OANDO: Evaluating the impact of recent upstream acquisitions

Oando Plc (OANDO) has been one of the most volatile and heavily traded stocks on the Nigerian Exchange over the last 12 months. Driven by their aggressive pivot into major upstream asset acquisitions (specifically from exiting International Oil Companies), the company is attempting a monumental transformation.

Currently trading at ₦53, retail investors are trying to determine if the massive debt taken on to fund these acquisitions will generate the required cash flow.

The Production Numbers

The core of the “New Oando” thesis is massive production growth. By acquiring mature assets from the likes of Eni (NAOC), Oando has significantly increased its daily barrel output.

• Pre-Acquisition Average: ~23,911 barrels of oil equivalent per day (boe/d)
• Post-Acquisition Production: 80,545 boe/d (Operated JV)
• Target Growth: Continuing a 36-well development program to push production even higher.

The Valuation Question

Valuing an indigenous oil and gas company is notoriously difficult due to the opacity of joint venture agreements and fluctuating global oil prices.

If Brent Crude remains comfortably above $75 per barrel, Oando’s new production volumes will generate immense free cash flow, allowing them to rapidly deleverage. In this scenario, the current share price of ₦53 is deeply undervalued.

However, if oil prices crash, or if vandalism in the Niger Delta disrupts the newly acquired production, the massive debt burden could become suffocating, potentially wiping out shareholder equity.

The verdict

OANDO is a high-risk, high-reward play. It is no longer a downstream marketing company; it is a leveraged upstream producer. If you are bullish on global oil prices and believe management can effectively operate the newly acquired NAOC assets without disruption, the stock offers explosive upside potential.