaluation whether or not the activities resultin the discovery of producible reserves. Following such a determination,the capitalised costs are then amortised against the results of successfulfinds on a ‘unit of production’ basis.
Costs incurred in the production of crude oil from the Group’s propertiesare charged to the profit and loss account of the period in which theyare incurred.
Ceiling tests are performed annually on a country-wide basis to determinewhether the carrying amounts of capitalised costs exceeds the present valueof estimated discounted cash flows. Any excess of carrying amounts de-termined are written off to the profit and loss account of the period.
Tangible fixed assets related to oil and gas producing activities aredepleted on a unit of production basis over the proved developed re-serves of the field concerned except in the case of assets whoseuseful lives are shorter than the lifetime of the field, in which case thestraight-line method is applied. Producible wells are not depleted untilthey form part of a producing field.
Rights and concessions are depleted on the unit-of-production basisover the total proved reserves of the relevant area.
Estimated site restoration and abandonment costs are based on cur-rent requirements, technology and price levels and are stated at fairvalue, and the associated asset retirement costs are capitalized aspart of the carrying amount of the related tangible fixed assets. Thefair value calculation of the liability is based on the economic life of theproduction assets and discounted using the group’s average cost ofborrowing. The obligation is reflected under provisions in the balancesheet.
2.7 Intangible assets(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over thefair value of the Group’s share of the net identifiable assets of theacquired subsidiary/associate at the date of acquisition. Goodwill onacquisitions of subsidiaries is included in intangible assets. Goodwillon acquisitions of associates is included in investments in associates.Goodwill is tested annually for impairment and carried at cost lessaccumulated impairment losses. Gains and losses on the disposal ofan entity include the carrying amount of goodwill relating to the entitysold.
Goodwill is allocated to cash-generating units for the purpose of im-pairment testing. Each of those cash-generating units represents theGroup’s investment in each country of operation by each primaryreporting segment.
Until 31 December 2005, goodwill was amortised on a straight linebasis over a period between 5 to 20 years and assessed for anindication of impairment at each balance sheet date. However, thegroup early adopted SAS 26 issued by the Nigerian Accounting Stan-dards Board and ceased amortisation of goodwill from 1 January2006. Goodwill is now tested for impairment annually, as well aswhen there are indications of impairment.
pg60
(b) Computer softwareAcquired computer software licenses are capitalised on the basis ofthe costs incurred to acquire and bring to use the specific software.These costs are amortised over their estimated useful lives (three tofive years).
Costs associated with maintaining computer software programmesare recognised as an expense as incurred. Expenditure on internally-developed software is capitalised if it meets the criteria for capitalisingdevelopment costs. Direct costs include the software development,employee costs and an appropriate portion of relevant overheads.Computer software development costs recognised as assets are am-ortised over their estimated useful lives (not exceeding five years).
2.8 Long term receivable - pipeline cost recoveryLong term receivable in respect of pipeline cost recovery is accounted forat cost, less provision for impairment. Provision for impairment of the longterm receivable is established when there is objective evidence that theGroup will not be able to collect all amounts due according to the originalterms of the receivable.
2.9 Impairment of assetsAssets are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recover-able. An impairment loss is recognised for the amount by which theasset’s carrying amount exceeds its recoverable amount. The recov-erable amount is the higher of an asset’s fair value less costs to selland value in use. For the purposes of assessing impairment, assetsare grouped at the lowest levels for which there are separately identi-fiable cash flows (cash-generating units).
2.10 InventoriesInventories are stated at lower of cost and net realisable value. Costincludes expenditure incurred in acquiring and transporting the inven-tory to its present location. Cost is determined on using the weightedaverage method. For finished goods and work in progress, raw mate-rials, direct labour, other direct costs and related production overheads(based on normal operating capacity). It excludes borrowing costs.Net realisable value is the estimated selling price in the ordinary courseof business, less applicable variable selling expenses.
2.11 Trade receivablesTrade receivables are stated after provisions have been made fordebts considered doubtful of recovery. A provision for impairment of
trade receivables is established when there is objective evidence thatthe Group will not be able to collect all amounts due according to theoriginal terms of the receivables. The amount of the provision isrecognised in the income statement.
2.12 Cash and cash equivalentsCash and cash equivalents includes cash in hand, deposits held at call withbanks and other short-term highly liquid investments with original maturitiesof three months or less.
2.13 BorrowingsBorrowings are recognised initially at fair value, net of transaction costsincurred. Borrowings are subsequently stated at amortised cost; any differ-ence between the proceeds (net of transaction costs) and the redemptionvalue is recognised in the income statement over the period of the borrow-ings using the effective interest method.Borrowings are classified as cur-rent liabilities unless the Group has an unconditional right to defer settle-ment of the liability for at least 12 months after the balance sheet date.
Borrowing costsBorrowing costs are recognised as an expense in the period in which theyare incurred, except when they are directly attributable to the acquisi-tion, construction or production of a qualifying asset.
2.14 Deferred income taxDeferred income tax is provided in full, using the liability method, ontemporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the consolidated financial state-ments. However, if the deferred income tax arises from initial recogni-tion of an asset or liability in a transaction other than a business combi-nation that at the time of the transaction affects neither accounting nortaxable profit or loss, it is not accounted for. Deferred income tax isdetermined using tax rates (and laws) that have been enacted or sub-stantively enacted by the balance sheet date and are expected to applywhen the related deferred income tax asset is realised or the deferredincome tax liability is settled.
Deferred income tax assets are recognised to the extent that it is prob-able that future taxable profit will be available against which the tempo-rary differences can be utilised.
Deferred income tax has not been provided on temporary differencesarising on investments in subsidiaries and associates, as the timing ofthe reversal of the temporary difference is controlled by the Group and
pg61
it is probable that the temporary difference will not reverse in theforeseeable future. Where this ceases to be the case, deferred taxwill be provided for.
2.15 Employee benefitsThe Group operates a defined contribution retirement benefit scheme forits employees. A defined contribution plan is a pension plan under whichthe Company pays fixed contributions into a separate entity. The Companyhas no legal or constructive obligations to pay further contributions if thefund does not hold sufficient assets to pay all employees the benefits relat-ing to employee service in the current and prior periods.
The assets of all schemes are held in separate trustee administered funds,which are funded by contributions from both the company and employees.The Company’s contributions to the defined contribution schemes arecharged to the profit and loss account in the year to which they relate.
2.16 ProvisionsIn accordance with SAS 23, provisions for environmental restoration, re-structuring costs and legal claims are recognised when: the Group has apresent legal or constructive obligation as a result of past events; it ismore likely than not that an outflow of resources will be required tosettle the obligation; and the amount has been reliably estimated. Re-structuring provisions comprise lease termination penalties and em-ployee termination payments. Provisions are not recognised for futureoperating losses.
Where there are a number of similar obligations, the likelihood that anoutflow will be required in settlement is determined by considering theclass of obligations as a whole. A provision is recognised even if thelikelihood of an outflow with respect to any one item included in thesame class of obligations may be small.
Provisions are measured at the present value of management’s bestestimate of the expenditure required to settle the present obligation atthe balance sheet date. The discount rate used to determine the presentvalue reflects current market assessments of the time value of money.
Decommissioning liabilitiesWith effect from 31 December 2006, a provision is recognised for thedecommissioning liabilities for underground tanks. Based on manage-ment estimation of the future cash flows required for the decommis-sioning of those assets, a provision is recognised and the correspond-ing amount added to the cost of the asset under property plant and
equipment. The present values are determined using the company’saverage cost of borrowing. Subsequent depreciation charges of theasset are accounted for in accordance with the Company’s deprecia-tion policy and the accretion of discount (i.e. the increase during theperiod in the discounted amount of provision arising from the passageof time) included in finance costs.
2.17 Share capitalOrdinary shares are classified as equity. Incidental costs directly attribut-able to the issue of new shares or options are shown in equity as a deduc-tion, net of tax, from the proceeds.
2.18 Revenue recognitionRevenue comprises the fair value of the sale of goods and services,net of value-added tax, rebates and discounts and after eliminatingsales within the Group.
Discounts are usually negotiated with commercial customers and are some-times given on a transaction basis or fixed per customer, subject to subse-quent reviews. The Group also gives rebates per litre of petroleum prod-ucts sold to retailers who operate their own outlets.
Revenue is recognised as follows:(a) Sale of products
Revenue from sale of petroleum products and gas is recognised when aGroup entity has delivered products to the customer, the customer hasaccepted the products and collectability of the related receivables isreasonably assured.
(b) Sale of servicesRevenue from sale of services, such as freight and through-put charges, isrecognised in the accounting period in which the services are rendered, byreference to completion of the specific transaction assessed on the basisof the actual service provided as a proportion of the total services to beprovided.
(c) Dividend incomeDividend income is recognised when the right to receive payment is estab-lished.
(d) Interest incomeInterest income is recognised on a time proportion basis using theeffective interest rate.
pg62
2.19 LeasesOperating leasesLeases in which a significant portion of the risks and rewards of ownershipare retained by the lessor are classified as operating leases. Pay-ments made under operating leases (net of any incentives receivedfrom the lessor) are charged to the income statement on a straight-linebasis over the period of the lease.
