Interim Results

30th Sep 2008 07:00



Afren plc

Interim Results

Afren plc ("Afren" or the "Company") (AIM: AFR), the premier pan-African independent oil and gas company, announces its interim results for the six months ended 30 June 2008 and an operational update to 29 September 2008.

Osman Shahenshah, Chief Executive of Afren plc, commented:

 

30 September 2008

 

Chairman and Chief Executive's Statement

Evolving into an established African producer

In the first half of 2008, Afren made the transition to an established oil and gas production company and achieved the significant First Oil milestone from the flagship Okoro Setu Project in Nigeria; and remarkably, all this within only two years from announcing the agreement to appraise and develop the fields.  Afren is expecting production to reach a rate of in excess of 21,000 bopd from 7 wells by November.

In addition to the important First Oil milestone, 2008 has already witnessed our most rapid period of portfolio expansion to date. We doubled the number of assets in our portfolio, expanded our network of strategic relationships, and made three new African country entries. We more than doubled our 2P reserves and contingent resources base to 80 mmbbl and now have exposure to exploration drilling in Africa's most prospective basins.

Focus... an endorsement of Afren's differentiated strategy

This rapid growth has been fuelled by adhering to our differentiated growth strategy, to continue to focus exclusively on Africa, to partner with National Oil Companies, to partner with indigenous companies and to monetise gas in the Gulf of Guinea.

Through our strategic partnership with PETROCI (the National Oil Company of Côte d'Ivoire), we completed the acquisition of a 47.96% working interest and operatorship of the producing Block CI-11; a direct 65% interest and operatorship with rights over an additional 15% interest in the undeveloped Block CI-01; and a 100% interest in the onshore Lion Gas Plant. The acquisition offers a combination of production, near-term development, appraisal and exploration upside, as well as midstream interests and a full local workforce that we will now look to expand further.

We entered into two further indigenous partnerships in Nigeria, bringing the total number of partnerships to six. We will be jointly developing the Ebok field with Oriental. The field was awarded to Oriental by the Nigerian National Petroleum Corporation ("NNPC") / Mobil Joint Venture. This asset is a material proved undeveloped opportunity, with the potential to add significant reserves and production to Afren's existing portfolio. Afren also has a collaborative agreement with Oriental to access similar proved undeveloped opportunities from the Oil Majors.

Through a Joint Venture with Global Energy Company Limited, a leading Nigerian-based international oil and gas company active across the Gulf of Guinea, Afren has signed Production Sharing Contracts for OPL 907 and OPL 917. The JV partnership, Afren Global Energy Resources Limited, has taken a 41% interest in OPL 907 and a 42% interest in OPL 917, and will act as operator of both assets.

In relation to gas monetisation, we announced co-operation agreements with two major European utilities. The first, with E.ON Ruhrgas AG ("E.ON Ruhrgas") and liquefaction partner African LNG holdings ("African LNG"), to investigate the availability and accessibility of gas in Nigeria, with a focus on the Anambra Basin and South Eastern regions. The second, with Electricité de France ("EdF") and liquefaction partner Gasol (announced after the period end), to examine establishing a gas aggregation joint venture to identify and develop onshore and offshore stranded gas assets in certain other West African countries. The parties have the intention to jointly develop, collect and monetise the gas for domestic and export purposes.

Finally, we acquired an 88% working interest in the Keta Block in Ghana and a 15% working interest in Block 16 in Angola; both of which have materially upgraded the high-impact nature of our exploration portfolio and together, they offer significant oil resource potential.

 

Outlook - towards full production on Okoro Setu, high impact exploration drilling, infill development drilling and materially accretive transactions

As we continue to grow shareholder value, Okoro Setu in Nigeria and Block CI-11 in Côte d'Ivoire provide the foundation cash-flow and additional financial flexibility to further grow the reserves base, both organically and through continuing to deliver materially accretive transactions in Africa through our proven partnership strategy. Looking forward, the next 12 months offers exciting newsflow as we approach full production on Okoro Setu in Nigeria; start and complete appraisal drilling on the Ebok field in Nigeria; carry out exploration drilling on the Keta Block in Ghana, Block 16 in Angola and La Noumbi in Congo Brazzaville; commence development drilling on the Eremor field in Nigeria; complete a wireline and rig based workover programme on Block CI-11 in Côte d'Ivoire; and commence the development  programme on Block CI-01 also in Côte d'Ivoire. 

