20th Sep 2006 07:02
Afren PLC20 September 2006 Afren plc Interim Results Afren plc ("Afren" or the "Company") (AIM:AFR), the independent oil and gasexploration and development company, announces its interim results for the sixmonths ended 30 June 2006. Highlights Acquisitions and Operations •Strategic entry into the Republic of Congo (Brazzaville) through the announced acquisition of Heritage Congo Limited •Agreement signed with AMNI International Petroleum Development Company for the development of the Okoro / Setu fields offshore Nigeria, significantly upgrading Afren's recoverable reserves •Announcement of Obo-1 discovery on Block 1 of the Joint Development Zone Management •Appointment of experienced industry personnel as Drilling Manager and Okoro / Setu Asset Manager Financial •Successful convertible bond issue, after the balance sheet date, upsized to US$75 million from US$50 million following strategic investment from the Heerema Group •Company well capitalised with £11.3 million net cash as at 30 June 2006, which excludes US$75 million from the convertible bond issue Outlook •Drilling contract secured for the Seadrill-7 Jack-up drilling unit for the 2006 appraisal well programme on the Okoro / Setu fields, commencing end September •Exploration drilling to be carried out on La Noumbi licence in the Republic of Congo (Brazzaville) before the end of 2006 •In a separate announcement today Afren announced a nine month contract secured for Global Santa Fe's Adriatic VI Jack-up drilling unit for 2007-08 Nigeria development programme, targeting first production in early 2008 Brian O'Cathain, Chief Executive of Afren plc, commented: "At the time of Afren's listing in March 2005, the Company stated that its aimwas to grow into a leading pan-African oil and gas company with a diversifiedportfolio through acquisition. During the first half of 2006 we have continuedto demonstrate our progress in achieving this. The second half of the year should prove to be a step change period for Afren aswe begin the Afren operated appraisal drilling in Nigeria and we move towardsthe development stage of the Okoro and Setu fields and our target production of15,000 to 20,000 barrels of oil per day in 2008." 20 September 2006 Enquiries AfrenBrian O'Cathain +44 20 7182 1800Osman Shahenshah +44 20 7182 1800Pelham Public RelationsJames Henderson [email protected] +44 020 7743 6674AlisdairHaythornthwaite [email protected] +44 020 7743 6676 Editors' Notes Afren (www.afren.com) was founded in December 2004 by a management teamincluding Dr Rilwanu Lukman (former Secretary General and President of OPEC)with the vision to become the leading pan African independent Exploration andProduction company. Since its listing on the AIM market of the London StockExchange, Afren has rapidly expanded its portfolio and the management team hasdelivered significant assets in the Joint Development Zone of Nigeria Sao Tomeand Principe, Nigeria, Republic of Congo (Brazzaville), Gabon and Congo. Afren will continue to add to its diversified portfolio of production, near termdevelopment and high impact exploration with the overall objective of creatingsubstantial shareholder value. Chairman and Chief Executive Statement The first half of 2006 has been a period of intense activity as Afren hascontinued its West African portfolio diversification with its strategic entryinto the Republic of Congo through the announced acquisition of Heritage OilCorporation's interests. Afren also signed a Production Sharing and TechnicalServices Agreement with AMNI International Petroleum Development Company("AMNI"), a well established Nigerian indigenous company, for the development ofthe proven undeveloped Okoro / Setu fields offshore Nigeria. The fields havecombined estimated recoverable reserves of 35 to 60 million barrels,representing a significant upgrade to the current asset base. Drilling contractswere secured for the Seadrill-7 and Global Santa Fe's Adriatic VI Jack-updrilling units, which will take Afren through the appraisal and development ofits proven undeveloped fields. We were delighted to announce the discovery bythe Obo-1 well in the Joint Development Zone, where Afren holds a 4.41% interestthrough its 49% ownership of Dangote Energy Equity Resources (DEER). Afren aims to continue its development into a leading pan-African Oil & GasExploration, Development and Production Company through both organic andacquisitive growth, and is looking forward to an important delivery phase as webegin the countdown to first oil in early 2008, with the Afren operatedappraisal programme on the Okoro / Setu development due to commence shortly. Nigeria Afren significantly upgraded its proved undeveloped reserves through itsagreement with AMNI for the development of the Okoro / Setu fields, offshoreNigeria. The fields have combined estimated recoverable reserves of 35 to 60mmbbls and are expected to flow in excess of 15,000 barrels of oil per day("bopd") when full combined production is