6th Mar 2008 07:01
Afren PLC06 March 2008 Afren plc (AIM: AFR) Strategic acquisition of Devon Energy's interests in Cote d'Ivoire London, 6 March 2008 - Afren plc ("Afren" or the "Company") is pleased toannounce that it has entered into an agreement with Devon Energy Corporation ("Devon") to acquire its interests in Cote d'Ivoire, comprising a 47.96% workinginterest and operatorship of the producing Block CI-11, a direct 65% interestand operatorship with rights over an additional 15% interest in the undevelopedBlock CI-01 and a 100% interest in the onshore Lion Gas Plant ("LGP"), effective30th June 2007. KEY HIGHLIGHTS • Agreed consideration for the acquisition is US$205 million • The acquisition will be funded through a financing package arranged by BNP Paribas • The acquisition offers access to immediate oil and gas production, proven reserves and cash flow: o Current net daily volumes of approximately 3,000 entitlement barrels of oil equivalent per day ("boepd") from upstream oil and gas production and NGL extraction (approximately 5,000 boepd on a working interest basis) o Combined net 2P reserves for the Block CI-01 and Block CI-11 interests of approximately 28 million barrels of oil equivalent ("mmboe") as at 30th June 2007 • The portfolio offers significant upside: o Near term opportunity to optimize and increase Block CI-11 production through a low risk wireline and rig based workover programme, in addition to the development of additional reservoir intervals o Existing proved undeveloped reserves on Block CI-01 present an attractive development opportunity o Targeting total net daily production volumes in excess of 6,000 entitlement boepd by 2010 from the upstream assets and the LGP • Afren will take on operatorship, together with Afren's partner PETROCI, the National Oil Company of Cote d'Ivoire, of a fully integrated gas project and assume a competent and skilled local workforce • The acquisition marks an important strategic entry into Cote d'Ivoire and Afren is delighted to have formed a broad African strategic alliance with Cherokee Allied Oil and Gas Corporation ("Cherokee") and to be working alongside PETROCI • The acquisition is subject to customary regulatory and governmental approvals AFREN POST ACQUISITION • The acquisition significantly strengthens Afren's existing portfolio o Increases Afren's existing 2P reserve base by 67% to 70 mmboe o Immediate production and cash flow ahead of production start-up at the Okoro Setu project in Nigeria o A material and balanced platform in a new country with significant upside, taking the total portfolio to 17 assets in 7 countries in less than three years o Portfolio and product diversification with oil, gas and high-value liquid extraction Osman Shahenshah, Chief Executive of Afren, commented: "This material transaction, which follows on from the Company's acquisition ofDevon's assets in Ghana and Angola, represents a step change addition to Afren'sexisting portfolio. The portfolio of businesses acquired from Devon offersimmediate production for Afren, ahead of production start-up from the Okoro Setuproject in Nigeria. "Through a single action, and through our partnership with the National OilCompany of Cote d'Ivoire, PETROCI, we have acquired a fully functioning businessin Cote d'Ivoire, with the combination of production, near term development,appraisal and exploration upside, as well as midstream interests and a fulllocal workforce, which we will now look to further expand. We look forward tobuilding on our partnership with PETROCI and our overall position in Coted'Ivoire." Enquiries: Afren plc +44 20 7451 9700Osman Shahenshah Chief ExecutiveEvert Jan Mulder Chief Operating OfficerGalib Virani Investor Relations Jefferies International Limited +44 20 7029 8000Toby HaywardOliver Griffiths Tristone Capital Limited +44 20 7355 5800Simon Ashby-RuddMajid Shafiq Pelham Public Relations +44 20 7743 6673James HendersonAlisdair Haythornthwaite Conference call In conjunction with this announcement, Afren will be hosting a conference callat 08.30 GMT. The presentation materials that will be referred to during thecall will be available at the Company's website (www.afren.com). To access the conference call please dial the appropriate number below shortlybefore the call and ask for the Afren Conference Call. A replay facility willbe available from approximately 09.30 GMT on 6 March until 12 March. Thetelephone numbers and access codes are: Live Event Replay Facility from 09.30 GMT UK Participants +44 20 7190 1595 +44 207 154 2833 Access code: 3851826# Toll Free: 0800 358 5260 North American +1 480 629 1990 +1 303 590 3030Participants Access code: 3851826# Toll Free: +1 800 762 8973 An on-demand webcast will be available from 16.00 GMT on 6 March, via thefollowing URL address: http://www.axisto.com/webcasting/investis/Afrens/strategic-acquisition/ Additional Information and summary of the assets being acquired: Upstream ownership and license details Paying WI % Participating WI%Block CI-11Devon Cote d'Ivoire, Ltd. (Operator) 47.9592% 47.9592%(1)PETROCI 20.1360% 20.1360%International Finance Corporation 18.9456% 18.9456%SK Energy Co. Ltd. 12.9592% 12.9592% Paying WI % Voting WI% Participating WI%Block CI-01Devon CI One Corporation (Operator) 100.00% 65.00% 80.00%(2)PETROCI 0.00% (Carried) 20.00% 20.00%SK Energy Co., Ltd. 0.00% 15.00% 0.00% Block CI-11 Block CI-11 is located about 13 km offshore and 89 km from Abidjan in waterdepths ranging from 45 metres to 280 metres. The