In a commitment to transparency and open communication, the Namibian National Petroleum Corporation (Namcor) has acknowledged challenges it has faced in the past, particularly in 2010, which led to significant losses. This follows exposure to fluctuating oil prices and a what the corporation termed a “flawed agreement” between Namcor and a third-party supplier, with ensuing financial implications which prompted a government bailout.
In a statement issued last week, Namcor’s acting managing director, Shiwana Ndeunyema, said these factors underscore the complexity of operating in a volatile market.
As at 31 March 2023, Namcor unaudited financial statements confirm the entity made an unprecedented net loss of N$700 million.
“This was coupled with a significant working capital deficit, which created significant cash flow challenges in the company. In May 2023, Namcor management and the board carried out an extensive diagnostic to determine the factors that contributed to the entity’s precarious financial position. This exercise, culminated in the development of a Recovery Plan, in which 10 factors were considered as the root cause,” the company stated.
According to Ndeunyema, chief amongst these factors were issues relating to market volatility, and significant breach of internal controls and governance
“The Recovery Plan was meant to close the gaps identified in the 10 factors, to avoid further leakage. The volatility of global markets, exacerbated by geopolitical events such as Russia’s invasion of Ukraine and the lingering impact of the Covid-19 pandemic, continued to pose challenges,” Namcor stated.
After the development of the Recovery Plan, and the successful implementation of associated governance and control initiatives, Namcor developed a three-phase turnaround strategy, whose primary aim is to address the working capital deficit facing the company.
“The first phase focuses on short-term survival and stabilisation, coupled with decisive shareholder capital intervention, secondly, medium-term strategies centered on implementing a new operating model to reduce exposure and ensure sustained success. The third phase relies on the development of a 15-year strategic masterplan that seeks to position the company for long-term sustainability, with efforts towards unlocking the opportunities presented by the recent oil discoveries and embracing the energy transition,” the Namcor statement reads.
The statement added that as of 31 March, 2023, the corporation faced a significant working capital deficit, with a creditor’s book of N$2.5 billion.
“Through meticulous sales planning, robust margin and profitability analysis, and strategic debt restructuring, Namcor successfully reduced this amount to N$1.9 billion by September 2023. While the company currently enjoys a positive gross profit position, associated defaults in supplier payments necessitate timely shareholder intervention to avoid further interest on debt. The turnaround strategy is poised to restore financial health and secure a sustainable future for Namcor,” the statement reads.
Beyond its role as a petroleum products trading company, Namcor actively participates in the upstream space through its exploration and production entity. The corporation is currently involved in significant oil finds and is the custodian of the Namibian State’s interests in these hydrocarbon discoveries.
From the recent TotalEnergies and Shell discoveries, Namcor has also partnered with Galp Energia and Kustos Energy with the drilling of back-to-back oil wells which commenced this month.
“Despite challenges, Namcor’s management is resolute in its commitment to implementing the turnaround strategy and steering the corporation toward stability. Our staff remain our biggest priority and we have gone to greater lengths to keep the staff informed about our challenges and associated turnaround strategy and will continue to provide much needed assurance to our employees. The turnaround strategy has been fully owned by the board, management and staff,” Namcor stated.