Afren Issues Results for 2006, Posts Loss

Afren PLC on Monday released its preliminary results for the year ended 31 December 2006.



--Successful appraisal program on the Okoro Setu Project in Q3 2006
--Afren drilled two appraisal wells on the Okoro Field, on time and on budget
--The successful results of the appraisal program fulfilled all pre-drill objectives and have significantly delineated the development
--Independent reserves report estimates 2P reserve level of 32mmbbls

--The Obo-1 well on Block 1 of the Joint Development Zone of Nigeria Sao Tome & Principe logged a cumulative total of at least 150 feet (45 meters) of net hydrocarbon pay

Corporate and Acquisitions

--Agreement signed with Amni International Petroleum Development Company ("AMNI") for the development of the Okoro Setu Project in Nigeria
--Strategic entry into the Republic of Congo (Brazzaville) through the acquisition of a 14% stake in the La Noumbi permit
--Foothold in Angola established, through Heads of Agreement for a 5% stake in onshore Cabinda Block B
--Appointment of Dr Rilwanu Lukman as Chairman
--Osman Shahenshah appointed Chief Executive and Evert Jan Mulder joins as Chief Operating Officer
--Dr Rilwanu Lukman establishes the International Advisory Board


--US$200 million fully underwritten Credit Facility secured post year-end, which will primarily be used to finance the development of the Okoro Setu Project
--US$15 million equity placement post year end to BNP Paribas and Standard Bank, the Mandated Lead Arranger and Lead Syndicate Bank respectively for the Credit Facility
--Successful convertible bond issue, upsized to US$75 million from US$50 million following strategic investment from the Heerema Group
--Company well capitalized at year end with US$35.7 million net cash at year end exchange rates


--Development drilling on Okoro Setu Project to commence in Q3 2007
--Rig contract for nine month program secured for Global Santa Fe's Adriatic VI
--Approval of the Field Development Plan is expected shortly from the Department of Petroleum Resources in Nigeria
--Afren is in advanced stage discussions on securing an FPSO in Nigeria

--High impact exploration drilling on the Doungou prospect in Republic of Congo (Brazzaville) in Q3 2007
--Drilling activity on the Admiral prospect in Gabon in Q3 2007

Osman Shahenshah, Chief Executive of Afren, commented:

"During 2006, Afren made significant progress in the growth of its West African portfolio and has demonstrated its ability as technical operator through the two well appraisal program on the Okoro Field in Nigeria.

"2007 marks an important year for Afren, as the Company enters the next phase of its growth, focusing on the development of the Okoro Setu Project in Nigeria, while at the same time using its African relationships to continue to grow its diversified portfolio. With a strengthened operational team, Afren is well placed and on track for 15,000 to 20,000 bopd of production by early 2008."

Afren was founded in December 2004 by a management team including Dr Rilwanu Lukman, (current Chairman), Osman Shahenshah, (current Chief Executive) and Bert Cooper (Advisor to the Board), with the vision to become the premier pan African independent Exploration and Production company. Since its listing on the AIM market of the London Stock Exchange, Afren has rapidly expanded its portfolio and the management team has delivered nine assets in the Joint Development Zone of Nigeria Sao Tome and Príncipe, Nigeria, Gabon, Angola and Congo Brazzaville.

Afren will continue to add to its diversified portfolio of near term development and high impact exploration, with the overall objective of creating substantial shareholder value.

Chairman and Chief Executive Statement

Afren continued the rapid expansion of its portfolio in 2006 with further penetration in Nigeria and strategic entries into Congo Brazzaville and Angola. Today the Company has a diversified West African portfolio and is on track towards achieving its near term production target of 15,000 to 20,000 bopd from the existing portfolio.

Afren has demonstrated its ability to fast track the development of proved undeveloped fields in Nigeria. Having announced an agreement with Amni International Petroleum Development Company ("AMNI") for the development of the Okoro Setu fields offshore in the Eastern Niger Delta in June 2006, Afren, as the technical operator, successfully drilled two appraisal wells on time and on budget in Q3 2006. Development drilling is due to start in Q3 2007 using Global Santa Fe's Adriatic VI, with first oil expected in early 2008.

