LON:AFR^J17 | Afren - First Thread

24th Oct '08 by 5bag

51 comments 16277 reads

http://www.afren.com/

A unique African proposition

Afren is an independent oil and gas exploration and production company that was founded in 2004 by a management team including Dr Rilwanu Lukman the former Secretary General and President of OPEC.

The vision is to become the premier pan-African independent exploration and production company, through partnering with indigenous companies and governments and acquiring equity stakes in exploration and development assets.

The co is rapidly expanding its asset base and has an aggressive strategy regarding reserves growth. The co's production is set to grow to to an expected figure of 63000 boepd by end of 2010.

Assets:-

Country	Acquired	%WI	Operator	Current programme
Cote d'Ivoire
Block CI-11	Q1 08	47.96%	Afren	Production
Block CI-01	Q1 08	80.0%	Afren	Development
Lion Gas plant	Q1 08	100%	Afren	Production
Nigeria
Okoro	Q2 06	50.0%	Amni	Production
Setu	Q2 06	50.0%	Amni	Appraisal
Okwok	Q3 09	56%	Oriental	Appraisal
OPL 907	Q1 08	41.0%	GEC	Appraisal
OPL 917	Q1 08	41.0%	GEC	Appraisal
Ebok	Q1 08	40.0%	Oriental	Production Q4 2010
OML26	Q3 10	20.5%	FHN	Production/appraisal
OML115	Q1 10	45%	Oriental	Appraisal
Nigeria (Sao Tome & Principle JDZ)
Block 1	Q1 05	4.41%	Chevron	Exploration
Ghana
Keta	Q2 08	70%	Afren	Exploration
Kenya - Black Marlin Acreage
Block L17/L18	Q3 10	65%	EAX (afren)	Exploration
Block 1	Q3 10	50%	EAX (afren)	Exploration
Block 10A	Q3 10	20%	Tullow	Exploration
Madagascar- Black Marlin Acreage
Block 1101	Q3 10	40%	Candax	Exploration
Seychelles- Black Marlin Acreage
Blocks A,B,C	Q3 10	75%	EAX (afren)	Exploration
Ethiopia- Black Marlin Acreage
Blocks 2,6,7,8	Q3 10	30%	Africa Oil	Exploration

“ Afren has the asset base and set-up to become one of the leaders of the next generation of Africa-oriented independent oil and gas companies...” Olivier Serra, Managing Director, BNP Paribas RBL Group

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The first half of 2009 was another period of significant progress across all aspects of Afren's core
business, with both operational and strategic successes demonstrated. Afren continued to exceed
prior production guidance in Nigeria and Côte d'Ivoire, while delivering further low risk reserves
growth, through the successful appraisal of the Ebok field in Nigeria. In addition, the acquisition of
an interest in the Okwok field in Nigeria subsequent to period end significantly increases the
reserves potential on the larger Ebok - Okwok complex, whilst offering joint development synergies.
The first phase drillingis to commence shortly on the Ebok field, the wellhead support structure is
under construction, production facilities are under final negotiation, and the Company is on track for
first production from the field in H1 2010. The financial results incorporate Afren's first full half year
of production, with low oil prices in early 2009 impacting revenues at Okoro, CI-11 and LGP.
Afren expects the benefits of the cost efficiencies identified in H1 2009 to be
realised in H2 2009.

" * The Company and the Directors entered into the Placing and Sponsor's Agreement
on 10 November 2009 with Merrill Lynch International, Morgan Stanley, Evolution,
Nomura and Jefferies relating to the issue of approximately US$175 million of
new Ordinary Shares (the "New Shares") and the sale of Ordinary Shares by
certain shareholders, including certain Directors in connection with the
exercise of 40,000,000 warrants over Ordinary Shares (the "Founder Shares" and
together with the New Shares, the "Placing Shares") ......"

Am I missing something?

mn

doverbeach

2nd Jul '09

The reason for the recent couple of days rise would be the Capital Markets Day presentation held on June 30 on their Ebok project. RNS here http://www.investegate.co.uk/Article.aspx?id=200906300900017477U. Presentations here: http://www.afren.com/presentations.asp

From the RNS:

Field development (Phase 1a and 1b) will commence with the drilling of six horizontal production wells and one water injection well, and is set to deliver first oil in early 2010 at an initial rate of 15,000 bopd, increasing to 35,000 bopd at end 2010. Two appraisal wells will also be drilled to prove the identified upside of the D2 Southern Lobe and West Fault Block locations.

