TIDMAFR
RNS Number : 5772O
Afren PLC
29 May 2015
Afren plc: Interim Management Statement
-- US$200 million interim funding provided by existing
Noteholders by way of new private placement notes in April 2015;
proceeds to be used for general corporate purposes and capex; wider
recapitalisation programme to be completed by the end of July
2015
-- Nigeria projects progressing: Completion of top-side Ebok CFB
extension; options for Okoro FFD with a low oil price under
discussion; completion of first Okwok development well; fifth
production well completed on OML 26
-- 2015 capex guidance US$0.4 billion expected to focus on
existing producing assets in Nigeria; average production guidance
expected to be 23,000 - 32,000 bopd, reflecting lower share of
production from Ebok following end of cost recovery
-- Q1 2015 net production at 36,035 bopd, above FY guidance
range but in line with expectations; Q1 2015 Revenue of US$130
million; Operating cash flow before movements in working capital of
US$59 million; Capex US$212 million; Net Debt US$1,196 million
London, 29 May 2015 - Afren plc ("Afren" or the "Group"), (LSE:
AFR), announces its Interim Management Statement ("IMS") and
financial results for the three months ended 31 March 2015 and an
update on its operations year-to-date 2015. Information contained
within this release is unaudited and is subject to further
review.
Operational Update
Afren delivered revenue of US$130.3 million (Q1 2014: US$269.0
million) and operating cash flows before movements in working
capital of US$59.1 million (Q1 2014: US$169.1 million) in Q1 2015,
driven by average net production at 36,035 bopd in line with
expectations to meet our guidance range for 2015, averaging 23,000
- 32,000 bopd. The fall in revenue was due to lower realised oil
prices and production liftings from Ebok utilised to settle a net
profit interest (NPI) liability. NPI represents a contractual
profit share payable to previous owners of the Ebok field for which
liftings made in settlement are offset against cost of sales (NPI
liftings commenced in Q4 2014).
Our 2015 production guidance range reflects a lower share of
production following end of all cost recovery at Ebok. At Ebok,
following completion of the installation of the CFB extension
wellhead jacket in late Q4 2014, the Partners completed the
top-side installation of the bridge and decks in March 2015 and are
targeting hook-up and commissioning of the facilities by Q4 2015.
Gross production at the Ebok field was 30,954 bopd. As previously
announced, Afren and Oriental have reached an agreement to end cost
recovery. Oriental will fund its share of expenditure from May 1
2015. As a result of the agreement, Afren will receive a lower
share of production to reflect its share of working interest in
Ebok.
At Okoro, gross production at the field was circa 15,073 bopd in
the period, incorporating planned downtime. The Partners are
currently in discussions on how to manage the Okoro Further Field
Development Plan in line with the current low oil price environment
with a view to re-engineering the forward work programme. At Okwok,
Afren and its JV Partners Oriental and Addax Petroleum, have
completed and flow tested a first development well, which was
completed in April 2015 from the Okwok jacket having been drilled
to a total measured depth of 9,202 ft and flow tested successfully
at a maximum rate of 5,400 bopd (24.5 deg API oil).
At OML 26, following the receipt of Field Development Plan (FDP)
approval by the Nigerian regulatory authorities in H1 2014, the
Partners successfully drilled two producers in H2 2014. A third
producer was spudded in December 2014 and completed in February
2015, a fourth producer was completed in March 2015 and a fifth
producer has just been completed in May 2015. All five new wells
have been drilled with the same rig and from the same location
cluster. Two of the wells tested at over 2,000 bopd and a third
around 1,000 bopd during post completion well tests without any
gaslift. The new wells will undergo the statutory well tests and
gaslifted to realise their full production potential in the coming
months. Submission of the OML 26 FDP to the Nigerian authorities
for Isoko is expected in Q2 2015.
At the Barda Rash field in Kurdistan, following a material
reduction to previously published estimates of reserves and
resources resulting from the reprocessing 3D seismic shot in 2012
and results from the Company's drilling campaign as well as the
publication of an updated Competent Person's Report (CPR) on 12
January 2015, Afren is in discussions with the MNR regarding
potential divestment opportunity options for the field.