The acquisition of a 14-percent. stake in the La Noumbi permit in Congo Brazzaville provides a strategic entry into a growing Gulf of Guinea oil province and exposure to an exciting high impact exploration play. The Heads of Agreement with Gulf Energy Resources for a 5 percent. stake in onshore Cabinda Block B establishes a foothold in Angola, a leading area for exploration in sub-Saharan Africa with 11.4 billion barrels of proved undeveloped reserves in country.

In order to finance the continued growth of the portfolio and the appraisal program on the Okoro Setu Project, Afren successfully placed a US$50 million convertible bond, which was subsequently upsized to US$75 million by the Heerema Group.

Most significantly, subsequent to year end, the Company secured a US$200 million Credit Facility, which will primarily be used to finance the development of the Okoro Setu Project. The Facility is fully underwritten by BNP Paribas as Mandated Lead Arranger and has been secured against Afren assets, primarily the Okoro Setu Project reserves. BNP Paribas and Standard Bank (a lead syndicate bank) have also, subsequent to year end, taken a US$15 million position in the company representing a significant vote of confidence in both the Project and Company.


We are delighted to welcome Evert Jan Mulder to the Executive team as Chief Operating Officer. Evert Jan has worked within the international Oil & Gas industry for almost 25 years, including positions within Addax Petroleum, Shell, Weatherford and Halliburton. Evert Jan has significant Nigerian experience, having worked with both Addax Petroleum and Shell in Nigeria. He was most recently the Chief Operating Officer of Addax Petroleum, Nigeria's largest independent oil producer. Whilst at Addax Petroleum, he was responsible for increasing the daily average oil production from 30,000 bopd to 75,000 bopd in 24 months, while maintaining reserves. He coordinated the planning and implementation of Okwori, Addax's first green field development using an FPSO and new subsea well technology.

The Company has also established an International Advisory Board to assist and advise the Board in its objective to grow the Company into the leading pan African independent Exploration and Production Company. The International Advisory Board is a consultative body with a strong orientation to Africa, the oil and gas industry and the international capital markets. The founding members of the International Advisory Board are Brian Ward and Ennio Sganzerla, two senior oil industry practitioners with significant African experience. Brian Ward was formerly the Regional Chief Executive for Shell E&P Africa and was responsible for Shell's Upstream African operations and relationships with Host Governments. Ennio Sganzerla was until recently Senior Vice President (E&P) at ENI, having joined the group in 1971. Ennio was instrumental in establishing and building ENI's presence in Congo, and played an active role in increasing ENI's position in Nigeria, Gabon and Egypt as Regional VP for Africa. Ennio was also active in leading the group's M&A activities, including the acquisition of Lasmo plc, British Borneo and others.

We were also delighted to announce the appointment of John St. John as Strategic Financial Advisor to the Board. John is one of the most acclaimed names in European Equity Capital Markets and was formerly Global Head of Equity Capital Markets at Dresdner Kleinwort Wasserstein, Salomon Brothers, Lehman Brothers and Commerzbank. He has been advisor on over €100 billion of equity and equity-linked issuance in all major markets worldwide. He currently serves as Chairman of Equity Capital Markets at Nomura International plc.

In February 2007, Osman Shahenshah was appointed as Chief Executive of Afren. On behalf of Afren's Board and shareholders, we would like to thank Brian O'Cathain for his significant contribution over the last two years to the development of Afren.

The Next Phase of Growth – An Exciting Year Ahead

Afren aims to continue its development into a leading pan African Oil & Gas Exploration, Development and Production Company by partnering with indigenous companies, African National Oil Companies and Governments. The Company will continue to focus on near term development and producing opportunities, while carefully reviewing high impact exploration prospects. The Company intends to further exploit the development of proven undeveloped fields in Nigeria and build on the strategic entries into Congo Brazzaville, Angola and Gabon.