Finance leasesLeases in which ownership, risks and rewards are transferred to the les-see, who is obligated to pay such costs as insurance, maintenance andsimilar charges on the asset are classified as finance leases. Assets underfinance lease are capitalised and depreciated over their estimated use-ful lives in line with the Group’s policy for assets of the same class.Finance charges are allocated over the lease term.
2.20 Dividend distributionDividend distribution to the Company’s shareholders is recognised as a liability inthe Group’s financial statements in the period in which the dividends are approvedby the Company’s shareholders.
3. Segment information
3.1 Primary reporting format - business segmentsThe Group is broadly organised on a worldwide basis into five mainbusiness segments within the energy industry.
(i) Exploration and production of oil and gas (E&P)This segment involves the exploration for and production of oil and gasthrough the acquisition of rights in oil blocks on the Nigerian continentalshelf and deep offshore.
(ii) Refining and marketing of petroleum productsThis segment involves the refining of crude and the marketing and sale ofpetroleum products. Over the years, the Group had focused primarily onthe marketing of petroleum products. Presently, the Group is in the processof acquiring and developing a refinery business. The activities of the tradingcompanies are reported under this segment.
( i i i ) Gas and PowerThe Group through the activities of its subsidiaries, Gaslink and East Hori-zon Gas Company, is involved in the distribution of natural gas. The Groupalso incorporated a Power company to serve a niche in Nigeria’s powersector, by providing reliable power to industrial customers.
(iv) Energy servicesThis segment involves the provision of services such as drilling and comple-tion fluids and solid control waste management; oil-well cementing and otherservices to upstream companies.
(v) Corporate & othersThese include company activities that cannot be directly allocated to any ofthe above segments.
The segment results for the year ended 31 December 2008 are as follows:
N’000
Exploration Refining & Gas & Energy Corporate && Production marketing Power Services Others Group
Total gross segment sales 13,890,880 314,944,308 6,491,321 4,093,926 - 339,420,435Inter-segment sales - - - - - -Sales 13,890,880 314,944,308 6,491,321 4,093,926 - 339,420,435
Operating profit/(loss) 4,993,783 13,825,841 504,535 (1,025,749) 3,111,890 21,410,300Finance cost (911,994) (5,327,669) (255,394) (277,193) (3,895,439) (10,667,689)
Profit before income tax 10,742,611Income tax expense (2,399,286)Profit for the year 8,343,325
pg63
The segment results for the year ended 31 December 2007 are as follows:N’000
Exploration Refining & Gas & Energy Corporate && Production marketing Power Services Others Group
Total gross segment sales - 171,388,754 4,388,751 10,438,575 - 186,216,080Inter-segment sales - (323,997) - - - (323,997)Sales - 171,064,757 4,388,751 10,438,575 - 185,892,083Operating (loss)/profit (166,448) 7,466,263 661,023 149,606 - 8,110,444Finance cost - (1,001,403) (14,323) (280,990) - (1,296,716)
Profit before income tax 6,813,728Income tax expense (1,333,313)Profit for the year 5,480,415
Inter-segment revenue under refining & marketing in 2007 represents sales to the energy services segment. Inter-segment transactions are entered into under thenormal commercial terms and conditions that would also be available to unrelated third parties. There were no intersegment sales in current year.
The segment assets and liabilities as at 31 December 2008 and capital expenditure for the year then ended are as follows:
Exploration Refining & Gas & Energy Corporate && Production marketing Power Services Others Group
Assets 54,677,262 142,622,114 21,328,241 24,794,336 42,132,002 285,553,955Liabilities 7,835,435 116,800,608 17,586,843 14,716,663 74,683,965 231,623,514
Capital Expenditure* 44,684,324 18,393,891 1,992,471 21,913,974 2,491,311 89,475,971
The segment assets and liabilities as at 31 December 2007 and capital expenditure for the year then ended are as follows:
Exploration Refining & Gas & Energy Corporate && Production marketing Power Services Others Group
Assets 1,660,730 126,340,802 16,712,752 17,969,771 - 162,684,055Liabilities 295,615 90,049,075 12,676,528 10,049,048 - 113,070,266
Capital Expenditure* 1,480,211 2,453,861 13,999 11,901,658 - 15,849,729
pg64
Segment assets consist primarily of property, plant and equipment,intangible assets, investments, inventories, receivables and operatingcash. They exclude deferred taxation.
Segment liabilities comprise operating liabilities. They exclude corpo-rate and deferred taxation.
*Capital expenditure comprises additions to property, plant and equip-ment and intangible assets (excluding revaluation surplus, decommis-sioning costs and goodwill).
3.2 Secondary reporting format - geographical segments
The Group’s business segments operate in three main geographicalareas.
The home country of the Company - which is also the main operatingcompany - is Nigeria. The Group’s sales are mainly in Nigeria and othercountries within and outside the West African coast, namely, Ghana,Togo, and Liberia. ‘Other countries’ include Bermuda and the BritishVirgin Island.
Segment information on a geographical basis for the year ended and as at 31 December 2008 are as follows:N’000
Exploration Refining & Gas & Energy Corporate && Production marketing Power Services Others Group
SalesWithin Nigeria 13,890,880 249,834,486 6,491,321 4,093,926 - 274,310,613Other West African countries - 9,317,760 - - - 9,317,760Other countries - 55,792,062 - - - 55,792,062
13,890,880 314,944,308 6,491,321 4,093,926 - 339,420,435
Total assetsWithin Nigeria 54,677,262 131,758,976 21,328,241 3,357,464 42,132,002 253,253,945Other West African countries - 2,335,478 - - - 2,335,478Other countries - 8,527,660 - 21,436,872 - 29,964,532
54,677,262 142,622,114 21,328,241 24,794,336 42,132,002 285,553,955
Capital expenditureWithin Nigeria 44,684,324 18,156,468 1,992,471 21,913,974 2,491,311 89,238,548Other West African countries 237,423 237,423Other countries -
44,684,324 18,393,891 1,992,471 21,913,974 2,491,311 89,475,971
pg65
Segment information on a geographical basis for the year ended and as at 31 December 2007 are as follows:N’000
Exploration Refining & Gas & Energy Corporate && Production marketing Power Services Others Group
Within Nigeria - 152,246,366 4,388,751 10,438,575 - 167,073,692Other West African countries - 8,038,206 - - - 8,038,206Other countries - 10,780,185 - - - 10,780,185
- 171,064,757 4,388,751 10,438,575 - 185,892,083
Total assetsWithin Nigeria 1,660,730 106,320,469 16,712,752 17,969,771 - 142,663,722Other West African countries - 2,861,143 - - - 2,861,143Other countries - 17,159,190 - - - 17,159,190
1,660,730 126,340,802 16,712,752 17,969,771 - 162,684,055
Capital expenditureWithin Nigeria 1,480,211 2,363,379 13,999 11,901,658 - 15,759,247Other West African countries - 49,921 - - - 49,921Other countries - 40,561 - - - 40,561
1,480,211 2,453,861 13,999 11,901,658 - 15,849,729
Sales are disclosed based on the country in which the customer is located. Total assets are allocated based on where the assets are located.
Capital expenditure is allocated based on where the assets are located.
pg66
4 Property, plant and equipmentN’000
(4.1) GroupFixtures,
Upstream Land and Plant and Motor fittings, and Construction Assets* buildings machinery vehicles equipment in progress Total
Cost/ValuationAt 1 January 2008 7,248,770 14,608,580 2,793,255 1,105,163 2,400,717 14,270,487 42,426,972Transfer/reclassification - 84,024 - (460) 101,526 (185,090) -Additions 41,531,993 55,094 365,285 436,721 197,180 12,967,524 55,553,797Decommissioning asset addition 783,995 - - - - - 783,995Reversal of revaluation surplus - (424,098) (257,506) - - - (681,604)Disposals (24,957) (2,936) (49,188) (115,247) (103,733) (296,061)Exchange difference - (9,831) (5,714) (3,833) 921 (2,802) (2,802)
At 31 December 2008 49,564,758 14,288,812 2,892,384 1,488,403 2,585,097 26,946,386 26,946,386
DepreciationAt 1 January 2008 - 19,992 167,455 588,341 1,332,570 - 2,108,358Transfer/reclassification - - (186) - 186 - -Charge for the year 4,096,408 625,519 588,723 269,399 212,916 - 5,792,965Disposals - (1,640) (1,132) (24,614) (12,574) - (39,960)Exchange difference - (1,349) 1,061 (1,719) 3,295 1,288
At 31 December 2008 4,096,408 642,522 755,921 831,407 1,536,393 - 7,862,651
Net book valueAt 31 December 2008 45,468,350 13,646,290 2,136,463 656,996 1,048,704 26,946,387 89,903,189
At 31 December 2007 7,248,770 14,588,588 2,625,800 516,822 1,068,147 14,270,487 40,318,614
* Following the acquisition of tangible oil and gas producing assets during the year and the transfer of concession rights and related exploration costs to OandoExploration and Production Limited, all exploration and production activities have been reclassified from intangible assets to property, plant and equipment. Detailednotes in respect of upstream activities and further analysis into various asset categories are shown in note 36. Prior year comparatives have also been restated.
