29th Apr 2014 07:00
Afren plc (AFR LN)
Annual Financial Report and Notice of General Meeting
London 29 April 2014 Following the release on 27 March 2014 of Afren plc's ("Afren" or the "Company") preliminary full year results for the year ended 31 December 2013 (the "Preliminary Announcement"), the Company announces it has published its Annual Report and Accounts for 2013 (the "Annual Report and Accounts").
The Company's 2014 Annual General Meeting will be held at the offices of White & Case LLP, 5 Old Broad Street, London, EC2N 1DW on Wednesday 4 June 2014 at 11.00 am. Copies of the Annual Report and Accounts and the Notice of the 2014 Annual General Meeting are available to view on the Company's website at www.afren.com.
In accordance with Disclosure and Transparency Rule 6.3.5(2) (b) additional information is set out in the appendices to this announcement. The Preliminary Announcement included a set of condensed financial statements and a fair review of the development and performance of the business and the position of the Company and the Group.
Pursuant to Listing Rule 9.6.1, copies of each of the Annual Report and Accounts, the Notice of the Company's 2014 Annual General Meeting and the form of proxy in relation to the 2014 Annual General Meeting will shortly be available for inspection on the National Storage Mechanism which can be accessed at http://www.morningstar.co.uk/uk/NSM.
For further information contact:
James Henderson Mark Antelme |
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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 a constituent of the Financial Times Stock Exchange Index of the leading 250 UK listed companies. Afren has a portfolio of assets spanning the full cycle exploration and production (E&P) value chain. Afren is currently producing from its assets in Nigeria and the Kurdistan region of Iraq and holds further exploration interests in Ghana, Nigeria, Côte d'Ivoire, the Kurdistan region of Iraq, Congo Brazzaville, Kenya, Ethiopia, Madagascar, Seychelles, Tanzania and South Africa. For more information please refer to www.afren.com.
Appendix A: Directors' Responsibility Statement
The following Directors' Responsibility Statement is extracted from page 106 of the Annual Report and Accounts.
Directors' Responsibility Statement
I confirm to the best of my knowledge:
1. The financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
2. The strategic report, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
3. The annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
By order of the Board
Osman Shahenshah
Chief Executive
26 March 2014
Appendix B: Principal Risks and Uncertainties
The following description of principal risks and uncertainties is extracted from pages 30 to 32 of the Annual Report and Accounts.
Principal Risks and Uncertainties
We have identified the following principal risks and uncertainties in relation to the Group's financial and operational performance in 2013.
Key risk | Description and impact | How we manage it |
Operational risk | ||
Field delivery risk | · Field delivery risk applies to all phases of the E&P cycle from seismic acquisition through to production operations. At each phase the mitigating measures will be different. However, failure to control risks will lead to project delays, cost over-runs, high production costs, early field decommissioning and, ultimately, lower than expected reserves.
· In 2013, development continued at our producing assets in Nigeria and Kurdistan, with significant drilling campaigns in Ebok and Barda Rash, and the engineering and fabrication of the new Ebok Central Fault Block extension platform.
· During 2014, we will closely manage the installation, hook-up and commissioning of the new Ebok facilities, to ensure safe operations and to minimise any impact on production. | · All operations are subject to risk reviews, to identify as early as possible any potential risks to success.
· Our engineers analyse results from appraisal and development wells, and determine the appropriate course of action for the drilling programme and facility design.
· We closely monitor all projects to ensure they go to plan and so we can take action to maintain progress.
· We monitor project finances alongside their budget to minimise over-runs.
· We monitor production operations closely to ensure we minimise unplanned downtime and control operating costs tightly.
· We compare actual production regularly to forecast production. |
Exploration failure | · Exploration activities can be capital intensive and may involve a high degree of risk. Sustained exploration failure will affect the Group's growth potential.
· In 2013, we achieved world-class exploration success. The highlight of the year was the discovery at Ogo, offshore Nigeria, the third largest discovery in 2013.
| · Exploration assets are subject to a rigorous peer review process.
· We evaluate exploration risk for each prospect by looking in detail at how to de-risk the key elements of the subsurface data, source rock, reservoir, trapping and seal mechanisms. We subsequently rank prospects and approve budgets.
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Environmental orsafety incidents | · As Afren's activities continue to expand there is a continuing focus on preventing major pollution or loss of life due to failure of systems, equipment or human action. | · We have implemented comprehensive Environment, Health, Safety and Security (EHSS) management systems based on best industry practice, at both corporate and country level, with an annual independent audit programme to ensure effective implementation.
· Afren oversees its contractors closely to ensure they accept and meet our EHSS standards.
· Specific EHSS teams in each area of operation.
· Contingency plans in place and tested regularly. |
Unfulfilled workor Production Sharing Contracts (PSC) obligations | · Loss of production interest or exploration licence due to incomplete fulfilment of work or PSC obligations. | · The operations, finance and legal teams jointly monitor compliance with licence obligations.
· We maintain good, open working relationships with local governments in the countries of operation. |
External risk | ||
Geo-political risk | · The countries in which Afren operates continue to face political, socio‑economic and legal uncertainties.