OPERATIONAL REVIEW

Nigeria

Afren is partnered with 6 indigenous companies in Nigeria. This is consistent with the strategy and commitment of partnering with indigenous companies to target low cost development options that yield near-term production.

Okoro Setu Project

Working with indigenous producer Amni International, first oil from the Okoro field was produced on 10th June 2008 when the first two of an initial five well programme were brought on stream. The last of the remaining three wells have been successfully drilled, completed and are hooked up ready for production. The wells drilled were a mixture of horizontal and highly deviated penetrations of the reservoir intervals. Reservoir quality was typically at the higher end of expectations.  Based on Afren's reservoir modelling work, an additional two drilling locations were identified and approved for drilling. The new wells are expected to have comparable rates to the current producing wells. These wells are scheduled for completion at the end of October.  FPSO operations have been in line with expectations.

Ebok

As announced on 31 March 2008, Afren entered into its sixth indigenous partnership in Nigeria, with Oriental Energy Resources Limited ("Oriental"), to jointly develop Ebok. Oriental was awarded a 100 per cent. interest and operatorship of Ebok in May 2007 by the NNPC / Mobil Joint Venture. The farm-out has been structured such that the field benefits from the Nigerian Marginal Field Fiscal and Tax Regime. Afren recently received the consent of the Honourable Minister for Energy and the NNPC / Mobil Joint Venture for the assignment of a 40% participating interest in Ebok to Afren.

Afren has secured a contract for the Trident IV, and, together with partner Oriental, plans to commence appraisal drilling in October. The principle objectives of the programme are to establish the areal distribution of the reservoir properties and to acquire the full data suite, in particular fluid samples, which are essential for development planning. To this end, Afren will conduct up to two Drill Stem Tests with full sand control to determine the rate and properties of the oil tested and will also run an extensive wireline logging programme.

Assuming a successful outcome to the appraisal phase Afren will look to submit a Field Development Plan (FDP) to the Nigerian authorities in the second quarter of 2009 with a view, subject to regulatory approvals and equipment availability, to commence development operations thereafter.  

Eremor development

Afren is partnered with the indigenous company Excel on the Eremor development. A revised development plan was defined for Eremor to reflect the requirement to deliver stabilised crude oil to adjacent third party infrastructure. The new Field Development Plan is based on a barge mounted production system that is capable of handling and treating produced water and gas in order to deliver stabilised and fiscally metered crude oil to the Brass manifold on Shell's pipeline network.  It is still planned to re-enter and produce from one of the existing wells using electric submersible pumps (ESP) and then drill a new horizontal well in the second year of development.  The partner approval process on this revised development programme is ongoing. 

Ogedeh development

Afren is in partnership with Bicta, a well established indigenous oil company. The Ogedeh discovery was made by Chevron in 1993 in an area lying close to existing infrastructure. Afren has been working on a number of development scenarios to establish which approach will deliver the best commercial returns for the partnership.

OPL907 / OPL917

Together with its partners, Afren is currently finalising an environmental impact assessment (EIA) programme ahead of the planned seismic acquisition programme across both blocks. This programme is currently planned to commence during first half of 2009. 

Ghana 

The acquisition of the Keta block, from Devon, was completed in June 2008. Afren will have an initial 88% equity interest in the acreage. Afren is in the final stages of negotiating a farm-down to reduce its financial exposure to the commitment well and subsequent forward work programme. The well is scheduled for November 2008 on the Cuda prospect which is assessed by Afren to have mean resources of 325 mmbbls (P10 upside of 642 mmbbls).

Angola

Afren has acquired a 15% working interest in Block 16 (subject to completion), which is situated offshore Angola within the Lower Congo Basin and covers an area of 4,936 km2. It is an exploratory block with nine wells previously drilled and two discoveries. The Miocene and Oligocene discoveries, prospects, leads, and play types mapped within Block 16 are analogous to the fields in Blocks 15, 17, 31, and 32, adjacent to Block 16.

 

The Republic of Congo

Afren holds a 14% interest in the La Noumbi high-impact exploration licence, with multiple reservoir targets covering an area of 2,830km2. Preliminary interpretation of the new seismic data set has identified several attractive prospects mapped at several stratigraphic levels. The 2D seismic data acquired in 2007 has now been incorporated with re-processed older data in the north of the block and an attractive prospect inventory has been developed. Two exploration wells have been proposed by the operator and are supported by Afren. These wells are scheduled to be drilled in the first half of 2009, subject to JV approval.

