EDGY OPTIMIST By Obinna Chima
Renaissance Capital Africa recently initiated coverage of Oando Plc with the argument that the market is valuing the company on the weight of its debts rather than the worth of its assets.
In a report titled, “Oando Plc: A billion barrels in search of a balance sheet,” the emerging and frontier markets investment bank contends that one of Nigeria’s largest indigenous energy companies is trading well below what its underlying oil and gas reserves are worth.
That disconnect between price and value runs through the report. Renaissance Capital puts Oando’s fair equity value at about N1.53 trillion, against a current market capitalisation of roughly N320 billion. Its central point is not that the shares are cheap by accident, but that investors are fixated on the company’s borrowings and overlooked its resource base.
No doubt, energy security has returned to the top of the global agenda, and with it a premium on producers able to bring reliable supply to market. The International Energy Agency projects global oil supply falling by 4.3 million barrels per day in 2026, and Nigeria is targeting a near-doubling of output to three million barrels per day by 2030. In that setting, proven reserves in capable hands are increasingly scarce, and Oando holds a great many of them.
The scale of what the company owns is not in dispute. Its 2024 acquisition of the Nigerian Agip Oil Company lifted Oando’s proved and probable (2P) reserves to about 920 million barrels of oil equivalent, among the largest reserve bases held by any Nigerian indigenous exploration and production company and equivalent to roughly 78 years of output at current rates. About 61 per cent of those reserves are gas, aligning the company with Nigeria’s gas-to-power priorities. The difficulty, as the report’s title implies, has never been a shortage of oil and gas but the balance sheet needed to turn them into cash.
Renaissance Capital builds its valuation from the assets up. Using a sum-of-the-parts discounted cash flow model, it values Oando’s upstream exploration and production business at N3.16 trillion, with a single cluster of assets (OMLs 60 to 63, acquired from NAOC) accounting for 98.9 per cent of that figure. A further N493.9 billion is ascribed to the supply and trading arm, which generates most of the group’s revenue but little of its value. After deducting net debt of about N2.13 trillion, the bank arrives at an equity value of N1.53 trillion, or N123.1 a share, well above the market price of N34.00.
The investment bank’s clearest evidence for the discount lies in how the market prices Oando’s barrels. Even at Renaissance Capital’s valuation, the company is valued at an enterprise value of just $1.9 for every barrel of 2P reserves, against a range of $4 to $8 a barrel for comparable international producers. On earnings, the shares trade broadly in line with peers; the gap is widest on reserve value. The report is explicit about the cause: high leverage and negative returns on equity, rather than any weakness in the assets themselves.
The report argues this discount can narrow. It forecasts Oando’s working-interest production rising 4.5 times, from 32,500 barrels of oil equivalent per day in 2025 to 145,400 by 2030. Revenue is projected to grow from N3.2 trillion to N4.8 trillion over the period, at an annual rate of 8.6 per cent, with the higher-margin upstream business climbing from about a fifth of group revenue to more than half and contributing over 90 per cent of gross profit. The company, in the report’s reading, is not short of inventory; the task is to bring it to market.
Notably, the case does not depend on high oil prices. Renaissance Capital assumes realised crude prices fall from $76.7 a barrel in 2026 to $68.8 by 2030, yet still projects crude revenue rising as production volumes climb faster than prices decline. Its sensitivity analysis suggests a $5 change in the oil price moves fair value by about N24.7 a share, making the pace of the production ramp, not the commodity cycle, the decisive variable.
The gas side of the story sits within a larger national push. Nigeria holds the largest proven gas reserves in Africa (about 210 trillion cubic feet, roughly a third of the continent’s total) and since 2021 has pursued a “Decade of Gas” policy intended to turn that resource into power, industry and export earnings by 2030. Successive administrations have cast gas, rather than crude, as the fuel of Nigeria’s next phase of development, and the current government has said it is accelerating the programme to deepen domestic utilisation and reduce the economy’s dependence on oil.
That backdrop matters for Oando, whose reserves are about 61 per cent gas. Renaissance Capital notes that the company’s gas is contracted domestically to power generators, industrial offtakers and the Nigeria LNG complex under longer-dated, lower-volatility agreements, priced at around $3.00 per thousand cubic feet by 2028 on the bank’s assumptions. That contractual base, the report argues, should temper the earnings swings that come with exposure to crude prices, while giving Oando a foothold in the very market the Decade of Gas is meant to build. For a country with chronic power shortages and idle industrial capacity, monetising gas at home is as much economic as commercial.
The report also highlights the importance of securing the financing required to deliver the programme. Oando’s net debt is estimated at about N2.4 trillion in 2026. It also notes the company’s negative shareholders’ equity and the material uncertainty relating to going concern, reflecting working-capital and financing pressures.
Oando’s proposed recapitalisation is meant to address that constraint. Management plans a N500 billion capital raise, anchored by a N200 billion rights issue, alongside a bond programme of up to $1.5 billion and the conversion of $300 million of reserve-based lending into equity. Full execution, Renaissance Capital estimates, would restore positive shareholders’ equity and reduce gearing from about 134 per cent in 2025 to roughly 97 per cent in 2026 and 76 per cent by 2028, lowering finance costs and freeing internally generated cash for development.
Execution also remains central to the outlook. Delivering the production ramp modelled by Renaissance Capital will require a sustained programme of well reactivations, new drilling, infrastructure debottlenecking and high facility uptime. Recent operating improvements provide an encouraging foundation, but continued delivery will be required to show the programme can be executed at the assumed scale and pace.
The potential reward is set against that risk. Because the valuation rests on Oando’s current 12.43 billion shares and deliberately excludes the planned raise, a successful recapitalisation would represent upside not yet captured in the numbers. More fundamentally, a repaired balance sheet would allow the market to value the company on what its assets can generate rather than on the weight of its liabilities, the re-rating the report is built around.
The picture Renaissance Capital paints is balanced; Oando does not need to find another billion barrels to create value, only to develop what it already holds and repair the balance sheet that has held it back. On the bank’s numbers, the reserves and the discount are both large. Closing the discount will depend on disciplined execution of the production and recapitalisation plans now under way.