Annual General Meeting - Chairman's statement

Afren plc (AFR LN)

Annual General Meeting - Chairman's statement

London, 11 June 2013 - At today's AGM the Chairman, Egbert Imomoh, opened the meeting with the following statement:

Our vision to be the leading independent upstream Exploration and Production (E&P) Company in each of the areas we operate is underpinned by a clear and consistent strategy - creating value for our shareholders across the E&P chain. In this regard, 2012 proved to be yet another defining year; we delivered record financial results driven by strong production performance at our greenfield developments, offshore Nigeria, and achieved significant exploration success with discoveries in Nigeria and the Kurdistan region of Iraq. In 2012, Group production grew by 123% to 43,059 boepd, turnover increased by 151% to c.US$1.5 billion, cash flow from operations increased by 177% to US$935 million; equivalent to US$60 per flowing barrel, a level that we believe is sustainable given the pipeline of existing production, development and appraisal opportunities within our portfolio.

Having established a proven track record as a fast-track developer of oil and gas assets through accretive low cost acquisitions, Afren demonstrated its credentials as an explorer in 2012 with discoveries at the Okoro Field Extension, Ebok North Fault Block ("Ebok NFB"), both offshore Nigeria, and at Simrit-2, located on the Ain Sifni PSC, Kurdistan region of Iraq, achieving an E&A success ratio in the year of 88%. Our success with the drill bit in Nigeria led to a 265% 2P reserves replacement ratio and increase in net 2P reserves to 210 mmboe. This was achieved while lowering our operating cost per barrel by 16% to US$15.0 per barrel and with a reduction in the Total Recordable Incident Rate by 33% to 1.47.

Using our fast track development skills and existing infrastructure, we commenced early production from both the Okoro Field Extension and Ebok NFB within ten months of discovery and are moving towards the finalisation of full field development solutions for both discoveries. In the Kurdistan region of Iraq, we commenced production operations from the Barda Rash field producing our first cargo of sales specification oil to tank. To date, approximately 18,800 barrels is held in storage at the field with first sales expected shortly. We have recently commenced Phase 2 operations on the field which will involve new wells to increase production capacity. We continue to maintain a close relationship with the government and remain positive regarding political developments in the region towards delivering significant and sustainable oil export revenues.

In East Africa, 2012 was also a period of extensive data acquisition across our portfolio and as a result, we have significantly increased our net prospective resource volume by 176% to 5,838 mmboe. Over the next 12 to 18 months, we will continue to de-risk our exploration acreage across our portfolio through a high-impact E&A campaign targeting both frontier and established basins.

We have started 2013 strongly, with year-on-year growth of 14% in net production in Q1 2013 and remain firmly on-track to achieve our production guidance of 40,000 to 47,000 boepd net to Afren. We have also made a successful start to our 2013 drilling campaign with the successful Okwok-10 and Okwok-11 appraisal wells. The results from the appraisal programme are currently being integrated into the field model and optimised Field Development Plan (FDP), prior to submission to the Nigerian authorities later this year.

The Group remains in a position of financial strength, with robust high-margin cash flows being generated from a growing production base supported by a strong balance sheet with the capacity and flexibility to optimally explore and develop our high-quality portfolio of growth opportunities well into the future. In addition, as part of our active portfolio management process, we will look to farm-out and divest assets at different points in the value chain to either increase the rate of return on investment from our portfolio or to use the proceeds to recycle cash and maintain capital efficiency. In this regard, we completed the farm out of 17.14% participating interest in the OPL 310 licence, offshore Nigeria, to Lekoil in May 2013. An exploration well is currently being drilled at the Ogo prospect and together with a planned side-track which, in aggregate, will be targeting gross P50 prospective resources of 202 mmboe.

I would like to say a few words about our Corporate Responsibility activities. Our policies encompass our relationships with all stakeholders including shareholders, employees, contractors, local communities and host governments, as well as with the environments in which we work. In 2012, the Group participated in a wide range of education, health, employment, entrepreneurship and infrastructure initiatives within the communities across our countries of operations.

Since IPO we have delivered Total Shareholder Returns of 556% to end 2012, representing an upper quartile performance against our peers. This growth has only been possible through the recruitment of exceptional and specialised operational, technical and financial human talent. The scarcity of such talent is compounded by the fact that we operate in oil and gas provinces in the world where security and political stability is of great concern. The Group continues to recruit across its operations and the competition for such talent continues to intensify given the ever-increasing focus on Africa and the Middle East by the Majors, African National Oil Companies, Asian National Oil Companies, private equity groups and US independent oil companies. Our remuneration philosophy reflects the need to retain the most able people in a highly competitive talent market and we will provide appropriate rewards for exceptional achievement leading to the long-term increase in Company value.

With a pipeline of large-scale development projects and multiple exploration and appraisal wells planned being worked on by our talented and dedicated staff, the Company has an exceptionally strong platform in place to realise further value for our shareholders in 2013 and beyond.

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Notes to Editors

Afren plc

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 E&P value chain. Afren is currently producing from its assets in Nigeria, Côte d'Ivoire and the Kurdistan region of Iraq and holds further exploration interests in Ghana, Nigeria, Côte d'Ivoire, the Kurdistan region of Iraq, 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.