 

Gabon

Afren currently holds acreage interests in the shallow water Gabon Coastal Basin and the primary target across the area is the pre-salt Gamba sandstone formation, which is the main reservoir for Gabon's oil resources, including the giant Rabi-Kounga field.

An exploration well was drilled on the Admiral prospect in the Themis Marin permit in Q1 2008. The well encountered an excellent reservoir section but was water bearing. Following this well result, the Themis Marin permit was surrendered in March 2008.

In July 2008 an exploration well (ICM-1) was drilled on the Charlie prospect in Iris Marin. The well encountered a thick reservoir section but was water bearing. The likely cause of failure is the lack of a robust structural closure. Work is ongoing to review the remaining prospectivity in the acreage. Negotiations with the government (DGH) have been concluded on the proposed work programme and commercial terms for a PSC on the Ibekelia permit. The JV is in the process of deciding whether to go forward and convert the Ibekelia permit to a full PSC. 

Nigeria - São Tóme & Príncipe Joint Development Zone

Afren's 4.41% interest in Block 1 of the JDZ offers exposure to world class exploration acreage.  In 2006, Chevron made the Obo-1 discovery which contained 150 feet of net pay and proved a working oil and gas system in the JDZ. Post well studies have been completed and an attractive prospect inventory developed. Further drilling is awaiting the results of exploration drilling in the adjacent Blocks 2, 3 and 4. This activity has been delayed until 2009 due to lack of rig availability. 

FINANCIAL REVIEW

Afren has had an active six months financially, securing the US$169 million facility to acquire the Côte d'Ivoire assets as well as an extremely successful equity raise in April 2008, with net cash raised of circa US$230 million. The balance sheet has been significantly strengthened and, despite over US$160 million of investment in development and exploration assets, net debt was just US$12.5 million at the end of June (December 2007: US$54.9 million).

The loss per share was 8.6c compared with 5.0c for the first half of 2007 and a 16.5c loss for the full year 2007. The actual loss for the period was US$26.8 million compared with a loss of US$10.2 million for the equivalent period in 2007, but following the equity issues in June 2007 and April 2008 the average number of shares in issue was significantly higher (313.1 million and 203.3 million for the first half of 2008 and the first half of 2007 respectively). The increased loss mostly reflects the continued company expansion as average staff numbers grew from 32 in the first half of 2007 to 60 in the first half of 2008. In addition, early operating costs were incurred on the Okoro Setu project as production start-up was approached. Revenues will be booked as the cargoes are sold during the second half of the year. Also impacting the results were write-offs of unsuccessful exploration expenditure. Due to the timing of the wells in 2007, no costs were written off in the first half, however, a total of US$2.7 million was written off in the first half of 2008; US$1.8 million relating to the Admiral prospect on the Themis permit in Gabon and US$0.9 million relating to the costs incurred to the end of June on the Charlie prospect on the Iris permit, also in Gabon, which was announced as unsuccessful at the end of July.

Net financing costs were US$1.1 million (first half 2007: US$2.5 million) reflecting the higher cash balances held in the period. Of the total interest cost of US$14.7 million, US$11.4 million was capitalised as part of the cost of developing the assets (first half 2007 US$5.9 million and US$2.7 million respectively), giving a net charge to the income statement of US$3.3 million (first half 2007: US$3.2 million).

The total assets of the Group have grown to US$671.0 million from US$301.1 million at 31 December 2007 and US$242.3 million at 30 June 2007. A significant element of this growth relates to Okoro Setu which now has a carrying value of US$289.7 million (December 2007: US$138.3 million; June 2007: US$74.5 million). The remainder of the balance in oil and gas assets (US$5.5 million) relates to the Eremor field (December 2007: US$2.6 million; June 2007: US$0.3 million). The majority of the US$14.6 million increase in intangible assets in the period relates to the acquisition of the Keta block in Ghana and some drilling studies relating to the well planned to be drilled in the fourth quarter of 2008 (US$10.4 million). A further US$3.1 million of additions related to the signature bonus and other costs on OPLs 907 and 917, the exploration blocks in the Anambra basin, announced in March. Offsetting the expenditure was the US$2.7 million write-off referred to above. In addition, Afren took up its rights to shares in Gasol during April 2008 at 8 pence per share, taking its holding to 19.4 million shares, a little over 2% of the company. The other major element of the increase is in cash and cash equivalents, where, following the equity raise, two further draw downs on the Okoro facility in January and June (US$80 million and US$46million respectively) and the investment in assets, there was a net increase of US$176.8 million from December 2007 to June 2008.

