Oando: Unlocking Billion Barrels of Opportunity

A recent report by Renaissance Capital Africa highlights an opportunity worth billions for Nigeria's largest indigenous energy company, Oando Plc. The market is currently undervaluing the firm due to its substantial debt, rather than recognizing the true worth of its assets. The investment bank calculates Oando's fair equity value at around N1.53 trillion, significantly higher than the current market capitalisation of about N320 billion.

Oando holds an impressive portfolio of proven and probable reserves, estimated at over 920 million barrels of oil equivalent in 2024. This resource base, primarily gas, is critical to Nigeria's gas-to-power initiatives. Despite the abundant reserves, the company has struggled with a poor balance sheet, preventing it from monetizing the value of its oil and gas.

Renaissance Capital's valuation model, based on a sum-of-the-parts discounted cash flow analysis, puts Oando's upstream exploration and production business at N3.16 trillion. Even after accounting for the company's net debt of N2.13 trillion, the equity value is estimated at N1.53 trillion, a per-share price of N123.1, a substantial contrast to the current market price of N34.00.

The report suggests that this discount can be narrowed as Oando's working-interest production is expected to rise by 4.5 times from 2025 to 2030, with revenue projected to grow from N3.2 trillion to N4.8 trillion. The value resides not in high oil prices but in Oando's ability to ramp up production, making it less dependent on commodity cycles.

Furthermore, the bulk of its gas reserves are contracted to domestic power generators and industrial consumers, providing stability against fluctuating oil prices and aligning with Nigeria's national gas development strategy.