Following the play-opening Ogo discovery, offshore Nigeria,
Afren completed the fast track 2,716 km(2) marine 3D seismic
programme across OPL 310 and OML 113 to complement existing
coverage on the two licences. Processing of 3D seismic data has
been completed. The fast track post-stack time migration was
delivered in August 2014 and the final production pre-stack time
migration was delivered in late Q4 2014. The pre-stack depth
migration was delivered in April 2015. The interpretation of these
data sets will be used to finalise a well location. Afren has
instructed NSAI to commence the preparation of a CPR for OPL 310
incorporating the new block wide seismic data.
Capex guidance for 2015 remains at US$0.4 billion, focussed on
high margin Nigerian cash generating producing assets.
Commenting today, Alan Linn, Chief Executive Officer of Afren
plc, said:
"Afren has delivered a solid first quarter result despite the
continuing low oil price and additional NPI liftings from Ebok. We
have already significantly curtailed immediate capital expenditure
and are now working with our Partners to optimise forward
investment in development projects in Nigeria. Business and process
streamlining has commenced and we expect to begin seeing improved
bottom line results from these efficiencies across the business as
2015 unfolds. Whilst interim funding is now in place, it will take
time to work through historical issues and funding remains
extremely tight. We will be working with shareholders in the coming
weeks to explain the benefits of our proposed new funding structure
and encourage them to support us in resolving our financing issues
in order for Afren to deliver the long-term value and attractive
future I see for the Company."
Production
Average gross Average net
Production Q1 2015 (bopd) Working interest production production
=========================== =================== ============== ============
Okoro 50% 15,073 7,537
Ebok 50%(1) 30,954 26,887
OML 26 45% 3,580 1,611
Total 49,607 36,035
=========================== =================== ============== ============
(1 ) (Afren's net production in 2015 includes its 50% working
interest plus additional barrels to recover costs of capital
investment funded by Afren. It includes any volumes provided to
Partners to settle net profit interest liabilities.)
Financial Position
Revenue for the three months ended 31 March 2015 was US$130.3
million (Q1 2014: US$269.0 million). The 52% decrease in revenue is
attributable to a significantly lower realised oil price of
US$48.0/bbl (Q1 2014: US$ 106.5/bbl) and liftings of Ebok
production being provided in settlement of the net profit interest
liability (such amounts are therefore excluded from revenue and
offset against cost of sales).
This fall in revenue, together with higher administrative costs
incurred in relation to the Group's recapitalisation and the
write-off of Q1 2015 expenditure on certain exploration and
evaluation assets, resulted in a loss before tax for the period of
US$48.1 million (Q1 2014: profit before tax of US$55.8 million).
Although the Group continues to reflect the benefit of a five-year
tax holiday at the Ebok field, a tax charge of US$5.0 million was
recorded for Q1 2015 (Q1 2014: US$16.7 million credit). The tax
charge for Q1 2015 principally relates to the current tax charge at
Okoro. This resulted in a loss after tax of US$53.1 million (Q1
2014: US$72.5 million profit after tax).
Operating cash flow before movements in working capital for the
three months to 31 March 2015 was US$59.1 million (Q1 2014:
US$169.1 million). This decrease was primarily attributable to
lower revenue. Net cash generated by operating activities was
US$84.0 million (Q1 2014: US$114.2). The narrowing of the decrease
compared to operating cash flow before movements in working capital
reflects a reduction in the inventory of crude oil compared to the
respective year-ends.
During the three months to 31 March 2015 the Group spent
US$212.0 million developing its assets (US$209.7 million investment
in producing and development assets and US$2.3 million on
exploration and evaluation projects). The investment in producing
and development assets included US$128.9 million in respect of
various drilling and enhancement activities at Ebok.
Gross debt at 31 March 2015 was US$1,296.1 million, excluding
finance leases. Cash at bank at 31 March 2015 was US$100.5 million,
resulting in net debt (excluding finance leases) of US$1,195.6
million (31 December 2014: gross debt of US$1,304.0 million; cash
of US$236.5 million; and net debt of US$1,067.5 million).
On 30 April 2015, the Group announced that, as part of its
recapitalisation plan, it will be provided with US$200 million of
net interim funding. For further details of this and the overall
recapitalisation, please refer to our announcement on 30 April 2015
entitled "Completion of interim funding, appointment of new CEO and
update of reserves".
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