Most importantly, the Company is now entering a second phase of its growth strategy, the actual development and production of proven oil & gas fields. The management team - with a strengthened development and production focus - is well placed for this next phase and to realise Afren's near term target of 15,000-20,000 bopd of production.

2006 Operations Review

Nigeria - Fast Track Development

Afren announced the Production Sharing and Technical Services Agreement with AMNI in June 2006 to appraise and develop the Okoro and Setu oil discoveries located in OML 112 in the shallow waters of the eastern Niger Delta.

Within six months of announcing the agreement, Afren, as Technical Service Provider, successfully drilled two appraisal wells, Okoro-3 and Okoro-3ST, between September and December 2006. The successful results of the appraisal program fulfilled all pre-drill objectives and have significantly delineated the development. The independent reserves verification completed by Netherland Sewell & Associates Inc - prior to any reservoir modelling studies - estimates 1P oil reserves of 25 mmbbls for the Okoro and Setu Fields and a 2P reserve level of 32 mmbbls gross.

The Field Development Plan for the initial development of the Okoro Field, which was recently submitted to the Department of Petroleum Resources in Nigeria, is expected to be approved shortly. Development drilling will commence in Q3 2007 using Global Santa Fe's Adriatic VI drilling unit. Afren is in advanced stage discussions to secure the FPSO, which will be contracted for an initial five-year term. Target for first oil is on schedule, with peak production expected to reach 15,000 to 20,000 bopd by early 2008.

Congo – High Impact Drilling

Afren completed its acquisition of a 14-percent. share of the La Noumbi permit, which covers 2,830 km² and lies adjacent to - and on trend with - the world class M'Boundi field. Seven prospects and leads have been identified. The Doungou prospect is planned to be drilled in Q3 2007. Seismic processing is currently underway, based on 712km of recently acquired 2D seismic. In addition to an exploration well on the Doungou prospect, six contingent wells are still under consideration for drilling in 2007/08.

Nigeria Sao Tome and Príncipe – A Proven Hydrocarbon Play

Chevron, the Operator of Block 1 of the Joint Development Zone, commenced drilling of the first exploration well on 14 January 2006. The drilling operation was completed in 63 days, was drilled under budget and the Operator confirmed that it had discovered hydrocarbons. The Obo-1 well logged a cumulative total of at least 150 feet (45 meters) of net hydrocarbon pay in multiple reservoirs and provided important reservoir rock and liquid samples. The exploration well data is being analysed with a view to determining the future exploration program.

Gabon – Low Cost Exploration

3D seismic reprocessing is on-going on the Iris and Themis Marin permits. An exploration well on the Admiral prospect in Themis Marin is expected to be drilled in Q3 2007, by Global Santa Fe's Adriatic VI, prior to development drilling on the Okoro Field in Nigeria. The Company has received Government approval of the increase of Afren's stake in the Ibekelia Study Area from 10 to 20 percent.


The Group made a loss of £8.5 million for the year (2005: £4.6 million), equating to a loss per share of 4.4p, a 22% larger loss than in 2005 (3.6p). Administration expenses increased from £3.7 million to £6.8 million due to the higher levels of activity during the year. There was no exploration write-off during the year (2005: £1.2 million) reflecting the success of all three wells drilled in the period. Following the successful placement of US$75 million equivalent of convertible bonds and the significant investment in both Okoro Setu (£20.8 million) and the acquisition of La Noumbi (£13.2 million), net interest expense increased to £1.5 million (2005: £0.3 million income).

Total capitalised intangible expenditure stands at £44.9 million, but of this £20.8 million (Okoro Setu) is set to be transferred to tangible oil and gas assets within property, plant and equipment once the Field Development Plan approval is received from the Nigerian government. Development approval is expected before the end of April 2007.

Afren has a unique entrepreneurial culture both technically and in new business development. Our employees' African passion, "can do" approach and the team dynamic should enable us to continue our success in 2007 and beyond.

The next 12 months should be a very exciting period as we execute our main development program on the Okoro Setu Project and continue to utilise our African relationships to grow the diversified portfolio with the overall aim of creating substantial shareholder value.

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