21st Jul 2015 16:07
LONDON (Alliance News) - Embattled Afren PLC late Tuesday confirmed suspicions that it would postpone the critical general meeting that was due to be held this Friday, as the company is facing significant financial uncertainty.
Last Wednesday, the Nigerian oil producer said its shares had been suspended after a fall in production threatened its already controversial and much-debated restructuring plans.
The news had thrown doubt on whether the general meeting, at which shareholders were due to vote on the company's proposed debt-for-equity swap with its bondholders, will go ahead at all, but on Tuesday Afren confirmed it has decided to adjourn the meeting "until further notice".
Afren's complex and controversial recapitalisation plans are in jeopardy after Afren said near-term production in Nigeria is set to be "materially lower" than forecast when the plans were drawn up, causing financial uncertainty.
Afren previously had said it expected to produce between 29,000 to 36,000 barrels of oil per day in 2015, but admitted that it has "become clear" the company won't achieve the target, meaning it can not accurately inform the market about its financial position.
When it informed the market last week about the fall in production, Afren said it was seeking a further USD30 million in net cash proceeds from bondholders on top of the current restructuring proposals, and said it was talking to "other stakeholders" about the potential implications on the proposed restructuring, including its timeline.
Under the recapitalisation proposals, if they are to still go ahead, shareholders have the choice between a Yes vote, resulting in a significant dilution for shareholders to a stake varying between 8.5% to 15%, dependent on the uptake of a subsequent open offer, or a No vote, which will lead to the sale of Afren's assets.
A long chain of events wiped away Afren's equity value, as its share price fell by more than 98%. At the end of July 2014, Afren shares were trading at 148.8 pence before falling to 110.0p the day after it issued a profit warning.
Since then, Afren shares hit a low of 1.28 pence per share this past June, and the stock was trading at 1.785p on Wednesday last week when its shares were suspended.
By Joshua Warner; [email protected]; @JoshAlliance
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