Information update

Afren plc (AFR LN)

Information update

February 22, 2012 - In connection with the proposed offering of Senior Secured Notes, Afren plc ("Afren" or the "Company") today provides the following information update comprising the unaudited financial statements of the Company for the ten months ended 31 October 2011, and independent reserve and resource estimates by Netherland, Sewell & Associates and RPS Energy at 31 December 2011. The independent reserve and resource estimates published below have been issued in advance of the publication of Afren's 2011 Full-year Results, when the Company anticipates that ongoing assessment of its recently acquired assets onshore Nigeria and the Kurdistan region of Iraq will be completed and further updated independent estimates will be available.

Comprehensive income for each period was equivalent to profit after tax for each period presented.

1. Basis of accounting and presentation of financial information

The condensed Group interim financial statements comprised of Afren plc (''Afren'') and its subsidiaries (''the Group'') have been prepared in accordance with International Accounting Standard (''IAS'') 34, ''Interim Financial Reporting'', as adopted by the European Union, except that the condensed Group interim financial statements exclude the required disclosures pertaining to segment information. Accordingly, certain information and footnote disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards as issued by the IASB, have been omitted or condensed. The condensed Group interim financial statements are unaudited. The information for the year ended 31 December 2010 does not constitute statutory accounts as defined in sections 435(1) and (2) of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010 were published and copies of which were delivered to the Companies House. The report of the auditors on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain any statement under sections 498(2) or (3) of the Companies Act 2006.

Accounting policies

With the exception of the additional policy in relation to finance leases below, the same accounting policies, presentation and methods of computation have been followed in the condensed set of financial statements as applied in the preparation of the Group's audited financial statements for the year ended 31 December 2010.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognized as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group's general policy on borrowing costs. Contingent rentals are recognized as expenses in the period in which they are incurred.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed Group interim financial statements.

2. Profit per share

The profit and weighted average number of ordinary shares used in the calculation of the profit per share are as follows:

The weighted average number of ordinary shares for the purposes of diluted profit per share reconciles to the weighted average number of ordinary shares used in the calculation of basic profit per share as follows:

In 2010, 12 million potential ordinary shares were anti-dilutive and therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share. There were no excluded potential ordinary shares as at 31 October 2011.

3. Reconciliation of profit after tax to the normalised profit after tax

*Excludes realised (gains)/losses on derivative financial instruments.

Normalised profit after tax is a non-IFRS measure of financial performance of the Group, which in management's view more accurately reflects the Group's underlying financial performance. This may not be comparable to similarly titled measures reported by other companies.

4. Taxation

The effective tax rate has risen during the period as a result of having largely utilised the available tax losses in prior year and production on the Ebok field commencing during the period.

5. Tangible and intangible oil and gas assets

The Group acquired 60% interest in Barda Rash PSC, in Kurdistan region of Iraq. The carrying value included in intangible oil and gas assets relating to Barda Rash license was US$414.0 million as at 31 October 2011. In addition, the Group acquired 74% interest in Tanga block, located onshore and offshore Tanzania. The carrying amount as at 31 October 2011 was US$4.9 million.

The increase in tangible oil and gas assets during the period is due to expenditure on Ebok field development.

6. Obligations under finance lease

The Group has a seven year lease of a Mobile Offshore Production Unit (MOPU) and a Floating Storage Offloading Vessel (FSO) from Mercator Offshore (Nigeria) Limited. The capex day rate payable is accounted for as a finance lease and was originally recorded based on the present value of the lease. At 31 October, 2011 the value of the lease of US$120.6 million and US$19.3 million, respectively, has been reported in the balance sheet in non-current and current liabilities respectively. Interest on the finance lease included in the income statement during the period was US$4.8million.

7. Borrowings

8. Deferred consideration

US$193.5 million (US$200 million, undiscounted) relating to the acquisition of the 60% participating interest in the Barda Rash PSC, Kurdistan is due in February 2012 and therefore reported as deferred consideration in the balance sheet.

