After Boosting Production in 2011, Afren Plans to Reduce Capex

London-listed oil firm Afren announced Monday that it expects to report revenue of $600 million for last year – almost double the $319 million in reported for 2010.
Africa-focused Afren said that it boosted production in 2011 mainly as a result of the commissioning and ramping up of all 14 production wells associated with the initial phases of the development of its Ebok field, offshore Nigeria. It achieved an average net working-interest production rate of 19,200 barrels of oil equivalent per day in 2011 (2010: 14,320 boepd).
Afren's 2012 exploration and appraisal program has already begun with the successful Okoro East discovery. The firm is planning additional high-impact wells in Nigeria, as well as in Ghana, Tanzania, Kenya and the Kurdistan region of Iraq; Afren confirmed Monday that first oil is expected in August 2012 at Barda Rash, a field in Kurdistan for which it has received approval to develop.
However, the firm's capital expenditure this year is budgeted at between $450 million and $500 million – lower than the $550 it spent on capex last year.
"We have started our 2012 exploration campaign with a significant discovery offshore Nigeria, through the Okoro East Exploration well," said Osman Shahenshah, Afren's Chief Executive. "The multi-well drilling campaign in Ghana, Nigeria, the Joint Development Zone of Nigeria São Tomé and Príncipe, Tanzania, Kenya and the Kurdistan region of Iraq, has the potential to materially transform and increase our discovered resource base."
Commenting on the operations update, investment bank Westhouse Securities pointed out that although Afren plans to reduce capital expenditure in the year ahead, its high-impact drilling and development programs still require significant financial resources.
"However, as today's announcement shows, with the start-up of production at Ebok, revenue generation is also set to increase significantly, which should alleviate funding concerns and current debt levels," wrote the bank's analysts in a research note Monday. "The group remains a high-quality exposure to Africa, in our view, with a balance of growing production and exploration upside."


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