Depreciation, depletion and amortisation of upstream assets for the year are included in cost of sales.
pg67
(4.2) Company
N’000
Upstream Land and Plant and Motor fittings, and Construction Assets* buildings machinery vehicles equipment in progress Total
Cost/ValuationAt 1 January 2008 5,659,632 14,519,212 2,586,914 819,190 2,041,635 2,063,044 27,689,627Transfer/reclassification* (5,659,632) (13,526,724) (2,305,223) (631,061) (1,494,759) (1,877,058) (25,494,457)Additions - - 19,870 277,381 85,703 189,225 572,179Revaluation surplus written off - (424,098) (257,506) - - - (681,604)Disposals - - - - - - -
At 31 December 2008 - 568,390 44,055 465,510 632,579 375,211 2,085,745
DepreciationAt 1 January 2008 - - 47,126 467,430 1,136,016 - 1,650,572Transfer/reclassification - - (35,029) (397,618) (889,628) - (1,322,275)Charge for the year - 28,864 3,136 91,840 94,573 - 218,413Disposals - - - - - - -
At 31 December 2008 - 28,864 15,233 161,652 340,961 - 546,710
Net book valueAt 31 December 2008 - 539,526 28,822 303,858 291,618 375,211 1,539,035
At 31 December 2007 5,659,632 14,519,212 2,539,788 351,760 905,619 2,063,044 26,039,055
*Transfers/reclassifications are all to subsidiary entities.
Property, plant and equipment include the following assets which were held under finance leases at year end.
Plant and Motor TotalMachinery vehicles
Cost 836,708 684,604 1,521,312Accumulated depreciation (320,455) (360,659) (681,114)
516,253 323,945 840,198
pg68
Assets acquired under finance lease have been capitalised and depreciated in accordance with the requirements of the Statement of Accounting Standard No. 11.Depreciation charges for the year are included in administrative expenses.
RevaluationBuildings and freehold land and Plant and machinery were revalued in 2007 by Ubosi & Elleh, independent valuers. Valuations were done on the basis of the open marketvalue. The book values of the assets have been adjusted to the revaluations and the resultant surpluses, net of deferred income tax credited to the revaluation surplus inshareholders equity.
N’000 31-Dec-08 31-Dec-07
5 Intangible assets Group Company Group Company
Goodwill (note 5.1) 21,706,057 - 21,738,939 9,017,742Software costs (note 5.2) 644,456 597,334 725,832 682,072
22,350,513 597,334 22,464,771 9,699,814
31-Dec-08 31-Dec-07
(5.1) Goodwill Group Company Group CompanyMovement in goodwill is analysed as follows:
At 1 JanuaryCost 23,489,044 10,609,108 11,138,753 10,609,108Additions - - 12,350,291 -Transfer to Oando Marketing - (10,609,108) - -Write off* (32,882) - - -
At 31 December 23,456,162 - 23,489,044 10,609,108
AmortisationAt 1 January 1,750,105 1,591,366 1,750,105 1,591,366Transfer to Oando Marketing - (1,591,366) - -
At 31 December 1,750,105 - 1,750,105 1,591,366
Net book value at 31 December 21,706,057 - 21,738,939 9,017,742
In accordance with the group’s accounting policy, goodwill is not amortised but individually tested annually for impairment.*Write off relates to deferred cost previously included in goodwill now written off.
pg69
Impairment testing of goodwillGoodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the business segments. Impairment tests were conducted as at thebalance sheet date based on value in use calculations. The calculations used cash flow projections based on financial forecasts covering a five year-period. Thediscount rate used is the pre-tax interest rate that reflects the current market assessment of the risks specific to the business segment.Based on the impairment test, the carrying amount of goodwill is not higher than the recoverable value. Accordingly, no impairment loss has been recognised.
(5.2) Software costsIn accordance with the Group’s accounting policy, deferred software costs are amortised over 5years. Current year charge of N149.3 million is included in other administrativeexpenses.
6 Long term investments N’000 31-Dec-08 31-Dec-07
Group Company Group Company
Transcorp Plc 10,000 10,000 10,000 10,000Provision for diminution in value (8,000) (8,000) - -
2,000 2,000 10,000 10,000Unquoted sharesAt 1 January - 16,834,848 - 2,080,320Additions - 15,616,830 - 14,754,528Transfer to Oando Marketing Limited - (322,623) - -
At 31December - 32,129,055 - 16,834,848
Total investments 2,000 32,131,055 10,000 16,844,848
On 28th June 2007, the shareholders of the company, through a court ordered meeting, approved the transfer of its downstream petroleum marketing assets, liabilities and undertak-ings to Oando Marketing Limited in exchange for shares in Oando Marketing. The company effected the transfer on 1 January 2008.
The total net assets transferred was N15.573billion in exchange for 350million ordinary shares of 0.50k each in Oando Marketing Limited.
The carrying amount of investments transferred are analysed as follows:UNITAB Nigeria Limited 20,400Oando (Ghana) Limited 146,743Unipetrol Sierra Leone 4,400Oando Benin 3,997Oando Togo SA 171,883
347,423Provision for diminution in value (24,800)
322,623
pg70
N’000 31-Dec-08 31-Dec-07
Group Company Group CompanyAnalysis of the companyís unquoted investment is as follows:Akute Power Limited - 2,500 - -Apapa SPM Limited - 19,125 - -East Horizon Gas Co. Ltd. - 10,000 - 10,000Gaslink Nigeria Limited - 6,933,125 - 6,933,124Oando Energy Services Limited - 550,497 - 550,497Oando Exploration and Production Limited - 2,039,152 - 2,039,152Oando Gas and Power Limited - 1,000 - 1,000Oando Lekki Refinery Limited - 2,500 - 2,500Oando Marketing Limited - 15,573,050 - -Oando Production and Development Company Limited - 3,315,775 - 3,315,775Oando Port Harcourt refinery Limited - 2,500 - 2,500Oando Properties Limited - 250 - -Oando Searex VI Limited - - - -Oando Searex XII Limited - - - -Oando Supply and Trading Limited - 763,344 - 763,344Oando Trading Limited Bermuda - 2,894,333 - 2,894,333OML 112 & 117 Limited - 6,538 - -OML 125 & 134 BVI Limited - 6,328 - -OML 125 & 134 Limited - 2,500 - -UNITAB Nigeria Limited - - - 20,400Oando (Ghana) Limited - - - 146,743Oando Sierra Leone - - - 4,400Oando Benin - - - 3,997Oando Liberia - 6,538 - -Oando Togo SA - - - 171,883
- - -
- 32,129,055 - 16,859,648Provision for diminution in value - - - (24,800)
- 32,129,055 - 16,834,848
Provision for diminution in value is analysed as follows:UNITAB Nigeria Limited - 20,400Unipetrol Sierra Leone - 4,400
- 24,800
pg71
N’0007 Long term receivable Group Company Group Company
Long term prepayment 427,570 44,368 321,443 318,391Pipeline Cost Recovery Account 14,117,207 - 10,817,003 -
14,544,777 44,368 11,138,446 318,391
Pipeline Cost Recovery Account (PCRA) represents accumulated costs incurred in respect of the design, funding and construction of the pipeline infrastructure on behalf of theNigerian Gas Company by Gaslink and East Horizon, which are recoverable from gas sales over the duration of the respective Natural Gas Sale and Purchase Agreements.
The PCRA includes land and building construction costs, plant and equipment costs, work-in-progress, pipeline construction costs, project vehicle costs, interest onborrowings, bank charges and fees, pipeline insurance cost and other charges relevant to the pipeline construction such as legal and professional fees. This is stated atcost less amounts recovered from gas purchases.
