Oando Energy Resources Inc. (TSX: OER), which is focused on oil and gas exploration and production in Nigeria, has made a $238 million prepayment of certain loan facilities, which it utilized for the $1.5 billion acquisition of the ConocoPhillips Nigerian oil and gas business in July 2014.
The company realized $234 million by resetting its crude oil hedge floor price from an average of $95.35 per barrel to $65 per barrel on 10,615 bbl/day for the next 18 months and another 1,553 bbl/day for a further 18 months until January 2019.
The proceeds from the hedge unwind/reset (in addition to $4 million from cash in hand) were applied to prepay certain loan facilities as follows: $188 million applied to the $415 million in the reserves base lending facility, resulting in a balance of $227 million; and $51 million applied to the $338 million in the corporate facility, resulting in a balance of $287 million.
"The decline in global crude oil prices led to a substantial gain for our company and we have 10,832 bbl/day average production hedged for the balance of 2015 and 8,000 bbl/day for 2016," said Pade Durotoye, CEO of Oando Energy Resources. "Cashing out some value from this hedge will enable us reduce our outstanding loans and leverage by $238 million, saving the company $65 million in interest payments over the remaining term of the loan facilities, while preserving a floor of $65 per barrel. With 50% of our oil production hedged and 65% of our production being gas committed to stable long-term priced contracts, we are well positioned with strong cash flow to meet our obligations and aspirations through this current oil price down cycle."
As at the ConocoPhillips acquisition date of July 30, 2014, Oando Energy Resources had a total debt of approximately $900 million (inclusive of a $100 million structured facility provided by Afrexim). After taking account of previous amortizations and the hedge-related prepayment, the total debt of the company currently stands at $615 million.