Acquisition and strategic entry into the Kurdistan

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Afren plc (AFR LN)

Acquisition and strategic entry into the Kurdistan region of Iraq.

London, 27 July 2011 - Afren plc ("Afren" or the "Company") has today announced the proposed acquisition of a 60 per cent. participating interest in the Barda Rash PSC and 20 per cent. participating interest in the Ain Sifni PSC (together the "Acquisition"), located in the Kurdistan region of Iraq.

Introduction

Afren has today announced the acquisition of interests in two contiguous Production Sharing Contracts ("PSCs") located in the Kurdistan region of Iraq. The Company has agreed to acquire an operated 60 per cent. participating interest in the Barda Rash PSC from Komet Group S.A. ("Komet") and a non-operated 20 per cent. participating interest in the Ain Sifni PSC from the Kurdistan Regional Government ("KRG").

Highlights

The Board of Afren believes that the Acquisition represents a highly complementary extension of the Company's existing portfolio, and offers a combination of near term development upside, substantial low risk exploration potential and a strategic entry into the Kurdistan region of Iraq. In particular:

u The Acquisition delivers independently certified 890 mmbbls net 2C resources and total net un-risked resources of 1,074 mmbbls

o Total acquisition cost of approximately US$588.25 million (US$0.66 per 2C bbl) inclusive of approximately US$81.0 million back costs and US$14 million 2011 capex related to Ain Sifni

u A clear forward plan to develop Barda Rash and appraise Ain Sifni

o Progressive short term conversion of 2C resources into 2P reserves

u Phased development initially focusing on light oil reservoirs expected to deliver 75,000 bopd net to Afren within 5 years from Barda Rash alone

§ Phase 1: 15,000 bopd (gross) by end 2012

§ Phase 2: 35,000 bopd (gross) by end 2013

§ Phase 3: 125,000 bopd (gross) by end 2017

u Delivers low risk exploration upside to portfolio - 183 mmbbls net best estimate prospective resources

o Active E&A drilling campaign 2011 - 2012

u Complementary to Afren's core strengths developed in Nigeria

o Geologically de-risked

o Fast track development solution

o Low risk E&A upside

o Afren strategically advantaged through historic relationships

o Early mover advantage

o Positive political trends should eliminate valuation discount

u Team on the ground and in place to deliver work programme

o Reinforced in-house technical capability to successfully develop fractured carbonate reservoirs

u Strategic positioning

o Afren now well positioned in two of the world's top ten oil reserves in Nigeria and Iraq (Kurdistan region)

u Financing

o BNP Paribas and VTB Capital mandated and terms and conditions agreed for an up to US$200 million corporate credit facility

o The balance to be funded by a combination of equity financing, existing cash resources and cash flows from existing operations

Osman Shahenshah, Chief Executive of Afren, commented:

"We are delighted to acquire a high quality portfolio of assets in the Kurdistan region of Iraq, covering the full E&P spectrum of development, appraisal and low risk exploration upside. The acquisition is consistent with Afren's strategy of acquiring low cost barrels in areas of strategic advantage and increases Afren's current 2P and 2C recoverable reserves base by over 700% at a cost of under US$1 per barrel. With a team in place, we expect to generate an incremental 75,000 barrels of oil per day net to Afren within five years from the Barda Rash field alone."

Call for investors and analyst presentation

There will be a call for investors at 6:30pm BST (01:30pm EST / 10:30am PST) today. To participate in the call, please dial +44 (0)20 7190 1595 and quote the title "Afren Conference Call".

A presentation for analysts will be held at 08:30am BST (3:30am EST / 12:30am PST) tomorrow, Thursday 27th July, at No.1 Cornhill, London, EC3V 3ND. This will be broadcast live at www.afren.com and will be available on playback from 11:00am BST (6:00am EST / 03:00am PST). The presentation material is available at www.afren.com

Background on the Acquisition and funding

The Acquisition has been executed through Afren's wholly owned subsidiary Beta Energy Limited ("Afren Beta").

Under the terms of the farm-in agreement and joint operating agreement agreed with Komet and the KRG, a 60 per cent. participating interest in and operatorship of the Barda Rash PSC is being transferred to Afren Beta. Komet will retain a 20 per cent. participating interest in the Barda Rash PSC in which the KRG also holds a 20 per cent. interest.