With Phase 1 well planning defined, Afren is close to commitments on a drilling rig and requisite production facilities. A shortlist of drilling units has been compiled with seven rigs having been identified as fit for purpose, five of which are immediately available.

Several proposals have also been evaluated to date for FPSO's, MOPU's and FSO's. A development configuration deploying a MOPU and FSO is considered to be the most appropriate solution. EHSS regulatory compliance process is also well underway.

A second multi phased development targeting the upside to total potential field size of 152 mmbo, will be undertaken through to 2012.

More than you ever wanted to know about the technical stuff here http://www.afren.com/presentations.asp. I have asked over on the Technical thread here http://www.stockopedia.com/forum/view/30469/oil-eps-technical-discussion-thread?comment=9#9 if there looks anything unusual.

General grumble about Afren - they NEVER quote working interests in the main body of their press release. Hence todays Telegraph article - people not familiar with O&G might read

Initially, Ebok is expected to produce 15,000 boe per day, increasing to 35,000 at the end of 2010.

Significantly, the company is not only an oil explorer, it is also an oil producer. It is currently pumping 27,000 boe. This means the group has cash flow.

as meaning that Afren will be getting 62,000 barrels a day of production from 2011, but this ignores Afren's 50% (Okoro) and 40% (Ebok) WI's and they also don't mention that Okoro field will have a short life. I think it is a pity to over-egg things like this, as they have a decent story to tell without it.

macrus

db - could not agree more. I would also seriously question the deliverability Ebok upside (and core?) Ebok is a well known field and there have been plenty of people who saw the pre-drill data, and a couple who have seen the post-drill. No sign of the well logs in the blind them by science presentations. Can't see how Ebok will turn out to be a 35mbopd field.

Which would lead one to supsect that AFR is on the block - or it will look ugly by end 2010.

In reply to doverbeach (post #32)

Gradders73

Sorry, but I don't understand this. What do you mean by "on the block"?

SW10Chap

My brief view on the presentations on the technical thread here

No sign of the well logs in the blind them by science presentations. macrus

There are some extracts in there - although they're a bit compressed, and in one case have no scales :-))

SW10

for sale

In reply to Gradders73 (post #34)

You are correct - no sign of well logs that you could use

In reply to SW10Chap (post #35)

3rd Jul '09

The share price is on a roll at the moment.

Today's RNS: http://www.investegate.co.uk/Article.aspx?id=200907030700110610V

In direct response to the Nigerian government's objective to increase the level of local participation in the oil and gas sector and in line with the Company's strategy, Afren has established FHN with the support of two leading Nigerian financial institutions: First City Monument Bank Plc ('FCMB') and Guaranty Trust Bank Plc ('GTBank'). ... It will be fully capitalised at the time of consummating new acquisitions.

FHN ... will be used as a vehicle to acquire substantial oil and gas assets in Nigeria, including stakes in assets currently under negotiation, assets that may become available that are currently held by international independents and by the joint ventures between the Nigerian government and International Oil Companies, and assets that may be divested in connection with indigenous licensing rounds.

11th Aug '09

rig contract signed for Ebok: http://www.investegate.co.uk/Article.aspx?id=200908110700052041X

Afren and its partner, Oriental, announce that a rig contract has been signed with Transocean, commencing in September 2009. The Adriatic IX jack up drilling rig has been secured at a rate of US$97,000 per day for the first 250 days of operations, with a rate of US$85,000 per day there-after, based on a 425 day extension.

The Adriatic IX rig will be used to carry out an extensive drilling campaign at the Ebok Field located in OML 67, offshore Nigeria. Pending Government approval of the formal Field Development Plan, Ebok Field development will commence with the drilling of six horizontal production wells and one vertical water injection well. Two appraisal wells to test the additional upside potential within the Ebok West Fault Block and D2 Southern Lobe of the Field will also be drilled.