· 2013 has seen political tensions in all of the areas in which we operate and these continue to be closely monitored to minimise the impact on our operations.
· Disputes between the Iraqi and Kurdistan authorities over licences and oil exports continue to pose uncertainties for all E&P companies operating in the Kurdistan region of Iraq. | · Through close liaison in each relevant country, we monitor the situation from the perspective of our safety and security.
· Contingency plans in place and tested regularly.
· Through our contacts in governments and industry, as well as though specialist advisors, we continuously monitor and evaluate the potential impacts on our business arising from changes in the geo-political environment. |
Security incidents | · Afren continues to operate in regions where kidnapping, piracy and criminal attacks occur. | · Security teams in each area of operation.
· Rigorous security management programme.
· Security risk assessments for each asset and operation. |
Oil price volatility | · Oil prices can fluctuate significantly. | · We will protect our minimum cash flow requirements in a sustained downturn in oil prices.
· Group strategy is to hedge between 25-35% of production through financial instruments that allow us to protect against the risk. |
Host communityaction | · Our operations both on and offshore have the potential for interruption by our host communities if relations are not well established.
· We have continued our close relationships with our host communities and have seen no community action against our operations in 2013. | · Afren has a tried and tested system for managing community affairs, which is applied to all operations.
· Community affairs teams are in place where required.
· Contingency plans in place and tested regularly.
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Strategic risk | ||
Bribery and corruption | · As an international oil and gas operator, bribery and corruption represent an ongoing risk to our business. | · Afren has implemented a Code of Business Conduct and Anti-Bribery and Corruption Policy across all its operations. We will be updating them in 2014, and will accompany this with a further round of training for the Board, all employees and key contractors.
· We continued to review our anti-bribery and corruption practices during 2013.
· We have established an independent whistle-blowing hotline to enable concerns about poor practice to be voiced without fear of reprisal.
· We review and update specific Anti-Bribery and Corruption policies and procedures annually and quarterly respectively, to meet the stringent requirements of the UK Bribery Act as well as the UK Ministry of Justice Guidance.
· We provide new starters and existing employees with training on anti‑bribery and corruption as part of the induction process and as an ongoing programme.
· We provide quarterly updates to the Audit and Risk Committee regarding anti-bribery and corruption, including any whistle-blowing reports and their subsequent resolution. |
Management of growth | · We have continued to develop and consolidate our management systems, to take into account the changing needs of a growing organisation. Management of growth is a reducing risk.
| · All acquisitions are subject to thorough due diligence, to create an effective integration plan.
· We design remuneration policies to incentivise, motivate and retain key employees as well as to attract new personnel as required. |
Loss of key employees | · Loss of knowledge and skills to the Group, in particular in countries of operation.
· Intensified competition for human talent in Africa and the Middle East.
· As the Group has expanded so have the strength and depth of senior management. Loss of key personnel reduces as a risk as Afren continues to grow, and is also mitigated by our remuneration policies. | · We consider succession planning Group-wide, taking into account the development of the executive and senior management.
· We design remuneration policies to incentivise, motivate and retain key employees including Directors.
· We set salaries and reward of senior executives, including Directors, at competitive levels using third-party benchmarks.
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Financial risk | ||
Taxation and otherlegislation changes | · There is a risk that future changes in tax regimes and other legislation may impact our profitability. | · Our financial and legal teams monitor current legislation and proposed changes and incorporate these into our working practices.
· Maintenance of good, open working relationships with local authorities in the countries of operation.
· Involvement with industry groups in the country of operation to discuss sector issues. |
Treasury management | · The availability of financing to maintain the ongoing operations of the business is key. | · The Group continued to optimise its capital structure during 2013 and successfully extended its debt maturity and lowered its cost of debt.
· We continue to manage our expenditure and monitor cash flow to ensure that future cash requirements are appropriately controlled. |
Appendix C: Related Party Transactions
The following schedules of transactions between the Group and related parties and key management personnel are extracted from notes 5.11 and 5.12 of the Group's financial statements in the Annual Report and Accounts.
Related party transactions
Sales of good/services | Purchase of goods/services | Amounts owed to related parties | ||||
Year ended 2013 US$m | Year ended 2012 US$m | Year ended 2013 US$m | Year ended 2012 US$m | Year ended 2013 US$m | Year ended 2012 US$m | |
St. John Advisors Ltd | - | - | 0.3 | 0.3 | - | - |
STJ Advisors LLP | - | - | 0.2 | 0.5 | - | - |
St. John Advisors Ltd and STJ Advisors LLP are the contractor companies for the consulting services of John St. John, a Non-Executive Director of Afren, for which they receive fees, including contingent completion and success fees, from the Group. St. John Advisors also receives a monthly retainer of £15,000 under a contract which started from 27 June 2008. The contract has a 12-month period which automatically continues unless terminated by either party.
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'.
2013 US$m | 2012 US$m | |
Short-term employee benefits | 8.0 | 6.1 |
Other long-term benefits | 0.3 | 0.2 |
Exceptional award | - | 2.6 |
Share-based payment | 1.6 | 15.5 |
9.9 | 24.4 |
Related Shares:
AFR.L