Afren Fully Funded for East African Expansion

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Commenting on Tuesday's first half results from Afren, oil sector analyst Alessandro Pozzi said that the firm's Nigerian assets are highly cash generative and that he expects the firm's free cash flow to be approximately $400 million in 2012.

"Therefore, we see company fully funded to expand its exploration activities across its acreage in East Africa," said Pozzi in a research note Wednesday.

On Tuesday, Afren reported that it made a normalized pre-tax profit of $103 million during the six months to June 30 – which was a 132 percent improvement on 1H 2011.

The firm's net working-interest production came to 41,251 barrels of oil equivalent per day (boepd) during the half – an improvement of some 218 percent over 1H 2011.

Pozzi commented that this was a touch below Afren's full-year guidance of 42,000 to 46,000 boepd but that he expects Okoro East offshore Nigeria and the firm's producing assets in the Kurdistan region of Iraq to make up the difference during the second half.

In Kurdistan, Afren has already tested its first well on the Barda Rash field, achieving 6,000 barrels of oil per day. The firm is targeting three wells in the region, which it said are on track to achieve gross production of between 10,000 and 15,000 boepd by the year end and Pozzi believes this target is credible.

In East Africa, Afren's next production well – targeting the Pai Pai prospect onshore Kenya – could open up a "new play fairway", added Pozzi. However, this prospect – which is operated by Tullow Oil – has a chance of success of just 10 percent.