30th Oct 2014 08:20
LONDON (Alliance News) - Afren PLC Thursday reported flat net profit for the first nine months of 2014 as a tax exemption credit offset a fall in pretax profit and revenue driven by lower production, and it said it is implementing the recommendations in a recent review of its business practices as it tries to put a recent payments scandal behind it.
Earlier this month, the oil producer and explorer terminated the employment of Chief Executive Osman Shahenshah and Chief Operating Officer Shahid Ullah with immediate effect, firing them for gross misconduct based on evidence found by a review that unearthed irregular payments. It also fired Associate Directors Iain Wright and Galib Virani with immediate effect for the same reasons, and started disciplinary action against seven more employees who it said also received payments.
Afren had suspended Shahenshah and Ullah in late July pending an investigation into alleged evidence of unauthorised payments that were potentially for the benefit of those executives. The payments came to light in the course of Willkie Farr & Gallagher's independent review, commissioned by Afren's board, of the potential need for the company to disclose certain previous transactions to the market.
"The board is pleased to have received the results of the independent review by Willkie Farr and Gallagher (UK) LLP and is in the process of implementing its recommendations," new Chief Executive Toby Hayward said in a statement.
Afren reported a net profit of USD167.9 million for the nine months to September 30, compared with GBP170.1 million profit a year earlier, mainly thanks to a income tax credit of USD1.3 million as a result of now being in a five-year tax exemption period for the Ebok field in Nigeria and thanks to a smaller loss on derivative financial instruments of USD0.6 million, down from USD38.7 million.
However, revenue fell to USD798.5 million, from USD1.20 billion a year earlier, and pretax profit fell to GBP165.8 million, from GBP427.0 million, as production dropped to 31,147 barrels of oil a day, from 48,305 barrels a day, below the company's full year production guidance range of between 32,000 to 36,000 barrels of oil per day.
It blamed the revenue decrease primarily to a reduced share of production and liftings from the Ebok field after cost recovery.
Still, it retained its production guidance for the year, citing new incremental production wells now on-stream. The guidance excludes the Barda Rash field in the Kurdistan region of Iraq, where it had to suspend operations for a time due to the escalating hostilities in the area. It has just begun to resume operations at the field.
CEO Hayward was more positive about the company's medium-term outlook.
"Management remains focused on operational performance, having made good progress on our core development projects in Nigeria, which are expected to drive significant growth in production and cash flow in the medium-term. We are moving forward with our play-opening discovery at Ogo, while we continue to de-risk an exciting set of exploration opportunities across our portfolio," he said.
Still, Afren shares were down 2.4% at 91.00 pence early Thursday.
By Steve McGrath; [email protected]; @stevemcgrath1
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