9. Assets held for sale

A loss of US$2.6 million (2010: US$0.2 million) has been disclosed in the period as arising from discontinued operations. This loss relates to the seismic business of Black Marlin Energy Holdings Limited (Black Marlin) which was acquired by Afren as part of its acquisition of the issued share capital of Black Marlin in 2010. The trade and assets of this business were identified as held for sale on acquisition as an active programme was in place at 31 December 2010 for the sale of the business.

However, during the period under review it was decided by management that the business would no longer be sold but it that would be abandoned, with the assets of the business (largely marine and land seismic vehicles and equipment) either put into use by Afren in other parts of the Group or sold on a piecemeal basis.

These assets have therefore been reclassified in the period out of assets held for sale and into property, plant and equipment.

10. Merger Reserve

The provisions of the Companies Act 2006 relating to merger relief (s612 and s613) have been applied to the equity raising through a cash box structure, resulting in the creation of a merger reserve.

11. Contingent liabilities

There has been no material change to the contingencies reported in the annual report for the year ended 31 December 2010.

12. Related parties

The following table provides the total amount of transactions which have been entered into with related parties during the ten months ended 31 October 2011 and 2010:

Trading transactions

St. John Advisors Ltd is the contractor company for the consulting services of John St. John, a Non-executive Director. St. John Advisors also receive a monthly retainer of £15,000 for consulting advice. This contract is for 12 months from 27 June 2008 and automatically continues thereafter unless terminated by either party. A separate contract was engaged in 2010 with STJ Advisors LLP for consulting services in relation to the Notes which completed on 27 January 2011.

Tzell Travel Group operates as a franchise. The franchisee utilised by Afren for some of its travel needs is a close family member of the Chief Executive Officer and Tzell Travel Group is therefore considered a related party. Afren uses several travel agents as there is a significant travel element to its operations and Tzell competes on an even basis with these. Tzell provided approximately 7% (2010: 9%) of the travel arrangements by value.

First Hydrocarbon Nigeria Limited (FHN) is an associate company of Afren plc. During the period the Group provided professional services to FHN and the fees receivable relating to these services amounted to US$5 million. The amounts outstanding are unsecured and are expected to be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts on the amounts owed by related parties.

13. Subsequent events

On 2 November 2011 Afren announced the completion of the Kurdistan acquisition and execution of a corporate credit facility for up to US$200 million in connection with the acquisition. Following the completion, US$57.9 million included in prepayments as at 31 October 2011, in respect of Ain Sifni PSC, has subsequently been reclassified to intangible oil and gas assets. In November 2011, Afren received governmental approval for development of the Barda Rash field in Kurdistan.

On 1 December 2011 First Hydrocarbon Nigeria Limited (FHN) announced completion of a 45% interest in OML26, onshore Nigeria, for an estimated maximum investment of US$187.5 million.

Extract of NSAI report

Reserves

The estimated ultimate recovery (EUR) and reserves and future net revenue to the Afren interest in these properties, as of 31 December, 2011, are as follows:

(1) Net entitlement reserves are after deductions for royalty burdens.

(2) Gas reserves are not included because there is no viable market for produced gas.

Based on a Brent oil price of US$100/bbl.

Contingent resources

The estimated original oil-in-place (OOIP) and unrisked gross (100 per cent) contingent oil resources for these properties, as of 31 December, 2011, are as follows:

The estimated original gas-in-place (OGIP) and unrisked gross (100 per cent) contingent gas resources for these properties, as of 31 December , 2011, are as follows:

(1) Gas resources are not included because there is currently no viable market for produced gas.

Prospective resources

The estimated OOIP and unrisked gross (100 per cent) prospective oil resources for these properties, as of 31 December, 2011 are as follows:

(1) Note, does not include NSAI's 2011 re-evaluation of the Keta Block, offshore Ghana.

(2) Prospective oil volumes include condensate associated with the OPL 310 prospective gas resources.

The estimated OGIP and unrisked gross (100 per cent) prospective gas resources for these properties, as of 31 December, 2011 are as follows:

 Extract of RPS Energy report

The estimated stock-tank-oil-initially-in-place (STOIIP) and contingent oil resources for the Barda Rash field, as of 31 December, 2011 are as follows: