30th Apr 2015 16:22
LONDON (Alliance News) - Afren PLC Thursday said it swung to a pretax loss in 2014 as revenue fell and it was hit by an impairment charge due to lower oil prices and the write-off of its Barda Rash reserves.
The company had a torrid year in 2014, marked by a failed takeover approach that came on the back of a hit from the falling oil price, poor results from the Barda Rash field in the Kurdistan region of Iraq and a payments scandal which eventually resulted in the sacking of its chief executive and chief operating officer. Its shares plummeted, and it recently dropped out of the FTSE 250 index. It is still trying to agree a refinancing deal with its bondholders.
The oil producer reported a pretax loss of USD2 billion in 2014, compared with a pretax profit of USD140 million in 2013, as revenue dropped to USD946 million from USD1.6 billion and it booked an impairment charge of USD1.1 billion due to the fall in oil prices and curtailment of capital expenditure and USD0.9 billion in respect of a write-off of Barda Rash reserves.
Net production excluding Barda Rash of 31,819 barrels of oil per day, was slightly below the full year guidance range of between 32,000 to 36,000 barrels, the company said, adding that it expects a year-on-year reduction of 32% due to cost recovery at Ebok and delays with bringing new wells on stream across its producing asset base in Nigeria.
Earlier this month, Afren said that one of its partners has tried to terminate the production sharing and technical service contract covering the Okoro field offshore Nigeria, but said operations continue as normal. It said it had received a notice of breach of the contract from partner AMNI Petroleum Develpment Co after Afren said it was reviewing the group's capital structure and funding requirements.
Afren said it will prioritise capital allocation in 2015 for its existing producing asset base in Nigeria and sets production guidance at 23,000 to 32,000 barrels of oil per day, reflecting lower production from Ebok following the end of cost recovery.
It said it is targeting a broad programme of cost reductions and operational measures which will lead to efficiencies and significant cost savings in 2015, but said that lower oil prices have significantly impacted the business at the start of 2015 resulting in a review of the company's capital structure, liquidity, funding requirements and business plan.
In a separate statement, Afren confirmed that it has appointed Alan Linn as chief executive, following the dismissal of Osman Shahenshah last year after the discovery of an unauthorised payments issue.
Linn has 35 years of international experience in the oil and gas industry.
Toby Hayward will be stepping down as interim chief executive with immediate effect and will continue as an independent non-executive director of the company.
"Afren faced an unprecedented set of challenges in 2014, compounded by a decline in oil prices at the end of the year. Responding to these challenges has not been easy but as a board we are determined to stabilise and strengthen the company. We are pleased to have secured the necessary interim funding as a first step to our capital restructuring and we are delighted to welcome as new CEO Alan Linn who has 35 years international experience in the oil and gas industry and brings with him a wealth of knowledge in restructuring businesses in challenging environments," Hayward said in a statement.
"Afren still has an attractive portfolio of assets, which we believe will provide a suitable platform for the company to move forward with in 2015 and beyond," he added.
Shares in Afren closed up 1.5% at 3.30 pence on Thursday.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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