achieved. Appraisal and developmentdrilling will commence shortly and first production is expected in early 2008. The Seadrill 7 rig is being mobilised to commence appraisal drilling shortly.The planned programme includes an appraisal well to test upper and lowerreservoirs at Okoro and a re-entry and re-drill of the Setu-1 well. Afren signeda contract with Global Santa Fe to secure the Adriatic VI drilling unit for anine month programme starting in August 2007 to carry out the developmentdrilling programme on Okoro / Setu. This was very pleasing in an extremelycompetitive rig market. On the Ogedeh development in OML 90, discussions are ongoing with otherinterested parties in OML 90 about securing a rig for a potential jointdevelopment in the area. Nigeria Sao Tome and Principe Chevron, the Operator of Block 1 of the Joint Development Zone, commenceddrilling of the first exploration well on 14th January 2006. The drillingoperation was completed in 63 days, was drilled under budget and the Operatorconfirmed that it had discovered hydrocarbons. The Obo-1 well logged acumulative total of at least 150 feet (45 metres) of net hydrocarbon pay inmultiple reservoirs and provided important reservoir rock and liquid samples.The exploration well data is currently being analysed with a view to determiningthe future exploration programme. Republic of Congo (Brazzaville) Afren's strategic entry into the Congo followed a recent visit by a senior Afrenteam led by Dr Rilwanu Lukman with the President of the Republic of Congo. Afrenhas signed an agreement to acquire the entire issued share capital of HeritageCongo Limited, which holds Heritage's interests in the Republic of Congo. Thisincludes a 25 percent interest in the Kouakouala A production permit("Kouakouala"), a 14 percent interest in the La Noumbi exploration licence ("LaNoumbi") and a 30 percent interest in the Mengo field. All the licences arelocated close to or adjacent to the M'Boundi Field (1.4 billion barrel stocktank oil originally in place ("STOIIP")), which currently produces over 65,000bopd. The transaction is still subject to completion and the waiver ofpre-emption rights by the partners on the Kouakouala A and Mengo licences and istherefore not reflected in these interim results. The La Noumbi explorationpermit acquisition is not subject to pre-emption. The La Noumbi licence consists of 2,830 sq km of onshore under-explored acreageand lies directly to the north of, and on trend with, the Kouilou permit, whichcontains the prolific M'Boundi field. The licence is operated by Maurel et Promand offers an exciting high impact exploration opportunity. Several structuralleads have been identified, the most mature of which is Doungou, which is ontrend with and interpreted to be in a similar structural setting to M'Boundi. The seismic acquisition programme for 2006 has already commenced andpreparations for an exploration well on the Doungou prospect are underway. Threefirm and three contingent wells are required under the terms of the ProductionSharing Contract. Gabon 3D seismic reprocessing is ongoing on the Iris and Themis Marin fields. Anexploration well on Themis Marin is expected to take place in Q2 2007. Thedrilling rig slot for this exploration well has already been confirmed. TheCompany is currently awaiting Government approval on the increase of Afren'sstake in the Ibekelia Study Area from 10% to 20%. Management The Okoro / Setu project team is being established under Alan Hunt, who bringsover 30 years of project management experience from Shell International. Mr Huntheld various senior level positions within Shell International and waspreviously Senior Engineer in Nigeria for a number of years, Managing Directorof Shell Peru, Project Development Manager for Shell Expro and was responsiblefor the early stages of the development of the Sakhalin Project. Graham Ross joined Afren as Drilling Manager earlier this year. Mr Ross is ahighly experienced drilling manager, and has worked in the oil and gas industryfor over 26 years. Prior to his appointment with Afren, Mr Ross served asDrilling Manager for Premier Oil, where he was responsible for drillingoperations in Guinea Bissau and Gabon, as well as the UK North Sea. Prior tothat, he served as Group Drilling Manager for Enterprise Oil, where he wasresponsible for drilling exploration and development wells in Europe, Asia,South America and the Middle East. Financial Afren reported a net loss of £3.0 million (1H 2005: £1.6 million) for theperiod. The increased loss over the period is largely due to higheradministrative costs in relation to the strengthening of the technical, legaland business development departments. The Company remains well funded with net cash resources of £11.3 million at 30thJune 2006, which excludes proceeds from the US$75 million convertible bond issuethat closed post the period. Afren welcomes the convertible bond investors,including a private investment arm linked with the Heerema Group, which allowedAfren to