Total debt (including short term borrowings) amounted to US$281.2 million at the end of the period compared with US$146.7 million at the end of December 2007 and US$96.3 million at the end of June 2007. Of the June 2008 balance, US$164.4 million related to the Okoro facility (including rolled up capitalised interest), US$71.0 million to the convertible bonds issued in 2006 and US$45.8 million to an unsecured loan in Nigeria. On 25 July, it was announced that all the bondholders of the convertible bonds had submitted conversion notices. As such this portion of the debt will be derecognised in the second half of the year and an additional 71.1 million of shares issued.

Finally, on 1 June 2008, as part of the approved remuneration of Afren employees, an award was made under the newly adopted Long Term Incentive Plan, in lieu of share options. The shares vest after three years, subject to performance criteria, namely that Afren achieves a top quartile position compared with its peers by Total Shareholder Return (TSR) over that period. If Afren achieves less than median performance compared with its peers, no shares will vest. A potential award of 3,017,020 shares was made and as part of this award, the following Directors received the allocations below:

Osman Shahenshah 361,446

Egbert Imomoh 271,084

Constantine Ogunbiyi 240,964

With First Oil achieved and a strong balance sheet, Afren is well positioned for the challenges and opportunities for the remainder of the year and beyond.

 

 INDEPENDENT REVIEW REPORT TO AFREN PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 7. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.

Deloitte & Touche LLP

Chartered Accountants and Registered Auditor

London

29 September 2008

  Afren plc

Condensed Group Income Statement for the six months to 30 June 2008

		6 months
		to 30 June 2008	6 months to 30 June 2007			Year to 31 December 2007
		Unaudited	Unaudited			Audited
	Notes	US$'000	US$'000			US$'000
Revenue		-	-			-
Operating expenses		(3,454)	-			-
Gross loss		(3,454)	-			-
Administrative expenses		(18,371)	(6,615)			(18,100)
Other operating expenses - exploration costs written off		(2,669)	-			(12,037)
Other operating expenses - derivative financial instruments		(1,160)		(1,128)		(5,983)
Operating loss	3	(25,654)	(7,743)			(36,120)
Investment revenue		2,546	596			2,515
Finance costs		(3,297)	(3,165)			(5,171)
Other gains and losses - foreign currency (losses)/gains		(388)	107			(263)
Loss before tax		(26,793)	(10,205)			(39,039)
Taxation		-	-			-
Loss after tax		(26,793)	(10,205)			(39,039)
Loss per share
Basic and diluted	2	8.6c	5.0c			16.5c

All operations were continuing throughout all periods.

  Afren plc

Condensed Group Balance Sheet as at 30 June 2008

		At 30 June 2008	At 30 June 2007	At 31 December 2007
		Unaudited	Unaudited	Audited
	Notes	US$'000	US$'000	US$'000
Assets
Non-current assets
Intangible assets		64,239	52,857	49,656
Property, plant and equipment
- Oil and gas assets		295,221	74,527	140,926
- Other		1,728	1,481	1,545
Available for sale investments		3,627	1,127	1,475
		364,815	129,992	193,602
Current assets
Inventories		5,701	3,090	3,090
Trade and other receivables		31,878	13,052	12,626
Cash and cash equivalents		268,626	96,163	91,783
		306,205	112,305	107,499
Total assets		671,020	242,297	301,101
Liabilities
Current liabilities
Trade and other payables		(61,758)	(16,140)	(40,019)
Borrowings		(29,165)	-	-
		(90,923)	(16,140)	(40,019)
Net current assets		215,282	96,165	67,480
Non-current liabilities
Provision for decommissioning	4	(3,994)	-	-
Bank borrowings		(181,099)	(30,140)	(77,485)
Convertible bonds		(70,906)	(66,189)	(69,206)
Other non-current liabilities		(4,143)	-	(4,575)
		(260,142)	(96,329)	(151,266)
Total liabilities		(351,065)	(112,469)	(191,285)
Net assets		319,955	129,828	109,816
Equity
Share capital		7,293	5,202	5,365
Share premium		374,367	139,673	146,245
Other reserves		21,541	17,802	16,872
Accumulated losses		(83,246)	(32,849)	(58,666)
Total equity		319,955	129,828	109,816

