SAM Ofori and SILAS Koomson met in 2010 when they were both oil and gas students at Texas University in the United States. They shared common interest as a geoscience student and saw commercial opportunities in setting up oil and gas business back in their home country, Ghana. At that time, Ghana just discovered oil and gas in commercial quantity. Ofori and Koomson agreed that if they could establish a successful oil and gas business, there would be opportunities for rapid growth within just a few years.

On returning to Ghana in late 2015, they established a private company, AfriOIL Ltd, with savings from their student stipends and some private means. The companys business was to explore, develop and produce hydrocarbons. They acquired a concession located in the Deep-Water Cape Three Point. Initially, Ofori and Koomson acted as filed supervisors themselves, although they gradually did less of this work as the company expanded. AfriOIL ltd uses the services of expats from Texas University as well as other reputable oil companies. The company pay for their travel expenses and provides them with accommodation and living expenses.

Early growth:

The oil and gas industry in Ghana suffered from skills manpower shortage during the early years of commercial oil find. AfriOIL ltd proved success initially because Ofori and Koomson were both talented oil and gas professionals. They have a strong motivation to succeed, extensive knowledge of Ghanaian geophysical and geological rock formation and its attractions, ability to analyse oil rock properties and to communicate easily with their expats was also their strength. The company gained a strong reputation in parts of the US for efficient organisation, but also exhilarating and modern enhancing operations.

The company operated from a small office in Roman Ridge, Accra, from where operations were organised and coordinated. In the first year of operations, ending December 2016, they generated revenue of just under GH10 million, although they made losses in the early years, they were pleased with the revenue growth they achieved. As the company grew, it recruited a small

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number of full-time staff, using contacts in US universities to identify and attract Ghanaians who were studying there and were attracted by the prospects of working in the oil and gas industry in Ghana, and for a company where the prospects of career development seemed strong. In recruiting new staff, the company looked for individuals not only with oil and gas experience but also strong motivation, an interest in Ghana and its history, culture and resources, and an ability to communicate well with both foreigners and the local folks. By 2018, the company was operating two developed and producing fields with 60 field staff. The companys annual revenue in 2018 amounted to just short of Gh1million, and the net loss after tax was about 10% of revenue or Gh100,000.

Growth strategies:

Ofori and Koomson believe that they need to think ahead and develop a strategy for taking the company forward and growing the business. There seem to be a number of different options for growth, and they want AfriOIL to be at the forefront of developments in the oil and gas industry. One strategic option they have discussed is to increase the number of oil fields and wells.

In 2018 the company ran four developed wells on two fields. It might be able to increase this number in future, although there is probably a limit to the number of fields that can be acquired. If this is accepted, there would be a need to recruit more staff. Ofori and Koomson are also thinking of leasing out one or more unproductive wells. The directors of AfriOIL think that they would be unable to raise enough finance to develop those wells.

A restriction on the companys growth potential is that currently 70% of its staff are expats who come from USA. Recurrent expenditures on them are becoming increasingly high. AfriOIL may not be able to cope with the increase in the future. Couple with that is the Ghanaian local content policy which may not be favorable in hiring expats. The companys business is still at an early stage of development, and the directors understand that the company needs to sustain or improve the quality and efficiency of its operations and the skills of its employees.

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Decision-making:

The directors are reluctant to delegate authority to their employees. Each manager has a strict budget, and most spending is controlled from head office, for example spending on hotels, use of utility boats, helicopter services, moving to offshore and insurance. Managers are given a small budget for each operation for discretionary spending. Problems and concerns of staff during their operations offshore are dealt with initially by the managers, but are referred to head office if they cannot be resolved easily.

Until now, the directors have not made formal plans or budgets for the business, but they think that the company is reaching a stage where greater formality is required in the process of setting business targets and monitoring performance.

The directors are keen to encourage their participation in decision-making, and to this end they hold two-monthly meetings with staff. These meetings are used to discuss issues that have arisen in the business, matters that concern staff, and ideas that the directors have for the future of the business. Ofori and Koomson think that these meetings are constructive and useful. The meetings help them to monitor feelings and concerns among employees, and give employees an opportunity to contribute their ideas about how the company should be run and what it should be doing.

Financial issues:

When the company was established, it was financed entirely by equity capital. As the business grew and made profits in some years, a proportion of the profits were retained in the business to finance further growth. However, there have been some years of loss, although the directors still recommended and paid a dividend even in those loss-making years. As at 31 December 2018, there were retained losses, this has since improved. The company rents its offices in Accra, and does not have many non-current assets. Some thought was given a few years ago to buying two helicopters for the company, but the helicopters would not be used sufficiently to justify their cost, and the cost of employing the pilots. Even so, it has not been possible for the company to rely entirely on equity finance to support the business operations.

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As typical of the industry, the company needs a relatively large amount of working capital. This is because when a drilling operation is organized, AfriOIL is required to make down-payments to airlines, hotels and other ancillary services in advance of the operations. The company therefore borrows from its bank to finance working capital. The company budgets in US dollars. Its expenses are mainly in US dollars (e.g. payments to drilling rig owners, airlines etc.) and partly in Ghana cedis (for example, payments to owners of supply boats, hotels etc.). Its short-term borrowings are in Ghana cedis.

In October, 2019, AfriOIL discovered oil in two of its wells and subsequently began production in January 2020. The management has also decided to link its upstream operations with the downstream sector. However, in December 2020, the company has been knocked down by the COVID-19 pandemic. This has actually impacted on its operations. The directors are uncertain as to what could be done to improve the chances of development of the two wells after the COVID-19 pandemic. The management therefore decided to hire oil and gas accounting and finance consultant to carry out a thorough evaluation on the entire oil and gas investment project.