25th Aug '09

farm-in announced: http://www.investegate.co.uk/Article.aspx?id=200908250700069306X

Farm-in agreement with Addax Petroleum to acquire 70 per cent. of its 40 per cent. legal interest (28 per cent.) in the Okwok field

Similar to Ebok, Okwok was discovered by the ExxonMobil / NNPC Joint Venture (Okwok-1), with two subsequent appraisal wells drilled (Okwok-2 and Okwok-3) In 2006, Oriental and Addax Petroleum drilled three additional exploration / appraisal wells on Okwok

Afren estimates that Okwok holds in excess of 225 mmbbls Stock Tank Oil Initially In Place ('STOIIP') with recoverable reserves in excess of 70 mmbbls Afren has identified significant exploration potential at the deeper Qua Iboe level (two prospects identified, each estimated to contain circa 200 mmbbls STOIIP)

Okwok is next to Afren's Ebok development, so they should have a good understanding of the geology and hopefully there will be potential for cost efficiencies in joint development.

This presumbaly is the reason the share price has taken off in the last few days.

jonnyt

Yes, looks very positive to me.

Betasurfer

26th Sep '09

Interims for Afren on Friday - http://www.stockopedia.com/news/announcement/AFR/090925afr000811.htm

Posted a wider first-half loss ($37.4m compared with a net loss of $26.8m last year)
Said it had seen "significant operational success" and expected 2009 oil output to average 22,238 bopd.

Encouraging to see, I guess, as long as they don't run out of cash! Financial situation seems ok, though -

Cash balances at 30 June 2009 of US$153.3 million, net debt of US$194.9 million; 
and gearing now at 45% compared with 82% at year end.

http://www.reuters.com/article/rbssEnergyNews/idUSLO16616120090925

3rd Nov '09

There has been a lot of scepticism about whether Ebok will turn out as good as Afren expect ( eg post 33 above). Today's RNS is sounding very happy about the Ebok-5 appraisal well:

The Ebok-5 appraisal well has encountered 182ft of gross oil pay in the D1 reservoir and 84 ft of gross oil pay in the LD-1E reservoir...

Results confirm pre drill estimates of Ebok West Fault Block volumetrics, de-risks 92 mmbbls STOIIP, 25 mmbbls 2P recoverable

Provides further validation of Afren’s amplitude based model...

The results to date increase the total Ebok project to 78 mmbbls 2P recoverable reserves, with upside resources potential of 74 mmbbls

The well is currently drilling below 3350 going for deeper objectives the D2 and Qua Iboe sands.

At the same time Afren have announced that they have approval for phase 1 EDP and are on track for first oil H1 2010:

The development plan comprises five horizontal oil production wells in the D2 reservoir, one horizontal oil production well targeting the D1 reservoir and one water injection well in the central Fault Block 1 and Fault Block 2 areas of the field

All wells will be drilled from a single field location via a Well-head Support Structure (“WSS”) and Mobile Offshore Production Unit (“MOPU”)

Fabrication of the WSS is complete and is in transit for delivery to the project

Development drilling to commence post appraisal drilling on the D2 Southern Lobe, remaining on track to deliver 15,000 bopd at H1 2010

(As ever with Afren, the 15,000 projected volume quoted is gross.)

djpreston

10th Nov '09

Interesting comment on AFR today on Alphaville, regarding the placing (founders warrants and dilution) but also interesting is the unattributed note that they have used:

The bit on AV starts at about 11.33 http://ftalphaville.ft.com/marketslive/

Afren announced this morning that it will cancel its AIM listing to move to the LSE. Management had been talking about this move for quite some time and the new listing should give higher visibility to the company. However, valuation is still not attractive and going back to our point that management overestimates reserves, if you go on Afren’s website and download the latest analyst presentation you will find evidence of what we’ve been saying

NH
Slide 28 shows the CPR from N&S that attributes 19.1 mmbbls 2P for Ebok and 18.9 mmbbls 2P for Okoro vs. management talking about respective 2P of 52 and 32 mmbbls… Going back to the press release, AFR farmed into OPL 310, offshore Nigeria, I don’t know anything about this block so I’ll have to do a bit of work before getting back to you on this one.

NH
We sought clarification from Afren on the reserves gap between NSAI and their own estimate and we were not convinced by the answers that were provided. On Okoro, according to AFR, the annual report referred to the upper and lower sands containing 28.9 mmbbl and this constituted their announcement that there had been a downgrade. On CI-11, the company concedes that its current reserves number represents a small downgrade from that published at the time of acquisition

NH
It says NSAI is another 40% below that because it has yet to incorporate some of Afren's more recent work. No explanation was offered for the difference between the NSAI number and the original number. On the OPL 310, we got clarification on the price they paid: $3 m signature bonus + $10m upon going from OPL to OML + $4 m on first oil. Bottom line: we still have no comfort in AFR’s internal estimates, in that regard we’ll use NSAI’s numbers which lead us to SELL. SELL AFR

emptyend

In reply to djpreston (post #44)

One might have thought that such views would get in the way of the placing - but they don't seem to have:

http://www.oilvoice.com/n/Afren_Placing_Raises_1049_million/f23f9b5a2.aspx

...though they seem to have been $25mn short of the amount being suggested first thing today.

