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Afren PLC (AFR)

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Monday 06 June, 2011

Afren PLC

Annual General Meeting - Chairman's Statement

RNS Number : 8833H
Afren PLC
06 June 2011




Afren plc (AFR LN)

Annual General Meeting - Chairman's Statement

London, 6 June 2011 - At today's AGM the Chairman, Egbert Imomoh, opened the meeting with the following statement:

I am pleased to report that the year 2010 and first half of 2011 has been a period of growth and delivery across all fronts for Afren.  During this time, we acquired interests in 16 new assets and made six new country entries, thus expanding our geographic footprint and positioning the Company with attractive acreage positions in some of Africa's most prospective oil and gas plays.  Today, our portfolio comprises 29 assets across 11 countries and offers an attractive mix of both near, medium and long-term growth opportunities spanning the full cycle E&P value chain.  Independently estimated net 2P and 2C reserves associated with this portfolio stand at 136 mmboe, with net prospective resources of approximately 3.5 billion barrels, increases of 20 per cent. and 230 per cent. year-on-year respectively.


Operationally, net working interest production in 2010 averaged 14,333 boepd.  In Nigeria, production at the Okoro field remained ahead of pre start-up expectations at an average rate of 16,055 bopd gross for the year.  With our indigenous partner Amni, we  completed and bought onstream two infill wells that have increased field output to 21,000 bopd, which in turn is helping us optimise the ultimate recovery factor achievable at the field.  We have also identified a separate Okoro look-a-like structure to the East of the main field that is estimated to have similar resource potential.  Dependent on rig availability, we are exploring options to test this low risk and high reward opportunity later in the year. In Côte d'Ivoire, gross production during the year was 5,809 boepd including NGLs.  We are glad to report that following the period of political and social unrest all our staff are safe, and that production has now returned to normal levels.


Of particular significance has been the start up of production at the Ebok field, offshore south east Nigeria.  In just over two years from drilling the Ebok-4 appraisal well, together with our partner Oriental, we commenced production operations in February this year.  We have steadily increased production to 17,000 bopd from Phase 1, targeting the Central Fault Block, which is ahead of guidance.  Together with our other producing assets, Group wide operated production is now running close to 40,000 bopd, of which approximately 30,000 bopd is net to Afren.    Our appraisal drilling activity in the area continues to be successful.  We confirmed the nearby Okwok field as a commercial development project in October 2010, with NSAI independently ascribing 51.8 mmbbls gross recoverable resources to the field.  This is another significant step forward for Afren as we seek to build on our success to date and progressively establish a core, long term production hub for the Company in the area.


During 2010 we announced two major acquisitions.  In Nigeria, the acquisition of a 45 per cent interest from Total, Shell and ENI in OML 26 by First Hydrocarbon Nigeria (FHN), offers a major re-development opportunity that is expected to substantially augment our future production. Afren is a 45 per cent. shareholder in - and technical services provider - to FHN. We have defined a phased work programme that will see gross production at the field ultimately increase ten-fold to 50,000 bopd.  There are also three as yet undeveloped fields on the block and substantial exploration potential that could conceivably see this volume significantly increased in the future.


The acquisition of Black Marlin Energy represents a significant expansion to our exploration portfolio, which is primarily focused around three core exploration themes - the Upper Cretaceous play along the West African Transform Margin, low risk amplitude supported near field exploration in the prolific Tertiary systems of the Niger Delta and the Rift and Coastal Systems of East Africa.  We have continued to manage our exploration portfolio and risk exposure, both geological and financial.  The recent farm down of a 35 per cent. interest in the Keta Block offshore Ghana to ENI, in return for back costs and a full carry, has financially de-risked the Company through an upcoming exploration well on the large scale Cuda prospect, whilst enabling us to retain a material exposure to upside.  The acquisition of a 74 per cent. interest in the Tanga Block offshore Tanzania has extended our geological exposure to the highly attractive Coastal High play that we have defined in our Kenyan blocks L17 and L18 to the north.  In the coming months, Afren will embark on an exciting E&A campaign that will see up to 10 wells drilled targeting a mean resource base in excess of 630 mmbbls net to Afren.


Financially, Afren reported a full year profit after tax of US$46 million in 2010.  The Company is in a strong position with net debt as at 31 March 2011 of US$291.6 million with cash at bank of US$333.1 million.  In the first quarter of 2011, we became the first UK listed independent E&P company to access the bond market, raising US$500 million and reflecting the growing maturity of our capital structure.  The move has also opened additional sources of long term capital and reduced any reliance on a comparatively small number of lending banks and potential vulnerability in times of tight credit.  Our conservative balance sheet, together with positive cashflow from existing operations and the reserve based lending facility for the development of the Ebok/Okwok/OML 115 area means that there are considerable financial resources available to internally fund our forward capex programme and at the same time pursue further inorganic growth opportunities.


In December 2009, Afren moved to the Main Board of the London Stock Exchange and was admitted to the Financial Times Stock Index of the leading 250 listed companies (FTSE 250).  In terms of our relative market performance, in 2010 Afren's Total Shareholder Return was 74 per cent., representing an upper quartile performance versus our Main Market independent peer group.  We were the 25th best performer in the FTSE 250 index and outperformed the FTSE All Share and FTSE 250 indices by 63 per cent. and 49 per cent. respectively during the period.  Since IPO to the end of 2010, we have delivered a Total Shareholder Return of over 730 per cent. 


In December 2010, we announced that Constantine Ogunbiyi was to step down as Executive Director of Afren with effect from 4 January 2011 following his appointment as Chief Executive of First Hydrocarbon Nigeria.  We wish him every success in his new role. We have also started the process of seeking a new independent director to expand and complement the existing composition of the board.


We expect 2011 to be another defining year in the history of Afren, characterised by strong production growth and an internally funded E&A drilling campaign, whilst continuing to capitalise on a strong acquisition pipeline.





Afren plc

+44 20 7451 9700

Osman Shahenshah

Galib Virani

Pelham Bell Pottinger

+44 20 7337 1500

James Henderson

Mark Antelme


+44 20 7251 3801

Roland Rudd

Andrew Mitchell


Notes to Editors

Afren is an African focused independent oil and gas exploration and production company listed on the main market of the London Stock Exchange and constituent of the Financial Times Stock Exchange Index of the leading 250 UK listed companies. Afren has a portfolio of 29 assets across 11 countries spanning the full cycle E&P value chain.  Afren is currently producing from its assets offshore Nigeria and Côte d'Ivoire.  Afren has exploration interests in Ghana, Nigeria, Côte d'Ivoire, Congo Brazzaville, the Joint Development Zone of Nigeria - São Tomé & Príncipe, Kenya, Ethiopia, Madagascar, Seychelles, Tanzania and South Africa. 

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