Nigerian indigenous energy solutions company Oando, with primary and secondary listings on the Nigerian and Johannesburg Stock Exchanges, today announced the successful upsizing of its Reserve Based Lending (RBL2) facility to $375 million.
The refinancing, led by the African Export-Import Bank (Afreximbank) with the support of Mercuria, extends the final maturity date of the facility to January 30, 2029.
In recent years, Reserve-Based Loans (RBLs) have become a popular form of financing for the purchase, development, and operation of oil and gas assets.
Under this model, a borrower’s accessible amount—in this case, Oando—is directly correlated with the quantity and value of their proven reserves, with Oando’s standing at 1.0 Bnboe, also known as the Borrowing Base.
This increase is the consequence of the company’s progress in deleveraging, which has lowered the original $525 million RBL2 facility, inked in 2019, to $100 million by the end of 2024. This debt management cleared the road for a successful refinance.
It is anticipated that the funding package, which was obtained through a group of domestic and foreign lenders, will pay for field development, drilling programs, and infrastructure improvements in important oil and gas assets that Oando operates.
This investment coincides with Nigeria’s efforts to boost crude production and encourage greater private sector participation in upstream operations in the face of constraints from the global energy revolution.
According to Oando’s CEO, Wale Tinubu, the agreement is a “significant milestone” that will improve the company’s ability to provide value to shareholders and make a substantial contribution to Nigeria’s economic development and energy security.
He said; “We are pleased to have completed the upsizing of our RBL2 facility Our joint venture holds extensive reserves with the potential to generate over $11 billion in net cash flows to Oando over the assets’ life.
‘‘This working capital facility is a critical enabler towards efficiently extracting and monetizing these resources. We appreciate the continued partnership of Afreximbank and Mercuria, whose unwavering support underscores their alignment with our long-term focus on maximizing production, optimizing asset performance, and delivering sustainable value to all stakeholders.”
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With the help of this recently obtained cash infusion, the company will pursue important growth goals, such as expedited drilling campaigns, the application of improved operational efficiencies across its portfolio, and crucial infrastructure enhancements across its operations.
Oando PLC’s $375 million financing arrangement has a number of potential short- and long-term market effects, especially in the Nigerian and larger African energy and capital markets.
The capital infusion would increase investor trust, particularly in Nigeria’s upstream sector, since it shows that the country’s upstream oil and gas industry, which has been underinvested in previous years, has gained confidence.
The fact that Oando was able to raise so much money, perhaps in the face of challenging international financing conditions, may reassure both domestic and international investors about the feasibility of funding Nigerian energy assets.
Additionally, it will raise the value and trading activity of Oando shares since the company’s stock may move positively on the Johannesburg Stock Exchange (JSE) and Nigerian Exchange (NGX), particularly if the market views the financing as value-accretive.
Oando’s $375 million financing deal may have indirect but significant effects on Nigeria’s Eurobond market, particularly in terms of credit risk and investor sentiment. This is because the successful fundraising of funds, which most likely came from a combination of foreign and local lenders, indicates that international credit markets are still willing to price Nigerian corporate risk despite macroeconomic issues like inflation, fiscal pressure, and foreign exchange volatility.
Since oil is still Nigeria’s primary foreign exchange earner, Oando’s investment is likely to boost oil production, which supports Nigeria’s fiscal revenues and external reserves. Investors may view this as a sign of the country’s sovereign creditworthiness, which could result in narrower spreads on Nigeria’s sovereign Eurobonds or at the very least stabilize them.
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