Renaissance Capital Initiates Oando Coverage With ₦123 Target Price, a 262% Upside Based on Balance Sheet Deleveraging

Oando Plc has the reserves to become one of Nigeria’s largest indigenous oil-and-gas growth stories. What it lacks, according to Renaissance Capital Africa, is the balance sheet needed to turn those reserves into free cash flow and shareholder returns.

Renaissance initiated coverage of the Nigerian energy company with a Buy recommendation and a ₦123.10 target price, implying 262.1% upside from the ₦34 reference price used in the report.

“Ultimately, this is a highrisk, high-reward turnaround story where successful recapitalisation is a prerequisite for its market valuation to re-rate,” Renaissance Capital Africa analysts Olumide Sole said, in a September 01 note to clients.

The call rests on a high-risk premise: Oando must complete a recapitalization, execute a large production ramp and reduce leverage after the acquisition of Nigerian Agip Oil Co. assets transformed its upstream portfolio.

The brokerage’s research note said Oando is a deeply discounted, reserve-backed turnaround story rather than a conventional earnings-growth investment, whose value lies mainly in the upstream business.

Renaissance’s ₦123.10 target price means the share price is deeply discounted at the ₦34 reference price. But the 262% upside is conditional.

The investment case

Oando’s acquisition of Eni’s Nigerian Agip Oil Co. interest in 2024 expanded the group’s 2P reserves to about 920 million barrels of oil equivalent, including a roughly 61% gas component.

That places the company among Nigeria’s largest indigenous reserve holders and gives it a reserve life estimated at approximately 78 years at 2025 production levels.

Renaissance estimates that Oando’s working-interest production can increase more than fourfold, from 32,500 barrels of oil equivalent a day in 2025 to 145,400 boepd by 2030. The forecast assumes the company executes a development program involving 62 new wells and 55 workovers over 2026 through 2030.

Source: Renaissance Capital Africa.

The production ramp is expected to change the quality of Oando’s earnings. Renaissance forecasts the upstream segment will account for 51% of group revenue by 2030 but approximately 93% of gross profit, as crude and gas production displace low-margin trading as the central driver of value.

Balance-sheet revamp

The critical issue is leverage. Renaissance estimates Oando’s net debt at approximately ₦2.4 trillion in 2026, while the company’s shareholders’ equity remains negative under the brokerage’s base forecast through 2028.

Oando reported a ₦567 billion shareholders’ funds deficit in 2025, with gearing at 134%.

Management’s plan includes a ₦500 billion capital raise, including a ₦200 billion rights issue, as well as a broader multi-instrument program. The company also plans to convert $300 million of reserve-based lending into equity, although Renaissance said the debt conversion is not expected in 2026.

If fully executed, the recapitalization could restore positive book equity, reduce finance costs and improve borrowing capacity.

Renaissance estimates that applying the full ₦500 billion raise against borrowings could reduce gearing to about 97% in 2026 and 76% by 2028, while restoring pro-forma equity to approximately ₦52 billion in 2026.

The trade-off would be dilution though. Renaissance estimates that a ₦200 billion rights issue conducted at ₦50 a share could increase Oando’s shares outstanding from 12.43 billion to 16.43 billion. That would reduce its theoretical post-rights fair value from ₦123.10 per share to about ₦83.80, before accounting for the value of rights entitlements and the potential benefits of deleveraging.

Valuation

Renaissance values Oando through a sum-of-the-parts discounted cash-flow methodology. It assigns ₦3.16 trillion of risked net present value to the upstream business and ₦493.9 billion in enterprise value to the supply-and-trading operation. After deducting ₦2.13 trillion in net debt, the analyst arrives at group equity value of ₦1.53 trillion, or ₦123.10 per share.

Nearly all upstream value comes from OMLs 60 to 63, which contribute 98.9% of Renaissance’s upstream NPV estimate. OML 56 has been agreed for sale to Energia Ltd. and is excluded from the longer-term valuation beyond residual 2026 production.

The target price is sensitive to oil prices and funding costs. Renaissance estimates that a $5-per-barrel change in realized oil prices shifts fair value by around ₦24.70 per share, while a 100-basis-point move in the weighted average cost of capital changes the valuation by approximately ₦16 to ₦18 per share.

Gas as the longer-term prize

Oando’s reserve base is weighted toward gas, which represents about 61% to 62% of 2P reserves but contributed less than one-quarter of upstream revenue in 2025. Renaissance Capital Africa sees gas as a more stable source of earnings because domestic contracts are less exposed to crude-export disruption and spot-market volatility.

Renaissance forecasts gas production will rise from 26,700 boepd in 2026 to 99,000 boepd by 2030. Gas revenue is projected to increase from ₦141 billion to approximately ₦953 billion over the same period, helped by greater utilization of existing processing infrastructure.

Renaissance also sees a major cash-tax advantage. Oando entered 2026 with about ₦3.9 trillion in accumulated upstream and trading tax losses, plus unused capital allowances. The tax shield could keep cash taxes low through much of the forecast period and support free-cash-flow generation while the company funds development.

Risks for Equity investors

The risks are equally significant. Oando’s projected production increase is ambitious relative to its operating history, and the capital plan is not yet fully reflected in the analyst’s forecasts or valuation.

The company’s crude output fell to 4,900 barrels a day in 2022 before recovering to 11,300 barrels a day in 2025. Renaissance’s base case calls for crude output to rise to 38,100 barrels a day by 2030, while total working-interest production reaches 145,400 boepd.

Oando’s 2025 net income of ₦204.8 billion came despite a gross loss, aided by impairment reversals, other operating income and tax credits.

The brokerage expects profit quality to improve as upstream output rises, but notes that its estimates still include ₦264 billion to ₦295 billion a year of other operating income and impairment reversals within forecast EBITDA.

Oando closed trading Wednesday on the NGX at ₦38.30 per share for a market capitalisation of ₦558.7 billion.

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