Movement in the PCRA is analysed as follows:Group Company Group Company
At 1 January 10,817,003 - 4,285,388 -Additions during the year 5,037,374 - 7,657,559 -Capital recovered during the year (1,737,170) - (1,125,944) -
At 31 December 14,117,207 - 10,817,003 -
Group Company Group Company8 Inventories
Finished products 13,525,642 - 19,475,839 5,096,017Products in transit 2,221,187 - 2,888,387 2,823,058
15,746,829 - 22,364,226 7,919,075Consumable materials and engineering stocks 380,367 33,942 2,554,360 2,461,306
16,127,196 33,942 24,918,586 10,380,381Provision for slow moving and obsolete stocks (58,356) - (189,055) (189,055)
16,068,840 33,942 24,729,531 10,191,326
pg72
N’000 31-Dec-08 31-Dec-07
Group Company Group Company9 Debtors and prepayments
Trade debtors 24,332,464 - 29,934,020 6,235,992Bridging claims receivable 8,896,036 - 7,656,143 7,656,143Petroleum Support Fund 44,828,923 - - -Deposit for import 635,087 - 246,082 246,082Other debtors 15,153,328 457,522 7,146,973 2,587,339Amounts due from related companies - 120,626,018 49,823 13,038,718Prepayments 1,223,973 291,692 3,099,947 1,509,126
95,069,811 121,375,232 48,132,988 31,273,400Provision for doubtful bridging claims receivable - - (261,839) (261,839)Provision for doubtful trade and other receivables (1,366,862) (9,159) (1,057,853) (717,310)
93,702,949 121,366,073 46,813,296 30,294,25110 Creditors and accruals
Trade creditors 27,083,287 54,631 26,892,424 10,547,277Other creditors 15,119,587 313,439 8,806,657 175,532Accruals 3,039,662 582,754 5,365,335 3,654,000Petroleum Support Fund - - 165,583 165,583Amounts due to other related companies - 73,061,127 49,367 6,234,391Deferred income - - 130,153 130,153
45,242,536 74,011,951 41,409,519 20,906,93611 Borrowings
CurrentBank overdrafts 24,634,256 - 9,504,583 6,728,717Import finance facilities 676,048 - 2,430,691 27,691Finance lease obligation 166,987 79,601 283,255 283,255Other short term loans 110,830,618 45,916,387 36,255,270 17,869,725Current portion of long term loans 6,039,333 2,353,500 4,160,883 3,314,550
142,347,242 48,349,488 52,634,682 28,223,938Non-currentSyndicated/other project loans 37,941,166 23,545,000 9,804,794 -Finance lease obligation 164,368 72,279 191,608 191,608Other long term loans 3,755,579 1,765,125 7,733,950 7,733,950
41,861,113 25,382,404 17,730,352 7,925,558
pg73
Import finance facilities relate to special short term facilities obtained frombanks, to finance letters of credit opened in respect of the importation ofrefined petroleum products. Other short term loans relate to various commer-cial papers and bankers acceptance obtained from banks to finance workingcapital needs.
Syndicated long term loan relates to the following:
a) A five-year gas project facility of N2.8billion was secured in 2006 tofinance the execution of Greater Lagos Phase III gas distribution project.
b) Two 1-3 three year loans of N2.5billion and N1.1billion respectively forthe execution of new customers’ connects for Gaslink.
c) A seven year gas project facility of N11.4billion secured in July 2007 tofinance the execution of a gas pipeline for the UNICEMENT CompanyCalabar. The drawdown on the loan as at 31 December 2008 wasN8.2billion.
d) A seven year project finance facility of $25.5million secured in April2008 to finance the construction of a 12.5 MW Independent Power Plantfor Akute Power Limited. The loan is secured by an all assets deben-ture over all the assets of Akute Power Limited. Interest on the loan isLIBOR plus 3%.
Other long term loans are as follows:a) A three-year receivable-backed term loan of $95million obtained in July
2007 from a consortium of banks to finance working capital of thegroup. The loan has an interest rate of libor + 2.75%. As at year end, theoutstanding balance on the loan was $66.5million.
b) A two-year loan of $200million acquired to finance the acquisition ofupstream assets. The loan has an interest rate of 13.9%. The loan shallbe repaid in full at the final maturity date.
Reconciliation of minimum lease payments to present value of lease obligation (group)
Minimum Future Presentlease finance value
payment charges of obligation
N’000
Period not later than one year 195,748 28,761 166,987Period later than one year and not later than five years 186,135 21,767 164,368Period later than five years - - -
381,883 50,528 331,355
pg74
Group Company Group Company
12 Other non-current liabilities 934,458 - 726,853 673,734
Customer security deposits represent amounts deposited by dealers in respect of product supply, use of the Company’s equipment and retailing outlets. The deposits do not attractany interest and are refundable to the dealer less any amounts owed to the Company at the expiration of the dealership agreement.
13 Deferred taxation - non-current assetBalance, beginning of year - - - -Provision during the year (Note 27) 1,044,162 - - -
Balance, end of year 1,044,162 - - -
Deferred taxation - current assetBalance, beginning of year - - - -Provision during the year (Note 27) 1,179,580 - - -
Balance, end of year 1,179,580 - - -
Deferred taxation - current liabilityBalance, beginning of year - - - -Provision during the year (Note 27) 437,329 - - -
Balance, end of year 437,329 - - -
Deferred taxation - non-current liability
Balance, beginning of year 889,405 849,344 687,224 662,199Deferred tax transferred on acquisition of OML 125 & 134 3,782,634Provision during the year (Note 27) 77,343 (8,808) 194,394 187,145Revaluation surplus 2,756,075 70,147 - -Exchange difference (22,662) - 7,787 -
Balance, end of year 7,482,795 910,683 889,405 849,344
Deferred tax liability is as a result of accelerated capital allowances on existing property, plant and equipment and transferred liability in respect of Oando OML 125 & 134acquired during the year. Deferred tax related to revaluation surplus is included in revaluation reserve within equity.
Deferred tax asset is as a result of unrelieved tax losses from Oando Energy Services, Oando Production and Development Company and Oando Exploration and ProductionLimited and unrealised exchange losses.
N’000
pg75
N’000 31-Dec-08 31-Dec-07
Group Company Group Company14 Retirement benefit obligation
Balance, beginning of year 141,671 141,671 138,254 138,254Provision during the year - - 124,181 124,181Payments during the year (141,671) (141,671) (120,764) (120,764)
Balance, end of year - - 141,671 141,671
15 Provision for other liabilities & chargesBalance, beginning of year 425,279 425,279 372,079 372,079Additions/Valuation change 783,995 - 30,129 30,130Accretion discount 27,643 - 23,071 23,070Transfer to Oando Marketing - (425,279) - -
Balance, end of year 1,236,917 - 425,279 425,279
In accordance with the group accounting policy a provision is recognised for obligations relating to underground tanks and oil fields decommissioning, restoration andabandonment, at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. A correspondingamount is included under plant and machinery upon recognition, and depreciated in accordance with the Group’s policy.
16 Share capitalAuthorised:
1,000,000,000 Ordinary shares of 50k each 500,000 500,000 500,000 500,000Issued and fully paid:At beginning of the year754,070,523 ordinary shares of 50k each 377,035 377,035 286,150 286,150
Additions: 2007: 181,769,626 ordinary shares of 50k each - - 90,885 90,885 2008: 150,814,105 ordinary shares of 50k each - bonus 75,407 75,407
At end of the year 452,442 452,442 377,035 377,035904,884,628 Ordinary shares of 50k each
Additions represent the bonus shares of 1 for 5 declared at the annual general meeting held on 27 May 2008.
pg76
N’000 31-Dec-08 31-Dec-07
Group Company Group Company17 Share premium account
At beginning of the year 29,877,741 29,877,741 15,980,263 15,980,263Issue of shares - - 14,123,497 14,123,497Share issue cost (160,871) (160,871) (226,019) (226,019)
At end of the year 29,716,870 29,716,870 29,877,741 29,877,741
Share issue cost relate to mainly charges and fees in respect of the issue ofshares for the share swap exercise in 2007 which crystalised in 2008.
18 Revaluation reserveAt beginning of the year (note 4) 10,652,936 10,652,936 2,423,923 2,423,923Revaluation surplus during the year:- Land & building - - 7,971,277 7,971,277- Plant & Machinery - - 257,736 257,736Reversal of revaluation surplus (681,604) (681,604) - -Intragroup transfer (Oando Marketing) - (9,683,943) - -Deferred tax (2,756,075) (70,147) - -
At end of the year 7,215,257 217,242 10,652,936 10,652,936
Deferred tax on surplus on revaluation of property, plant and equipment has been recognised on an asset basis. This recognises the potential crystalisation of the liabilities in the eventof disposal of the assets.
Revaluation reserve is not available for redistribution to shareholders until realised through disposal of related assets.
31-Dec-08 31-Dec-07
Group Company Group Company19 Retained earnings
At beginning of the year 6,321,140 3,805,863 3,853,399 3,423,584Exchange difference 177 - 1,935 -Dividend:2007 final (4,526,954) (4,526,954) (2,289,203) (2,289,203)2007 bonus (75,407) (75,407) - -2008 Interim (2,715,102) (2,715,102) - -Profit for the year 8,339,273 6,343,567 4,755,009 2,671,482
At end of the year 7,343,127 2,831,967 6,321,140 3,805,863
pg77
N’000 31-Dec-08 31-Dec-07
Group Company Group Company20 Minority interest
Movement in minority interests during the year is as follows:At start of year 187,425 1,852,535Exchange difference (40,440) -Disposal of interests - (1,689,146)Profit for the year 4,052 24,036
At end of the year 151,037 187,425
21 TurnoverAnalysis by geographical regionWithin Nigeria 274,310,613 2,677,299 167,073,692 131,007,169Other West African Countries 9,317,760 - 8,038,206 -Others 55,792,062 4,160,442 10,780,185 -
339,420,435 6,837,741 185,892,083 131,007,169Analysis by product/typeCrude Oil 13,890,880 - - -Fuels 294,497,485 - 159,278,392 124,331,325Base oil, lubricants and other products 23,121,435 - 15,735,391 4,323,615Gas 6,928,345 - 4,765,485 276,950Barite, drill bits and oil well cement 548,368 1,383,748 -Non Fuel Revenue 116,692 - 677,590 618,205Intragroup dividend - 6,837,741 - -Others 317,230 - 4,051,477 1,457,074
339,420,435 6,837,741 185,892,083 131,007,169
22 Administrative expensesRepairs and maintenance 219,134 - 456,365 413,194Insurance 145,581 - 128,011 114,900Rent and other hiring costs 317,945 - 515,738 392,409Staff costs 3,092,217 326,235 2,451,957 1,855,901Depreciation 1,69,558 218,413 1,480,925 1,366,486Other administrative expenses 11,949,240 559,356 5,925,320 3,137,293
17,420,675 1,104,004 10,958,316 7,280,18323 Interest received
This represents interest income accruing from placements with commercial banks.
