On Tuesday, the management of Oando Plc announced the acquisition of 49% voting right in its gas, and power subsidiary by Helios Investment Partners. This is expected to further the group’s management, while helping to restore and build investors’ confidence.
According to the group in a corporate disclosure filed with the Nigerian Stock Exchange (NSE), the divested percentage of OGP which was acquired by Glover Gas & Power B.V., a special purpose vehicle owned by Helios Investment Partners LLP (Helios).
The deal frees up a princely $115.8 million, being the value of the 49% stake, while further enhancing cashflow for a group that is still enjoying the three-year interest free N94 billion syndicated Medium Term Loan (MTL) facility that has been restructured for five years.
However, it is obvious that the investing community has lost confidence in Oando Nigeria Plc and its management team, despite the huge opportunities and prospects of the company. There is no need to look too far for tell-tale signs of this- check the rate at which its price rose some years ago and what it is selling for today.
Who would have believed that a company that held so much promise would today command such low price at a time when many with far less promise are selling in three-digit figures per unit?
The situation is now at the level that most investors, seemingly, no longer believe the numbers emanating from the group or its press statements, because their hopes have been dashed on many occasions.
That notwithstanding, discerning investors that are thinking long-term are taking position in the stock, despite the negative numbers from the company. The reason is not far-fetched. Oando is the only indigenous player in the Nigerian energy sector that operates across the oil and gas value-chain listed on the Nigerian Stock Exchange (NSE).
There is however still a glimmer of hope with the projected further rebound of crude oil prices in the international market expected expected to boost the company’s numbers. That is, if militancy in the Niger Delta would allow it meet production level for export.
Some of the petroleum stocks in recent times have experienced a pullback, consolidating to form triangular patterns as a result of profit taking that followed the recent two-week rally.
Triangles often indicate a continuation of the overall trend, but that is not all always the case. Breakouts in either direction are noteworthy for those already holding the stocks, or those looking to initiate new positions.
A cursory look at the price movement of Oando shows a stock whose share price has cascaded from an all-time high of N290 on March 31, 2008. It dropped to N136 on April 30, 2010, which was its peak for that year. On January 31, 2011, the stock peaked at N80.07 per unit for that year.
It continued to drop, closing at N36.89 per share on June 30, 2014; on April 30, 2015, it changed hands for N20.48 each, its highest for that year.
Oando at the beginning of this year pulled back from N5.90 in January to its all-time low of N2.90 on March 1, 2016 before rallying to a high of N8.11 on May 31. This was reversed in downtrend, running through to November. This was despite the attempted rebound that failed, until the deal by members of the Organisation of Petroleum Exporting Countries (OPEC) sealed a deal to cut output by about 1.2 million barrels of crude per day late last month. This was further boosted by the decision by prominent non-members like Russia to further cut output, following which the price jumped above $55/b. Oando’s share price ranged for a week between N4.20 and N4.59.
In December, short-term resistance has formed at N4.80. A breakout above N4.50 signals a move to the top of the range at N5.45. A breakout above N4.50 provides a price target between N5.45 and N6.00. A more aggressive longer-term target is N6.15 to N7.12. A drop below N4.20 could signal that the corrective phase is still underway with the price likely to head to N3.50 or below.
The prices of oil and gas stocks on the Nigerian bourse have been moving down for some time now, following a strong rally early in the month. The early December rally will have many traders looking for a continuation of the trend and a breakout from these patterns. Moves to the downside must also be considered, as a breakout lower could signal a deeper correction.
Investors can wait for a breakout to the upside, or buy near the bottom of the ranged period. Let your investment goal guide your decision.
By Ambrose Omordion