Terms have also been agreed whereby the KRG will transfer a third party 20 per cent. non-operated participating interest in the Ain Sifni PSC to Afren Beta. The operator of the Ain Sifni PSC is Hunt Oil Middle East with a 60 per cent. interest and the KRG will retain a 20 per cent. interest.

The total consideration payable for the Acquisition is US$588.25 million, of which US$388.25 million will be due on closing and US$200 million six months from closing. The consideration will be satisfied in cash by Afren, through a combination of equity financing by way of a placing of new ordinary shares, through secured term loan facilities (part of which will also be used to fund the capital expenditure and minimum work commitment in relation to the blocks where the participating interests have been acquired), available cash at bank and future cash flows generated by the Company's ongoing production operations.

Afren has agreed terms and conditions and mandated BNP Paribas and VTB Capital to arrange an up to US$200 million corporate credit facility. The Company reported cash at bank of US$320.4 million as at 30 June 2011, US$215 million of which is available for acquisitions. The Company also expects to generate significant free cash flow from its ongoing production activities. In addition the Company intends to undertake a placing of new ordinary shares (the "Placing Shares"), representing up to approximately 8.5 per cent of Afren's issued ordinary share capital immediately prior to the Placing, with institutional and other qualifying investors.

Technical description of the Barda Rash PSC and Ain Sifni PSC

Location map - a contiguous acreage position

Regional overview - the Kurdistan region of Iraq

The Kurdistan Region of Iraq represents an attractive upstream opportunity to Afren. Three oil fields are already producing in the region, with crude offtake occurring both domestically and increasingly via export to the international market. Encouragingly in June 2011 oil exports from the region were reported at 175,000 bopd, up from 75,000 bopd in February, with payment for oil exports at the Tawke field in February and March also reported by the operator.

Whilst already proven to be a prolific hydrocarbon province, the region still remains relatively under-explored with only a small number of mapped prospects having been drilled to date. 28 exploration wells have been drilled in the region since 2006, of which 20 have been reported as discoveries yielding an estimated 5,800 mmboe of gross recoverable reserves (average success rate 71 per cent. and discovery rate of 207 mmboe per well). Yet to find resource estimates for the region are of a globally significant scale and range from 40 billion to 70 billion barrels.

Independent resource estimate

RPS Energy (RPS) has undertaken an independent assessment of contingent and prospective resources at the Barda Rash PSC and Ain Sifni PSC for Afren.

Barda Rash PSC

Of the total consideration, approximately US$418.75 million is in respect of the acquisition of a 60 per cent. interest in the Barda Rash PSC, and is inclusive of approximately US$63 million in repayment of back costs.

The Barda Rash PSC is located 55 km north west of Erbil, and holds the 14,174 mmbbls STOIIP / 1,470 mmbbls gross recoverable Barda Rash oil field (split 506 mmbbls light oil and 964 mmbbls heavier oil). The field is defined as an elongated anticline with surface expression of 20 km length and up to 7 km width. The reservoirs are principally fractured carbonates of various depositional settings.

Drilled in 2009, the BR-1 discovery well was drilled to 3,300 m and successfully encountered oil in Cretaceous to Jurassic reservoirs. Well tests were carried out on the Jurassic Mus and Adaiyah formations each yielded rates of around 3,200 bopd, with a subsequent extended test of the BR-1 well producing 440,000 barrels of 30° to 32° API oil over a three month period. During this time oil was trucked from on site storage and sent to local refineries. Export pipeline infrastructure is located approximately 55 km from the field location and has capacity available. Two further wells were drilled at the field in 2010, the BR-2 and BR-3 wells, both encountering oil full to base in all reservoirs. No oil water contact has yet been established.

The Company plans to undertake a phased development of the field with production start-up scheduled for 2012. Initial work will be on developing 506 mmbbls of recoverable light oil that is expected to deliver gross production of 125,000 bopd by 2017 (75,000 bopd net to Afren). Ongoing development will then focus on production of 964 mmbbls of recoverable heavier oil, offering further large scale production growth potential over the medium to longer term.

Ain Sifni PSC

Approximately US$169.5 million of the total consideration is in respect of the acquisition of a 20 per cent. interest in the Ain Sifni PSC, and is inclusive of approximately US$18.0 million of back costs and US$14.0 million of 2011 capital expenditure.