producing Lion and Pantherefields were discovered by Phillips in the 1980's and were brought on-stream in1995 by United Meridian Corporation (UMC), later acquired by Ocean Energy Inc.which subsequently merged with Devon. The fields have been developed via a Mobile Offshore Production Platform andfour tethered caissons. Oil and Gas are piped to Abidjan, where the oil is soldon the open market and gas is processed by the LGP and sold under two long termcontracts to domestic end users. Net 2P reserves are currently estimated at 11.6 mmboe as at 30th June 2007(source: Operator). Gross average daily production at Block CI-11 throughout2007 was 1,846 barrels per day of crude oil and 39.7 million cubic feet per day(mmcfd) of natural gas. Gas is sold under two long term contracts. Block CI-01 Block CI-01 was awarded to UMC in 1994, and is located in the easternmost partof Cote d'Ivoire offshore and shares an international border with Ghana. Itextends from near the shoreline to 1,900 metres water depth and is about 52kilometres from Abidjan. Three separate significant hydrocarbon accumulations have been discovered byexploration drilling in the late 1970's through the mid 1980's by Esso and Agip.The discoveries are Kudu, Eland and Ibex. Net 2P reserves are currentlyestimated at 16.7 mmboe (source: Operator). Afren anticipates a market opening for CI-01 gas between 2010 and 2012, offeringa near term development project with significant upside. The proposed conceptis to develop the Kudu and Eland fields with anticipated gas sales via the LGP.The Ibex field offers an oil development opportunity plus associated gas thatcould be incorporated within a broader CI-01 development solution. The Lion Gas Plant The Lion cryogenic straddle plant, which has an inlet capacity of 75 mmcfd, wasconstructed by Ocean Energy in 1998 to improve margins by extracting and sellinghigh value Natural Gas Liquids from gas produced at Block CI-11. Gas productionfrom adjacent Blocks CI-26 and CI-40, operated by Canadian Natural ResourcesLimited ("CNRL"), was added to the process stream, providing third party tariffrevenue from the use of the Block CI-11 pipeline infrastructure, and additionalgasoline and butane sales revenue at the LGP. The primary products from the LGP facility are butane and gasoline. Thegasoline produced is spiked back into the Lion crude oil stream and is sold onthe world market at existing crude prices whilst butane is sold into the localmarket. There is also the potential to extract and sell propane, offeringfurther upside opportunity. Afren is to acquire 100% ownership of the LGP, which enjoys tax exempt status,so net cash generated offers a high margin per barrel of product extracted andattractive economics. Other The acquisition is subject to certain conditions precedent, including customaryregulatory and governmental approvals. The transaction will take the form of anacquisition of Devon's subsidiaries Devon Cote d'Ivoire, Ltd, Devon CI OneCorporation and Lion G.P.L., S.A., all of which are share purchases. Glossary of terms bbls barrels of oilbcf billion cubic feet of gasbcfge billions of cubic feet gas equivalentboe barrels of oil equivalentbpd barrels per daybopd barrels of oil per dayboepd barrels of oil equivalent per daymcf thousand cubic feet of gasmmcfd million cubic feet per daymmboe millions of barrels of oil equivalentNGL Natural Gas LiquidsUS$ US DollarWI working interest1P proven2P proven and probable3P proven, probable and possible Background information Afren Plc Afren (www.afren.com) was founded in December 2004 by a management teamincluding Dr Rilwanu Lukman, (Chairman), Osman Shahenshah, (Chief Executive) andBert Cooper (Advisor to the Board), with the vision to become the premier panAfrican independent Exploration and Production company. Afren has built anexecutive and non-executive management and advisory team with broad andextensive experience in the industry, both in West Africa and internationally;in identifying and completing corporate expansion opportunities and in publiccompany financing. Afren also looks to leverage key relationships across theregion to gain preferential access to opportunities. Cherokee Allied Oil and Gas Cherokee Allied Oil and Gas Corporation is the oil and gas arm of Energy AlliedInternational ("Energy Allied" - www.energyallied.com). Energy Allied is aninternational project development firm that identifies and develops large scale,energy-related infrastructure projects. Their activities are focused onrefining, petrochemicals, biofuels, power and infrastructure industries. EnergyAllied currently has projects ongoing in North America, the Middle East and WestAfrica including Egypt, Cote d'Ivoire (a refinery) and Senegal. Note In accordance with the AIM Rules, the technical update information in thisreport has been reviewed and signed off by Dr Nick Johnson, who is Head ofExploration and Production at Afren Plc and has over 25 years relevantexperience within the sector. He consents to the information in the form andcontext in which it appears. The Company estimates its reserves in accordancewith the guidelines and definitions of the 2007 SPE/WPC/AAPG/SPEE PetroleumResource Management System ("PRMS") Classification System. -------------------------- (1) Post acquisition, Afren will transfer a 1.4388% carried Participating WI toCherokee (2) Post acquisition, Afren will transfer a 3.25% carried Participating WI toCherokee This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AFR.L