How Afren Plc rewrote the rules on developing Africa’s oil wealth

Friday, Feb 11 2011 by
17
How Afren Plc rewrote the rules on developing Africas oil wealth

For any investor with an eye on the huge developments made in oil and gas exploration and production in West Africa in recent years, Afren (LON:AFR) will need little introduction. Since raising $1m in a cramped West End office back in late 2004, the tight-knit entrepreneurial team has captivated the market with its plans, delivered on its objectives and been catapulted into the FTSE 250 with a market cap of over £1.5bn. Afren is a story about African focus, African understanding and African people – a strategy that has opened the doors to Governments and turned it into one of the largest independent oil producers on the continent.

Galib Virani, Associate Director and Afren’s Head of Acquisitions, is unassuming about the blistering pace at which the company has made the transition from small cap AIM stock to fully listed oil and gas mid cap independent. Yet, sitting with Stockopedia in rather smarter offices around the corner from where that first fundraising took place, Kenyan born Galib is in no doubt as to why the company’s strategy has paid off. By embracing indigenous businesses, employing local staff and joining forces with the communities that overlook West Africa’s rich oil fields, Afren has made progress where other oil companies have often struggled. 

The company’s first ever deal involved an opportunity to acquire a small non-operated interest in Block 1 of the Nigeria - Sao Tome & Principe Joint Development Zone. Since then, a series of deals – mostly focused on bringing discovered but undeveloped assets through to production – took net production in 2010 to 14,300 barrels of oil equivalent per day. Production is currently focused on the Okoro, CI-11 and Lion Gas Plant projects, in Nigeria and the Ivory Coast, but later this year the flagship Ebok field will come on stream. That project is forecast to take daily production to 40,000 barrels per day, with an exit rate of 55,000 barrels by year end 2011. With Afren now realising the increasing cashflow benefits associated with this production growth, the company’s shareholder base has started to diversify from being predominantly the net asset value (NAV) focused British to the more cashflow focused US funds – buying which has seen the Afren share price surge over tenfold from its January 2009 levels.

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Tullow Oil plc is an independent oil and gas exploration and production company. The Company's primary activity is the discovery and production of oil and gas. Its segments include West Africa; East Africa, and New Ventures. The West Africa Business focuses on its production and development projects in West Africa and Europe. The business includes its operated asset, the Jubilee field in Ghana, the TEN Project and a portfolio of non-operated production assets in approximately five countries across the region. The East Africa Business is focused on exploration activity across the Company's acreage position in Kenya. The New Ventures Business is focused on its frontier exploration and appraisal activity across Africa and South America. It manages its New Ventures portfolio through both license acquisitions and farm downs of existing acreage. Its activities include targeted exploration and appraisal, and selective development projects. It has operations in Africa and South America. more »

LSE Price
203.4p
Change
-0.7%
Mkt Cap (£m)
2,853
P/E (fwd)
9.8
Yield (fwd)
2.7



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