The Ain Sifni PSC is located approximately 70 km north west of Erbil, and holds the Jebel Simrit, Betnar and Maqlub structures In 2010 operator Hunt Oil drilled the Simrit structure, with the JS-1 well and logged continuous oil pay from 1,110 m to 3,077 m in Cretaceous and Jurassic reservoirs. Triassic reservoir targets were not penetrated by the well and no oil water contact was established. Independently certified gross 2C STOIIP and recoverable resources associated with the well are 391 mmbbls and 42 mmbbls respectively. The PSC has substantial upside over and above the volumes proved to date, with exploration potential being independently estimated at 7,493 mmbbls STOIIP and 917 mmbbls recoverable on a gross un-risked basis. This is primarily attributed to as yet un-drilled parts of the Jebel Simrit structure plus the Maqlub and Betnaar structures, located in the southern part of the PSC. The eastern extension of the Maqlub structure is interpreted to extend into the Barda Rash block.

Operator Hunt Oil Middle East is expected to shortly spud a well to appraise and test the western end of the Jebel Simrit structure, with the intention of progressing the opportunity to development status in the near term. Exploration wells are also planned to test the low risk Maqlub, Betnaar and East Simrit structures.

Impact of the Acquisition to Afren

The Acquisition represents a long term value growth opportunity for the Company. There are substantial contingent oil resources that have already been discovered that are expected to be progressively migrated into the 2P reserves category and produced through implementation of a phased development plan. The pro-forma impact on independently certified net 2C resources for the Company is substantial and, if converted as planned, could have a significant impact on net 2P reserves. In terms of production potential, the Company has a five year line of sight on realising 75,000 bopd on a net working interest (125,000 bopd gross) from Barda Rash alone, with the potential to incrementally boost field output further over the medium to longer term. In order to achieve this, the Company has put in place a team of regional experts with a long history of working on fracture carbonate reservoirs characteristic of those present in the Kurdistan region of Iraq.

The Acquisition has also introduced an attractive low risk exploration inventory to Afren, with near term drilling targets identified on the Ain Sifni PSC in particular. The resultant portfolio means that Afren is now strategically positioned in two of the world's fastest growing oil and gas plays, with Nigeria and Iraq both ranking in the world's top ten oil producers and top 12 proved oil reserves, complemented by a diversified inventory of exploration interests focused around high potential basins.

Forward Looking Statements

This announcement contains (or may contain) certain forward-looking statements with respect to certain of Afren's plans and its current goals and expectations relating to its future financial condition and performance and which involve a number of risks and uncertainties. Afren cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as 'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', or other words of similar meaning. Examples of forward-looking statements include, amongst others, statements regarding Afren's oil and gas contingent reserves, future financial position, income growth, impairment charges, business strategy, projected costs, estimates of capital expenditure, and plans, dividend growth and objectives for future operations of Afren and other statements that are not historical facts. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic and global economic and business conditions, the effects of continued volatility in credit markets, market-related risks such as changes in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, changes in legislation, the further development of standards and interpretations under International Financial Reporting Standards ("IFRS") applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of pending and future litigation or regulatory investigations, the success of future explorations, acquisitions and other strategic transactions and the impact of competition -, a number of which factors are beyond Afren's control. As a result, Afren's actual future results may differ materially from the plans, goals, and expectations set forth in Afren's forward-looking statements. Any forward-looking statements made herein by or on behalf of Afren speak only as of the date they are made. Except as required by the Financial Services Authority (the "FSA"), the London Stock Exchange or applicable law, Afren expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements, including any forward-looking statements contained in this announcement, to reflect any changes in Afren's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

These materials are not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration under the US Securities Act of 1933, as amended (the "Securities Act"), or an exemption from the registration requirements of the Securities Act. The Company has not registered and does not intend to register any securities under the Securities Act. There will be no public offering of securities in the United States.

Ends.

Notes to Editors

Afren is an independent upstream oil and gas exploration and production company listed on the main market of the London Stock Exchange and constituent of the Financial Times Stock Exchange Index of the leading 250 UK listed companies. Afren has a portfolio of 31 assets across 12 countries spanning the full cycle E&P value chain. Afren is currently producing from its assets offshore Nigeria and Côte d'Ivoire and holds further interests in the Kurdistan region of Iraq, Ghana, Nigeria, Côte d'Ivoire, Congo Brazzaville, the Joint Development Zone of Nigeria - São Tomé & Príncipe, Kenya, Ethiopia, Madagascar, Seychelles, Tanzania and South Africa. For more information please refer to www.afren.com