Nevertheless, one must admire the ability of these guys to raise funds, considering the hassles facing the smaller explorers.

shanklin100

11th Nov '09

I suspect its easier to get placings away when you have just announced that you are planning to move from AIM to become fully-listed and are certain to end up in the FTSE 250.

Presumably this creates lots of institutions obliged to pick up your stock, whether or not they like the fundamentals, who were no doubt delighted to participate in the placing?

Cheers, Martin

In reply to shanklin100 (post #46)

True, of course. Though I do wonder whether the idea that one "can't beat the market and so might as well merely index it" has now run much too far for capital allocation processes to function properly!! The idea that the big can get funded in preference to the small is surely the sort of thing that prompts lazy thinking (at best!) and diminishes average investment returns (and economic growth....though I fear I have already digressed too far!! ;-))

rgds

MrNachos

In reply to emptyend (post #45)

The RNS (10 Nov) mentions in Appx IV:

In reply to MrNachos (post #48)

I suspect that early reports of the placing (eg from Reuters India) may have been misleading:

UPDATE 1-Afren to raise $200 mln via placing; sees no dividend

....it looks as if the above figure they quoted probably includes the warrant proceeds?

Apologies for adding to the confusion, though a side issue in the greater scheme of things..

12th Jan '10

Afren plc announces successful completion of the Ebok-6 appraisal well offshore Nigeria and a further upgrade to Ebok volumetrics

Osman Shahenshah, Chief Executive of Afren, commented:

"The Ebok-6 appraisal well represents a successful conclusion to the three well
pre-development Ebok appraisal phase. We have significantly upgraded reserves
at the project to 116 mmbbls recoverable, representing an incremental 91 mmbbls
recoverable, through a 100% drilling success rate. While the first phase
development is underway, we will continue to de-risk the remaining appraisal and
exploration upside potential across the broader Ebok - Okwok complex with the
objective of delivering further material reserves growth."

5bag

7th Dec '10

ok, its been a while since I was here and a lot of water has flowed under the bridge, but here goes:-

FHN deal should prove to be a significant revenue earner, with 45% of 45% of FHN's %WI interest in OML26 to be attributed to afren. Thats already 1316 bopd as production has risen from 5000 to 6500 bopd, this asset is planned to increase production to 50000 bopd over 5 years, with significant extra explo upside on the block. AFR also receive technical service fees from FHN.

FPSO & MOPU facilities for Ebok are within a days of starting the hook-up to the wellhead facilities. The size of futher upside to Ebok reserves will be determined throughout the life of the field, and with the ebok deep drill encountering 370ft of net pay, this could prove very interesting. Significant extra explo upside.

Okwok has proved a commercial development with a base management case of 25mmbls, although afren are working internally on numbers of 70mmbls, and the full extent will be known in H2 2011. Significant extra explo upside.

Okoro production has risen following maintenance work to 18000 bopd (50% WI toi afren) and a further infill drill is in progress that will increase production by 3-5000 bopd.

Afren are set to average 55000 bopd throughout 2011, that's without OML26 & Okoro production increases being factored in.

The Black Marlin E.Africa acreage will receive some drillbit attention in 2011, as will the Ghana Keta block and OML115, situated next door to Okwok.

Cote d'Ivoire acreage is slated for workover and explo drilling as well.

More deals involving FHN are possible.

The 2011 current drill program is fully funded from revenue and current finance arrangements. This may change if further assets are acquired or more targets on current assets present themselves.

SP is currently a tad above 144p, with BofA and Arbuthnot securities both having targets at 185p.

SP is currently cheap IMO, and maybe factors in some risk for only having one main producing asset in Nigeria, which as we know, came under attack from MEND militants. Ebok field startup should go some way towards mitigating some of this risk.

Do the 2011 p/e numbers yourselves and compare against peers. As it stands now, these are cheap.

ps - header has been updated

Afren - first thread

Assets:-

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5bag

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