upsize the convertible bond issue by US$25 million. The Heerema Groupis an international market leader in global oilfield services, focused on thedesign, fabrication, transportation and installation of offshore facilities.This investment is consistent with the Heerema Group further expanding itscommitment to West African offshore activities. Outlook The next 12 months should be a very exciting period for the Company as wecontinue our rapid progress in building a diversified pan-African portfolio andexecute our main development programme on the Okoro / Setu project. Charles Jamieson Chairman Brian O'Cathain Chief Executive INDEPENDENT REVIEW REPORT TO THE SHAREHOLDERS OF AFREN PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises the Group income statement,the Group balance sheet, the Group cash flow statement, the Group statement ofchanges in equity and related notes 1 to 7. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. This report is made solely to the Company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Deloitte & Touche LLPChartered AccountantsLondon19 September 2006 Afren PlcGroup Income Statement for the six months to 30th June 2006 NOTES Six months to Six months to Year to 31st 30th June 2006 30th June 2005 December 2005 Unaudited Unaudited * Audited £'000 £'000 £'000 Revenue - - - Administrative expenses (3,352) (1,657) (3,685)Other operating expenses - - (1,202) Operating loss 3 (3,352) (1,657) (4,887) Investment revenue 351 77 250Other gains and losses (19) - 82- foreign currency gains/(losses) Loss before tax (3,020) (1,580) (4,555) Income tax expense - - - Loss after tax (3,020) (1,580) (4,555) Loss per share Basic and diluted 2 1.6p 1.8p 3.6p * Restated as described in note 1 All operations were continuing throughout all periods. Afren PlcGroup Balance Sheet as at 30th June 2006 NOTES At 30th June At 30th June At 31st December 2006 2005 2005 Unaudited Unaudited * Audited £'000 £'000 £'000 ASSETSNon-current assetsIntangible assets 12,306 7,074 9,348Property, plant and equipment 520 120 440 12,826 7,194 9,788Current assetsTrade and other receivables 4 3,758 885 2,567Cash and cash equivalents 11,325 4,611 17,165 15,083 5,496 19,732 Total assets 27,909 12,690 29,520 LIABILITIESCurrent liabilitiesTrade and other payables (2,391) (727) (1,310) Net current assets 12,692 4,769 18,422 Net assets 25,518 11,963 28,210 EQUITYShare capital 1,902 1,403 1,890Share premium 29,573 11,757 29,465Other reserves 1,618 383 1,410Accumulated losses (7,575) (1,580) (4,555) Total equity 25,518 11,963 28,210 * Restated as described in note 1 Afren PlcGroup Cash Flow Statement for the six months to 30th June 2006 Six months to Six months Year to 31st 30th June to 30th December 2006 June 2005 2005 Unaudited Unaudited* Audited £'000 £'000 £'000 Operating loss for the period (3,352) (1,657) (4,887) Depreciation of property, plant and equipment 80 17 40Impairment of intangible assets - - 1,202Share based payments charge 651 383 904Operating cash flows before movements in (2,621) (1,257) (2,741)working capital(Increase)/decrease in trade and other 488 (885) (2,567)operating receivablesIncrease/(decrease) in trade and other (314) 727 824operating payablesCurrency translation adjustments (19) - 82 NET CASH USED IN OPERATING ACTIVITIES (2,466) (1,415) (4,402) Purchases of property, plant and equipment (159) (120) (480)Exploration expenditure (3,669) (7,091) (9,503)Interest received 351 77 250 NET CASH USED IN INVESTING ACTIVITIES (3,477) (7,134) (9,733) Issues of ordinary shares 120 13,838 32,828Costs of share issues - (728) (1,674) NET CASH INFLOW FROM FINANCING ACTIVITIES 120 13,110 31,154 NET INCREASE/(DECREASE) IN CASH AND CASH (5,823) 4,561 17,019EQUIVALENTS Cash and cash equivalents at beginning 17,165 50 50of periodEffect of foreign exchange rate changes (17) - 96 CASH AND CASH EQUIVALENTS AT END OF PERIOD 11,325 4,611 17,165 * Restated as described in note 1 Afren PlcGroup Statement of Changes in Equity for the six months ended 30th June 2006(unaudited) Share Share Share based Translation Accumulated Total capital premium payments reserve losses equity account reserve £'000 £'000 £'000 £'000 £'000 £'000 At 1st January 2005 50 - - - - 50 Issue of share 1,353 12,485 - - - 13,838capitalDeductible costs - (728) - - - (728)of share issuesShare based - - 383 - - 383payments chargeNet loss for the - - - - (1,580) (1,580)period At 30th June 2005* 1,403 11,757 383 - (1,580) 11,963 Issue of share 487 18,654 - - - 19,141capitalDeductible costs - (946) - - - (946)of share issuesExchange differences - - - 506 - 506arising on translation of overseas operationsShare based - - 521 - - 521payments chargeNet loss for the - - - - (2,975) (2,975)period At 1st January 2006 1,890 29,465 904 506 (4,555) 28,210 Issue of share 12 108 - - - 120capitalExchange differences - - - (443) - (443)arising on translation of overseas operationsShare based payments - - 651 - - 651chargeNet loss for period - - - - (3,020) (3,020) At 30th June 2006 1,902 29,573 