pg78
N’000 31-Dec-08 31-Dec-07
Group Company Group Company24 Other operating income
Rent 77,459 - 29,780 29,048Profit on sale of property plant and equipment - - 635,704 635,704Foreign exchange gain - - 1,384,649 866,222Other income 1,738,985 365,029 420,869 176,959
1,816,444 365,029 2,471,002 1,707,93325 Interest payable and similar charges
Interest on long term loans 3,237,949 3,414,240 354,986 354,986Interest on short term loans and overdrafts 4,885,213 - 918,660 528,737Exchange loss 2,516,884 481,199 - -
Total interest on bank loans and overdrafts 10,640,046 3,895,439 1,273,640 883,723Accretion charge 27,643 - 23,076 23,070
Total interest payable and similar charges 10,667,689 3,895,439 1,296,717 906,793Other interests attributable to borrowings are distributed as follows:(a) Included in cost of sales 3,383,046 - 2,374,585 -(b) Capitalised during the year:Included in property, plant and equipment 3,317,089 - 392,637 -Included in exploration costs - - 125,094 125,094Included in recoverable pipeline construction costs 2,465,960 - 406,399 -
5,783,049 - 924,130 125,094
26 Profit before taxationProfit before taxation is stated after charging:- Depreciation, depletion and amortisation of upstream assets 4,096,408 - - -- Depreciation - others 1,696,558 218,413 1,480,925 1,366,486- Auditors’ remuneration 86,700 24,000 55,200 18,000- Directors’ remuneration 372,816 189,344 201,637 196,179- Foreign exchange loss 2,516,884 481,199 - -- Loss on sale of property plant and equipment 5,288 - - - and after crediting:- Foreign exchange gain - - 1,384,649 866,222- Profit on sale of property plant and equipment - - 635,704 635,704
pg79
N’000 31-Dec-08 31-Dec-07
Group Company Group Company27 Taxation
(a) Per profit and loss accountCharges for the yearIncome tax 3,815,575 175,419 1,053,014 786,914Education tax 292,782 1,488 85,905 71,655
4,108,357 176,907 1,138,919 858,569Deferred tax (Note 13) (1,709,071) (8,808) 194,394 187,145
2,399,286 168,099 1,333,313 1,045,714(b) Per balance sheet
Balance, 1 January 1,308,107 1,020,443 928,902 728,931Over/(under) provision for taxes 44,558 - (81,058) -Payments during the year (2,105,695) (583,836) (678,656) (567,057)Charge for the year 4,108,357 176,907 1,138,919 858,569
Balance, 31 December 3,355,327 613,514 1,308,107 1,020,443
28 Earnings per shareBasicBasic earnings per share is calculated by dividing the profit attributable to the equity holders of the Company by the weighted average number of shares in issue during the year.
DilutedDiluted earnings per share is calculated adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary share.
Group Company Group Company
Profit attributable to equity holders of the Company 8,339,273 6,343,567 4,755,009 2,671,482Weighted average number of shares in issue (thousands) 904,885 904,885 632,891 632,891Basic earnings per share (kobo) 922 701 751 422
Diluted earnings per share (kobo) 922 701 751 422
For the purposes of earnings per share calculations, the bonus issue in the year is assumed to have been made on the first day of the financial year.
pg80
N’000 31-Dec-08 31-Dec-07
29 Net cash flow from operating activities Group Company Group Companybefore changes in working capitalProfit on ordinary activities after taxation 8,343,325 6,343,567 5,480,415 2,671,482Adjustments for non-cash items and interests:- Taxation for the year 2,399,286 168,099 1,333,313 1,045,714- (Under)/overprovision for income taxes (44,558) - 81,058 -- Pre-acquisition profit - - (701,370) -- Depreciation, depletion and amortisation 5,792,966 218,413 1,480,925 1,366,486- Loss/(profit) on sale of property plant and equipment 5,288 - (635,704) (635,704)- Amortisation of software costs 149,333 149,333 10,419 -- Impairment loss on investments 8,000 8,000- Increase/(decrease) in provision for doubtful debts 47,170 (969,990) 276,737 83,474- Decrease in provision for slow moving and obsolete stocks (130,699) (189,055) 37,155 37,155- Provision for staff gratuity - - 124,181 124,181- Interest expense 10,640,046 3,895,439 1,273,646 883,723- Accretion expense 27,643 - 23,070 23,070- Interest received (4,548,759) (4,308,339) (871,336) (507,155)
22,689,041 5,315,467 7,912,509 5,092,42630 Net decrease in working capital
- Decrease/(Increase) in inventories 8,791,390 10,346,439 (9,607,508) (675,509)- Increase in debtors and prepayments (46,936,823) (90,101,832) (10,950,441) (9,713,554)- Increase in creditors and accruals 3,833,017 53,105,015 17,809,206 5,646,207- (Increase)/decrease in long term prepayments (106,127) 274,023 5,211 8,263- Increase/(decrease) in customers’ security deposits 207,605 (673,734) 20,405 17,777Adjusted for:- Intercompany transfer of assets* 5,674,306- Working capital transferred to Oando Marketing Limited 2,155,968
(34,210,938) (19,219,815) (2,723,127) (4,716,816)
*Intercompany transfer of assets relate to land and building (N14.7million) and upstream assets (N5.7billion) transferred to Oando Property Limited and Oando Explorationand Production Limited respectively.
pg81
31 Directors and employeesa) Directors’ remuneration:The remuneration paid to the directors of the Company was as follows:
N’000 31-Dec-08 31-Dec-07
Group Company Group Company
Fees paid to non executive directors:Chairman 850 600Others 6,969 4,125
7,819 4,725Executive directors’ salaries 111,233 123,785
119,052 128,510Other emoluments 70,292 67,669
189,344 196,179The directors received emoluments (excluding pension contributions) in the following ranges:
Number NumberN5,000,000 - N10,00,000 9 9Above N10,000,000 3 3
Included in the above analysis is the highest paid director at N71.3 million (2007: N72.25million).
Group Company Group Company(b) Staff costs
i. Employee costs during the year amounted to:Wages and salaries 2,225,373 280,102 1,660,747 1,116,386Employee benefits provision 360,808 - 133,863 126,459Welfare and training 283,285 - 499,481 481,979Other staff costs 222,751 46,133 157,866 131,077
3,092,217 326,235 2,451,957 1,855,901
pg82
ii. The average number of full-time persons employed by the Company during the year was as follows:N’000
31-Dec-08 31-Dec-07
Group Company Group CompanyNumber Number Number Number
Management staff 102 33 102 71Senior staff 322 70 329 254 Junior staff 7 4 61 53
431 107 492 378
iii. Higher-paid employees of the Company, other thandirectors, whose duties were wholly or mainly discharged in Nigeria, received remuneration(excluding pension contributions) in the following ranges:
Number Number Number Number
N1,000,001 - N1,500,000 4 4 26 16N1,500,001 - N2,000,000 3 0 147 132N2,000,001 - N2,500,000 67 35 116 99N2,500,001 - N3,000,000 97 12 53 32N3,000,001 - N3,500,000 81 14 25 22N3,500,001 - N4,000,000 55 2 18 5N4,000,001 - N4,500,000 22 4 24 15N4,500,001 - N5,000,000 21 3 13 12Above N5,000,000 81 33 70 45
32 Capital commitment N’000 N’000 N’000 N’000Outstanding capital expenditure contracted but notprovided for in the accounts 1,929,920 - 106,643 106,643Capital expenditure approved by the Board but notyet committed 23,467,250 10,000,000 12,803,363 12,803,363
25,397,170 10,000,000 12,910,006 12,910,00632 Contingent liabilities
32.1) Pending litigationThere are a number of legal suits outstanding against the Company for stated amounts of N712 million (2007:N355million). On the advice of Counsel, the Board ofDirectors are of the opinion that no material losses are expected to arise. Therefore, no provision has been made in the financial statements.
32.2) Bonds and guaranteesGuarantees, performance bonds, and advance payment guarantees issued in favour of the Company amounted to N1.813 billion. The Company also guaranteeda loan of N18.6 billion from a commercial bank on behalf of its gas subsidiaries. No guarantees were given on behalf of third parties.
(32.3) Other claimsIn February 2008, the Federal High Court ruled that Oando Plc should pay N172.42million less 5% of the amount as additional income tax liability including Educationtax of N23.28million. The additional assessments relate to the financial year 2003. The company has instituted an appeal at the Federal Court of Appeal. In theopinion of the directors, the claim by the Federal Inland Revenue Services is unlikely to succeed at the higher courts and therefore no provision has been madein the financial statements.
pg83
34 Related party transactionsSignificant related party transactions were in respect of intragroup purchase and sale of refined petroleum products on terms similar to suchtransactions entered into with third parties. Amounts in these regard have been eliminated on consolidation. However, transactions relating to the Company’s own financialstatements are as follows:
N’00031-Dec-08 31-Dec-07
Purchase of refined petroleum products from:
Oando Supply and Trading Limited - 46,178,145Oando Trading Limited - 15,733,276
- 61,911,421Amounts outstanding as of balance sheet date(included in trade creditors):Oando Supply and Trading Limited - 5,369,227Oando Trading Limited - 1,139,258
- 6,508,485
The company provided funding to finance several projects on behalf of subsidiaries during the period. The funds are given interest free except when the funding is financedby borrowings in which case the bank interest is charged to the entity. Amounts in these regard have been eliminated on consolidation. Transactions relating to thecompany’s own financial statements are as follows:Oando Exploration & Production Limited 36,224,659Oando Energy Services 8,836,903Oando Supply & Trading 1,294,159Oando Lekki Refinery 783,133Oando Gas and Power 464,642Apapa SPM 280,195Oando Production & Development Company 90,930Oando Properties 58,122Oando Power-Miscellaneous 53,205Gaslink Nigeria (26,285)Oando Marketing (499,905)Other Companies (2,367)
47,557,391
During the year, transactions were conducted between Oando Plc and other affiliate companies. These include:(a). Ocean and Oil Investment received N3,169 million in respect of dividend declared at the end of 2007 and interim dividend declared in August 2008 (2007:N559.7million)(b). Ocean and Oil Holdings Nigeria Limited is entitled to N994 million (2007:N413million) for technical and management services rendered.(c). Avante Capital Partners, a subsidiary of Ocean and Oil Holdings received N63.24 million (2007: N98.5 million) for corporate advisory services performed during the year.(d). Avante Property and Asset Management Limited, a subsidiary of Ocean and Oil Holdings received N98.6 million for professional services performed during the year.
pg84
The amount payable relating to these affiliates at the balance sheet date amounted to:N’000
31-Dec-08 1-Dec-031
Ocean and Oil Holdings Nigeria Limited 369,951 67,236
No transaction in respect of sale of goods or services was entered into with any key management personnel or shareholder.
Core investorOcean and Oil Investments (Nigeria) Limited, a special purpose entity set up for the purpose of acquiring significant interest in the then Unipetrol owned 34% of Oando Plc’s sharesat the balance sheet date (2007:34%). Ocean and Oil Investments is owned by Ocean and Oil Mauritius. Ocean and Oil Mauritius is owned by Ocean and Oil Holdings (BVI) Limited.Subsidiary informationEntity name Country of Nature of Issued share Percentage
incorporation business capital interest held
Akute Power Limited Nigeria Power generation 2,500 100%Apapa SPM Limited Nigeria Off shore submarine pipeline construction 19,125 100%East Horizon Gas Co. Ltd Nigeria Gas distribution 10,000 100%Gaslink Benin Limited Nigeria Gas distribution 2,618 100%Gaslink Nigeria Limited Nigeria Gas distribution 1,717,698 96.98%Oando Benin Limited Benin Marketing and sale of petroleum products 14,832 100%Oando Energy Services Limited Nigeria Provision of drilling and other services to upstream companies 5,000 100%Oando Exploration & Production Limited. Nigeria Exploration and production 5,000 100%Oando Gas and Power Limited Nigeria Gas and power generation and distribution 1,000 100%Oando Ghana Limited Ghana Marketing and sale of petroleum products (Subsidiary of Oando Marketing Limited) 126,575 82.9%Oando Lekki Refinery Limited Nigeria Petroleum refining 2,500 100%Oando Marketing Limited Nigeria Marketing and sale of petroleum products 175,000 100%Oando Port Harcourt Refinery Limited Nigeria Petroleum refining 2,500 100%Oando Production and DevelopmentCompany Limited Nigeria Exploration and production 10,000 95%Oando Properties Limited Nigeria Property management services 250 100%Oando Searex VI Limited British Virgin Island Provision of drilling and other services to upstream companies 0.1 100%Oando Searex XII Limited British Virgin Island Provision of drilling and other services to upstream companies 0.1 100%Unipetrol Sierra Leone Limited Sierra Leone Marketing and sale of petroleum products
(Subsidiary of Oando Marketing Limited) 10,079 80%Oando Supply and Trading Limited Nigeria Supply of crude oil and refined petroleum products 5,000 100%Oando Togo SA Togo Marketing and sale of petroleum products
(Subsidiary of Oando Marketing Limited) 186,288 75.3%Oando Trading Limited Bermuda Supply of crude oil and refined petroleum products 1,518 100%Oando Liberia Liberia Marketing and sale of petroleum products
(Subsidiary of Oando Marketing Limited) 6,538 100%OML 112 & 117 Limited British Virgin Island Provision of drilling and other services to upstream companies 6,538 100%Oando OML 125 & 134 BVI Limited British Virgin Island Exploration and production 6,329 100%Oando OML 125 & 134 Limited Nigeria Exploration and production (100% owned by OML 125 & 134 BVI) 2,500 100%TRANSGAS Nigeria Gas distribution (100% owned by Gaslink) 8,077 100%UNITAB Nigeria Limited Nigeria Marketing of automobile parts (Subsidiary of Oando Marketing Limited) 40,000 51%
pg85
35 Technical and management service agreementThe Company is a party to subsisting agreements in respect of technical know-how, marketing, management expertise, strategic planning and consultancy servicesassistance. These agreements are between the Company and Ocean and Oil Holdings Limited.The terms of the agreements include payment of Technical and ManagementService fees of 4% and 3% respectively of the Company’s net profit before taxation, where net profit before tax is under N2 billion (or 5% and 4% where net profit beforetax is over N2 billion). A total provision of N994million (2007: N413million) has been made in respect of the Technical and Management Service fees for the year and includedin administrative expenses disclosed in the financial statements.
36 Upstream activitiesN’000
(35.1) Details of upstream assetsMineral rights Land and Expl. costs Capital Moveable Abandonment
acquisition building & producing construction assets assetwells Total
CostAs at 1 January 5,421,548 - 1,827,222 - - - 7,248,770Transfers/reclassification 17,888 - 15,620 7,313 (40,821) - -Additions 24,461,108 23,750 11,641,808 5,239,084 166,243 783,995 42,315,988
As at 31 December 29,900,544 23,750 13,484,650 5,246,397 125,422 783,995 49,564,758
Depreciation / AmortisationAs at 1 January - - - - - - -Charge for the period (1,548,814) - (1,571,802) (953,366) (22,426) - (4,096,408)
As at 31 December (1,548,814) - (1,571,802) (953,366) (22,426) - (4,096,408)
Net Book ValueAs at 31 December 2008 28,351,730 23,750 11,912,848 4,293,031 102,996 783,995 45,468,350
As at 31 December 2007 5,421,548 - 1,827,222 - - - 7,248,770
On 30 December 2008, the Group acquired an undivided 15% interest in Oil Mining Leases (OMLs) 125 and 134 with effect from 1 July 2007. The OML 125 is currently inproduction, while further appraisal and development activities are ongoing in respect of OML 134. The Group’s share of the acquired assets and mineral rights acquisitioncosts are included as additions to upstream assets.
The Group’s share of total proved developed and undeveloped reserves in it’s various concessions were 12.3 and 7.8 million barrels of oil equivalent respectively.
The Group performed a ceiling test on the capitalised costs as at 31 December 2008 using a price of approximately N6,000 per barrel ($46/barrel). No amounts were writtenoff as a result of this exercise.
As disclosed in note 15, the total recorded liability for restoration and abandonment was approximately N784 million.
pg86
Supplementary data, including the standardised measure of oil and gas activities are presented in line with Statement of Accounting Standard No. 14 in the relevantsubsidiaries’ financial statements
(35.2) Details of concessions
ExpirationSubsidiary License Operator Nature Date Status
Oando OML 125 & 134 Ltd OML 125 NAE Offshore 04/07/2023 ProducingOando OML 125 & 134 Ltd OML 134 NAE Offshore 04/07/2023 ProducingOando Petroleum Development Company Ltd OML 56 ENERGIA Onshore 31/01/2023 DevelopmentOando Exploration And Production Ltd OPL 236 OEPL Onshore 31/03/2013 ExplorationOando Exploration And Production Ltd OPL 278 OEPL Onshore 31/01/2011 Exploration
37 Post balance sheet eventsNo events or transactions have occurred since the balance sheet date which would have a material effect upon the financial statement at that date or which need to bementioned in the financial statements in other to make them not misleading as to the financial position or result of operations at the balance sheet date.
38 Reclassification of prior year balancesCertain prior year balances have been reclassified to conform with current year presentation format.
pg87
STATEMENT OF VALUE ADDED FOR THE YEAR ENDED 31 DECEMBER 2008
31 Dec 08 31 Dec 07
Group Company Group Company
N’000 % N’000 % N’000 % N’000 %
Turnover 339,420,435 6,837,741 185,892,083 131,007,169
Other income 1,816,444 365,029 2,471,002 1,707,933
Interest received 4,548,759 4,308,339 871,336 507,155
345,785,638 11,511,109 189,234,421 133,222,257
Bought-in materials and services- Local purchases (255,607,646) (559,356) (132,911,056) (106,872,116)
- Foreign purchases (59,882,508) - (45,004,479) (18,526,835)
Value added 30,295,484 100 10,951,753 100 11,318,886 100 7,823,306 100
Distributed as follows:
Employees:
- To pay salaries, wages and other staff costs 3,092,217 10 326,235 3 2,451,957 22 1,855,901 24
Government:- To pay tax 4,108,357 14 176,907 2 1,138,919 10 858,569 11
Providers of capital:
- To pay dividend 2,715,102 9 2,715,102 25 - - - -
- To pay interest on borrowings 10,667,689 35 3,895,439 36 1,273,646 11 883,723 11
Minority interests 4,052 - - - 24,036 0 - -
Maintenance and expansion of assets:
- Deferred tax (1,709,071) (6) (8,808) (0) 194,394 2 187,145 2
- Depreciation 5,792,966 19 218,413 2 1,480,925 13 1,366,486 17
- Retained in the business 5,624,172 19 3,628,465 33 4,755,009 42 2,671,482 34
Value distributed 30,295,484 100 10,951,753 100 11,318,886 100 7,823,306 100
pg88
FIVE-YEAR FINANCIAL SUMMARY (2004 - 2008)
Group
2008 2007 2006 2005 2004Balance SheetProperty plant and equipment 89,903,189 40,318,614 14,396,003 13,689,809 11,702,542Intangible assets 22,350,513 22,464,771 14,514,551 13,600,875 9,723,129Investment in associatesLong term Investments 2,000 10,000 10,000 - 54,183Deferred tax asset 1,044,162 - - -Long term receivable 14,544,777 11,138,446 4,612,042 3,573,468 3,797,521Net current assets/(liabilities) (31,450,625) (6,601,994) (5,680,925) (4,483,890) 285,935Borrowings and other non-current liabilities (42,795,571) (18,457,205) (2,257,844) (2,735,899) (3,058,551)Deferred taxation (7,482,795) (889,405) (687,224) (638,790) (469,637)Retirement benefit obligation - (141,671) (138,254) (279,782) (470,447)Provision for other liabilities & charges (1,236,917) (425,279) (372,079) - -
44,878,733 47,416,277 24,396,270 22,725,791 21,564,675
Share capital 452,442 377,035 286,150 286,150 286,150Share premium 29,716,870 29,877,741 15,980,263 15,980,263 15,980,263Revaluation reserve 7,215,257 10,652,936 2,423,923 2,423,923 2,423,923Retained earnings 7,343,127 6,321,140 3,853,399 2,607,931 1,469,153Minority interest 151,037 187,425 1,825,535 1,427,524 1,405,186
44,878,733 47,416,277 24,369,270 22,725,791 21,564,675Profit and loss accountTurnover 339,420,435 185,892,083 209,078,938 182,763,434 103,062,711
Profit/(loss) before taxation 10,742,611 6,813,728 3,794,091 2,621,139 239,585Exceptional item - - 1,375,207Taxation (2,399,286) (1,333,313) (719,023) (847,496) (143,647)
Profit after taxation 8,343,325 5,480,415 3,075,068 1,773,643 1,471,145
Dividend* 7,242,056 2,289,203 1,430,752 1,144,602 652,319
Per share dataWeighted average number of shares 904,885 632,891 572,301 572,301 367,183Potential ordinary shares - - - - -Basic earnings per share (kobo) 922 751 411 265 243Diluted earnings per share 922 751 411 265 243Dividends per share (kobo) 800 362 250 200 178Net assets per share (kobo) 4,960 7,492 4,258 3,971 5,873Dividend cover 1.15 times 2.07 times 1.64 times 1.32 times 1.36 times
Note: Earnings, dividend and net assets per share are based on the weighted average number of shares in issue for the year. After tax profits have been used as numerators forcomputing earnings per share.
* Dividends are disclosed in the years declared at the Annual General Meeting.
pg89
Company 2008 2007 2006 2005 2004
Balance SheetProperty plant and equipment 1,539,035 26,039,055 13,788,755 13,149,388 11,415,060Intangible assets 597,334 9,699,814 13,445,903 12,501,645 9,548,197Investment in associates - - - - 37,709Long term Investments 32,131,055 16,844,848 2,080,320 1,755,153 1,265,864Deferred tax asset - -Long term receivable 44,368 318,391 326,654 60,346 385,093Net current assets/(liabilities) 25,199,816 1,827,053 (5,323,998) (3,925,513) (534,064)Borrowings and other non-current liabilities (25,382,404) (9,024,571) (1,403,261) (1,449,796) (1,374,251)Deferred taxation (910,683) (849,344) (662,199) (620,446) (458,920)Retirement benefit obligation - (141,671) (138,254) (279,782) (460,830)
33,218,521 44,713,575 22,113,920 21,190,995 19,823,858
Share capital 452,442 377,035 286,150 286,150 286,150Share premium 29,716,870 29,877,741 15,980,263 15,980,263 15,980,263Revaluation reserve 217,242 10,652,936 2,423,923 2,423,923 2,423,923Retained earnings 2,831,967 3,805,863 3,423,584 2,500,659 1,133,522
33,218,521 44,713,575 22,113,920 21,190,995 19,823,858
Profit and loss accountTurnover 6,837,741 131,007,169 132,397,373 121,591,635 85,852,713
Profit/(loss) before taxation 6,511,666 3,717,196 2,855,591 2,102,921 (386,711)Exceptional item - - - - 1,375,207Taxation (168,099) (1,045,714) (501,914) (727,117) (97,694)
Profit after taxation 6,343,567 2,671,482 2,353,677 1,375,804 890,802
Dividend* 7,242,056 2,289,203 1,430,752 1,144,602 652,319
Per share dataWeighted average number of shares 904,885 632,891 572,301 572,301 367,183Potential ordinary shares - - - -Basic earnings per share (kobo) 701 422 411 240 243Diluted earnings per share 701 422 411 240 243Dividends per share (kobo) 800 400 250 312 200Net assets per share (kobo) 3,671 7,065 3,864 3,703 5,399Dividend cover 0.87 times 1.17 times 1.65 times 1.20 times 1.37 times
* Dividends are disclosed in the years declared at the Annual General Meeting. Dividend comprises of interim dividend paid in the current year and dividend based on 2007 resultsdeclared in the current year which includes earnings from downstream operations transferred to Oando Marketing Limited in 2008.
FIVE-YEAR FINANCIAL SUMMARY (2004 - 2008)
pg90
PAYMENT NO BAL.AS AT 31ST DECEMBER, 2008 PAYABLE DATE
6 862,354.56 DECEMBER 4, 1997
7 6,216.52 DECEMBER 4, 1997
8 5,027,632.82 DECEMBER 16, 1998
9 6,118,105.10 MARCH 6, 2000
10 9,802,386.72 SEPTEMBER 14, 2000
11 30,821,654.78 JUNNE 21, 2001
12 30,938,387.38 JULY 31, 2002
13 59,547,480.00 JUNE 25, 2004
14 109,763,789.60 JUNE 28, 2005
15 111,979,375.50 JUNE 05, 2006
16 310,802,570.80 JUNE 29, 2007
TOTAL 675,669,953.78
EX-AGIP PLC PRE MERGER ACCOUNTSTATEMENT OF UNCLAIMED / RETURNED DIVIDEND WARRANTS
PAYMENT NO BAL.AS AT 31ST DECEMBER, 2008 PAYABLE DATE
19 1,739,008.58 APRIL 30, 1997
20 1,442,339.17 MAY 5, 1998
21 2,656,042.28 APRIL 26, 1999
22 7,370,137.90 MAY 3, 2000
23 4,939,103.21 OCTOBER 30, 2000
24 19,805,076.78 APRIL 25, 2001
25 7,009,194.89 SEPTEMBER 25, 2001
26 20,735,358.27 APRIL 30, 2002
TOTAL 65,696,261.08
STATEMENT OF UNCLAIMED / RETURNED DIVIDEND WARRANTS
pg91
pg92
PROXY FORM
The Annual General Meeting of Oando Plc (the “Company”) will be held at the Akwa Ibom State Hall (Ibom Hall) Uyo,Akwa Ibom State, Nigeria on Thursday, the 30th day of July, 2009 at 10.00 a.m. (the Meeting).
I/WE* of
being
a member/members of Oando Plc and holders of shares, hereby appoint** orfailing him/her, the Chairman of the Meeting as my/our proxy to act and vote for me/us on my/our behalf at the Meeting ofthe Company to be held on Thursday the 30th day of July, 2009, which will be held for the purposes of considering and, ifdeemed fit, passing with or without modification, the resolutions to be proposed at the Meeting and at each adjournment ofsame and to vote for or against the resolutions in accordance with the following instructions:
NOTEA member who is unable to attend the Annual General Meeting is entitled by law to vote by proxy. The proxy form has beenprepared to enable you exercise your right in case you cannot personally attend the Meeting.The proxy form should not be completed if you will be attending the Meeting. If you are unable to attend the Meeting, readthe following instructions carefully:
Proposed resolutions For Against
To declare the dividend recommended by the directors of the Company
To authorise the directors to fix the remuneration of the Auditors
To re-elect Mr. Oboden Ibru
To re-elect Mr. Alhaji Hamidu Mahmud
To re-elect Mr. Onajite Okoloko
To appoint Mr. Olufemi Adeyemo as a Director
may be fixed by the Directors and unless so fixed shall be more than half of the total number ofDirectors at any point in time, with at least half of the number present being non-executive directors”.
That pursuant to Article 84 of the Company’s Articles of Association, the Directors be and are herebyauthorized to raise, whether by way of a public offering or other methods, additional capital of up toN200,000,000,000 (Two Hundred Billion Naira) through the issuance of shares, convertible or non-convertible loans, medium term notes, notes, bonds and or any other instruments, in such tranches,series or proportions, at such coupon or interest rates, within such maturity periods, and on suchother terms and conditions; including through a book building process or other process all of whichshall be as determined by the Directors, subject to obtaining the approvals of relevant regulatoryauthorities”.”That the Directors be and are hereby authorized to enter into any agreements and orexecute any other documents necessary for and or incidental to effecting resolution (a) above”. “Thatthe Directors be and are hereby authorized to appoint such professional parties and perform all suchother acts and do all such other things as may be necessary for or incidental to effecting the aboveresolutions, including without limitation, complying with directives of any regulatory authority.”
To consider, and if approved, to pass with or without modification, the following as a specialresolution:”That the Directors be and are hereby authorized to divest and/or transfer up to 49% of theCompany’s shareholding in Oando Marketing Limited at such times, to such persons and or entitiesand on such terms and conditions as may be determined by the Directors, in accordance with anyapplicable statutory and or regulatory requirements”.
a. Write your name in BLOCK CAPITALS on the proxy form where marked*
b. Write the name of your proxy where marked**, and ensure that the proxy form is dated andsigned by you. The Common Seal must be affixed on the proxy form if executed by a corporation.
Resolved that the fees payable to the non-executive directors of the Company be increased fromN850,000.00 per annum for the Chairman and N750,000.00 each per annum for all other non-execu-tive directors to N1,000,000 per annum for the Chairman and N900,000 for all other non- executivedirectors with effect from 1 January 2009; which fees are payable quarterly in arrears”.
Resolved that Article 140 of the Company’s Articles of Association be and is hereby amended asfollows:
(i) the words “and or electronic” should be inserted after the word “printed”;
(ii) the existing Article 140 be numbered Article 140(a);
(iii) a new Article 140(b) be inserted as follows: “Electronic copy means a method ofelectronic communication which includes, but is not limited to, facsimile, electronicdata message (including but not limited to e-mail), bulletin board communications,internet websites, ms-word, excel spreadsheet, print portable document file (pdf),hypertext mark-up language (html) or similar text displayed via a web browser,electronic data interchange (EDI), Compact Disc, memory stick and computer networkcommunications.
Resolved that Article 108 of the Articles of Association be deleted and the following Article be adoptedas the new Article 108:”The quorum necessary for the transaction of the business of the Directors
Registered holders of certificated Oando Plc shares and holders of dematerialised Oando Plc shares in their own name whoare unable to attend the Meeting and who wish to be represented at the Meeting, must complete and return the attached formof proxy in accordance with the instructions contained in the form of proxy so as to be received by the share registrars, FirstRegistrars Nigeria Limited at Plot 2, Abebe Village Road, Iganmu, Lagos, or Computershare Investor Services (Proprietary)Limited, 70, Marshall Street, Johannesburg, 2001, South Africa, PO Box 61051, Marshalltown, 2107, not less than 48 hoursbefore the date of the Meeting.
Holders of Oando Plc shares in South Africa (whether certificated or dematerialised) through a nominee should timeously makethe necessary arrangements with that nominee or, if applicable, Central Securities Depository Participant (“CSDP”) or brokerto enable them to attend and vote at the Meeting or to enable their votes in respect of their Oando Plc shares to be cast at theMeeting by that nominee or a proxy.
Signature:
Dated this day of 2009.
pg93
First Registrars Nigeria LimitedPlot 2, Abebe Village Road,Iganmu, Lagos,
or
Computershare Investor Services (Proprietary) Limited,70 Marshall Street,Johannesburg, 2001, South AfricaPO Box 61051, Marshalltown, 2107
Please affixpostage stamp
pg94
ADMISSION CARD
ANNUAL GENERAL MEETING TO BE HELD AT AKWA IBOM STATE HALL
(IBOM HALL), BABANGIDA AVENUE, UYO, AKWA IBOM STATE,
NIGERIA.
On Thursday July 30, 2009 at 10.00 a.m
NAME OF SHAREHOLDER
_________________________________________________
NAME OF SHAREHOLDER
SIGATURE OF PERSON ATTENDING_________________________________________________
NOTE: The Shareholder or his/her proxy must produce this admission cardin order to be admitted at the meeting.
pg95
HEAD OFFICE(5th, 7th-10th Floor)2, Ajose Adeogun Street , Victoria IslandLagos, NigeriaTel: 234-1-2702400;E-mail: [email protected]: www.oandoplc.com
SA Office AddressMettle House32 Fricker RoadIllovoJohannesburgSouth Africa .Tel: 011 268 6235
GROUP LIAISON OFFICEFirst Floor50 Curzon StreetW1J 7UWLondonTel: 44-207-297-4280-7Fax: 44-207-499-5375
OANDO MARKETING(8th Floor)2, Ajose Adeogun Street , Victoria IslandLagos, NigeriaTel: 234-1-2601290-9; 2702400E-mail: [email protected]: www.oandoplc.com
ABUJA AREA OFFICEPlot 252,Central Business DistrictOpp. NNPC TowersFederal Capital TerritoryAbuja, NigeriaTel: 234-9-5235458-9
OANDO TRADING
Canon’s Court22, Victoria StreetHamilton HM 12BermudaTel: 441-295-1443Fax: 441-295-9216
OANDO SUPPLY AND TRADING(10th Floor)2, Ajose Adeogun Street , Victoria IslandLagos, NigeriaTel: 234-1-2704400Fax: 234- 1 – 2696758
GASLINK(5th Floor)2, Ajose Adeogun Street , Victoria IslandLagos, NigeriaTel: 234-1-2702794-5Fax: 234-1-2713403E-mail: [email protected]: www.gaslink.org
OANDO GAS & POWER(5th Floor)2, Ajose Adeogun Street , Victoria IslandLagos, NigeriaTel: 234-1-2702794-5Fax: 234-1-2713403
OANDO ENERGY SERVICES(7th Floor)2, Ajose Adeogun Street , Victoria IslandLagos, NigeriaTel: 234-1-2622311-4Fax: 234-1-2622311
OANDO EXPLORATION AND PRODUCTION
(7th Floor)2, Ajose Adeogun Street , VictoriaIslandLagos, NigeriaTel: 234-1-2601293-5, 4619882Fax: 234-1-2625467
WEST AFRICAN OPERATIONSOANDO BENIN REPUBLICOIBP 1093 Recette PrincipaleCotonouTel: 299-313679
OANDO GHANAB35 Augostino Neto RoadAirport Residential AreaAccra, GhanaTel: 233-21-761196, 761520
OANDO ( TOGO ) S.A.142, Rue 42 Enface De L’HotelSakarawa AblogameLome, TogoTel: 228-227-59-46, 227-04-22
PLANTS/TERMINALSAPAPA TERMINALTerminal OfficeKayode StreetMarine BeachApapa, LagosTel: 234-1-5870218
LAGOS AVIATION TERMINALOando Aviation
CONTACT DETAILS
Muritala Mohammed Local AirportOpposite Aero contractorsIkeja, LagosNigeriaTel: 234-1-4975888
ABUJA AVIATION TERMINALOando AviationBehind Julius Berger YardNnamdi Azikwe International AirportAbuja
BITUMEN PLANTC/O Oando Div. OfficeReclamation RoadPort HarcourtRivers StateNigeriaTel: 234-84-234516
LUBRICANT BLENDING PLANTRido VillageOff Kachia RoadPMB 2110Kaduna StateNigeriaTel: 234-62-516128, 236282ONNE TANK TERMINALOnne Terminal, Oando PlcOnne-NPA (flt) RoadOnne Oil and Gas Free ZonePort Harcourt, NigeriaTel: 234-84-579940
pg96