1,555 63 (7,575) 25,518 * Restated as described in note 1 Afren PlcNotes to the interim financial statements (unaudited) 1. Basis of accounting and presentation of financial information These interim consolidated financial statements are for the six months ended30th June 2006. The interim financial report, which is unaudited, has beenprepared in accordance with the recognition and measurement criteria ofInternational Financial Reporting Standards (IFRS) and the disclosurerequirements of the Listing Rules. The accounting policies and methods ofcomputation used are consistent with those used in the Group annual report forthe year ended 31st December 2005. The financial information for the year ended 31st December 2005 does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. A copy of the statutory accounts for the year has been delivered to theRegistrar of Companies. The auditors report on these accounts was not qualifiedand did not contain statements under section 237(2) or (3) of the Companies Act1985. The results for the six months to 30th June 2005 have been restated to recordthe results of a jointly controlled entity using proportional consolidation inaccordance with the Company's accounting policies as published in the Group'sannual report for the year ended 31st December 2005. The Company's originalinterim results for this period, published on 13th September 2005, recorded theresults of this entity using the equity method. These comparative results havealso been restated to capitalise certain field related expenditure that wasexpensed in the 13th September 2005 interim announcement, in order to be incompliance with the Company's full year 2005 accounting policies as describedabove. The combination of these restatements reduced the previously reported netloss for the first half of 2005 by £741,000 from £2,321,000 to £1,580,000 andincreased net assets by the same amount from £11,222,000 to £11,963,000. 2. Loss per share The calculation of the basic loss per share is based on the loss for the periodafter taxation of £3,020,000 (1H 2005 - £1,580,000) and a weighted averagenumber of shares in issue of 189,682,590 (1H 2005 - 89,478,992). As there is aloss for all periods presented there is no difference between the basic anddiluted loss per share. 3. Segmental reporting 6 months to June 2005 West Africa Unallocated Consolidated £'000 £'000 £'000 Segment result - (1,657) (1,657) Investment revenue 77 ----------Loss before and after tax (1,580) Notes to the interim financial statements (unaudited) (cont) 12 months to December 2005 West Africa Unallocated Consolidated £'000 £'000 £'000 Segment result (1,305) (3,582) (4,887) Investment revenue 250Other gains and losses 82 -----------Loss before and after tax (4,555) 6 months to June 2006 Segment result (435) (2,917) (3,352) Investment revenue 351Other gains and losses (19) -----------Loss before and after tax (3,020) 4. Trade and other receivables At 30th June 2006 At 30th June 2005 At 31st December 2005 £'000 £'000 £'000 Other debtors 2,389 188 2,178Prepayments 939 573 97VAT recoverable 430 124 292 Total 3,758 885 2,567 Prepayments and Other debtors include costs and amounts paid to or depositedwith third parties in respect of pending transactions of £2,341,000 (31stDecember 2005: £1,811,000). 5. Post Balance Sheet events On 3rd July 2006, Afren announced the closing of the private placement of US$50million equivalent in British Pounds of Convertible Senior Unsecured Bonds due2011 (the "Bonds"). The Bonds, privately placed with institutional investors,were issued at 100 percent of the principal amount and denominated in BritishPounds. The Bonds bear a coupon of 9 percent per annum (payable semi-annually),mature in 2011 and are convertible into ordinary shares of the Company. Theconversion price of 60 pence per ordinary share was set at a 25 percent premiumto the price determined in the pricing period leading up to closing. On 17th July 2006, Afren announced that it had upsized the previously announcedprivate placement by US$25 million to US$75 million equivalent in British Poundsof Convertible Senior Unsecured Bonds due 2011. The additional Bonds were issuedunder identical terms to those previously announced. On 25th August 2006 Afren exercised its options over 10,000,000 ordinary sharesin Gasol plc, a company listed on AIM, at 5p. Afren currently owns 6.98% ofGasol's capital. Notes to the interim financial statements (unaudited) (cont) On 8th September 2006, warrants over 500,000 ordinary shares of Afren wereexercised. Trading in these shares commenced on 15th September 2006. On 14th September 2006, warrants over 800,000 ordinary shares of Afren wereexercised. Trading in these shares is expected to commence on 20th September2006. 6. Dividend The directors do not recommend the payment of a dividend. 7. Approval of Accounts These interim accounts (unaudited) were approved by the Board of Directors on14th September 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AFR.L