  Afren plc

Condensed Group Cash Flow Statement for the six months to 30 June 2008

	Six  months to	Six months to	Year to
	30 June 2008	30 June 2007	31 December 2007
	Unaudited	Unaudited	Audited
	US$'000	US$'000	US$'000
Operating loss for the period	(25,654)	(7,743)	(36,120)
Depreciation of property, plant and equipment	451	301	973
Other operating expenses - derivative financial instruments losses	1,070	1,128	5,983
Other operating expenses - exploration costs write-off	2,669	-	12,037
Share based payments charge	4,006	868	1,995
Operating cashflows before movements in working capital	(17,458)	(5,446)	(15,132)
Increase in trade and other operating receivables	(8,505)	(3,546)	(4,287)
Increase/(decrease) in trade and other operating payables	13,567	(1,559)	10,183
Currency translation adjustments	156	40	(171)
Net cash used in operating activities	(12,240)	(10,511)	(9,407)
Purchases of property, plant and equipment
- Other	(625)	(471)	(1,216)
- Oil and gas assets	(134,525)	(22,950)	(63,060)
Exploration and evaluation expenditure	(12,432)	(5,690)	(24,538)
Expenditure on pending acquisitions	(15,943)	-	-
Purchase of investments	(1,501)	-	-
Investment revenue	2,401	596	2,372
Net cash used in investing activities	(162,625)	(28,515)	(86,442)
Issue of ordinary share capital	237,563	76,443	84,625
Costs of share issues	(7,513)	(2,767)	(3,219)
Net cash proceeds from borrowings	126,296	29,500	76,662
Interest paid	(5,857)	(3,628)	(6,855)
Net cash provided by financing activities	350,489	99,548	151,213
Net increase in cash and cash equivalents	175,624	60,522	55,364
Cash and cash equivalents at beginning of period	91,783	35,665	35,665
Effect of foreign exchange rate changes	1,219	(24)	754
Cash and cash equivalents at end of period	268,626	96,163	91,783

Afren plc

Condensed Group Statement of Changes in Equity for the six months ended 30 June 2008 (unaudited) 

	Share capital	Share premium account	Other reserves	Accumulated losses	Total equity
	US$'000	US$'000	US$'000	US$'000	US$'000
Group
At 1st January 2007	3,752	58,266	16,042	(24,096)	53,964
Issue of share capital	1,450	84,174	-	-	85,624
Deductible costs of share issues	-	(2,767)	-	-	(2,767)
Share capital to be issued	-	-	2,496	-	2,496
Share based payments	-	-	847	-	847
Other share based payments	-	-	21	-	21
Reserves transfer relating to convertible bonds	-	-	(1,452)	1,452	-
Revaluation of available for sale investments	-	-	(98)	-	(98)
Exchange differences arising on translation	-	-	(54)	-	(54)
Net loss for the period	-	-	-	(10,205)	(10,205)
Balance at 30 June 2007	5,202	139,673	17,802	(32,849)	129,828
Issue of share capital	113	4,578	-	-	4,691
Transfer reserves on issue of share capital	50	2,446	(2,496)	-	-
Deductible costs of share issues	-	(452)	-	-	(452)
Share based payments	-	-	1,089	-	1,089
Other share based payments	-	-	3,433	-	3,433
Reserves transfer relating to convertible bonds	-	-	(1,522)	1,522	-
Reserves transfer on exercise of options			(1,495)	1,495	-
Revaluation of available for sale investments	-	-	325	-	325
Exchange differences arising on translation	-	-	(264)	-	(264)
Net loss for the period	-	-	-	(28,834)	(28,834)
Balance at 1 January 2008	5,365	146,245	16,872	(58,666)	109,816
Issue of share capital	1,928	235,635	-	-	237,563
Deductible costs of share issues	-	(7,513)			(7,513)
Share based payments for services	-	-	3,946	-	3,946
Other share based payments	-	-	60	-	60
Reserves transfer relating to convertible bonds	-	-	(1,532)	1,532	-
Reserves transfer on exercise of options	-	-	(359)	359	-
Reserves transfer on exercise of warrants	-	-	(322)	322	-
Revaluation of available for sale investments	-	-	647	-	647
Exchange differences arising on translation	-	-	2,229	-	2,229
Net loss for the period	-	-	-	(26,793)	(26,793)
Balance at 30 June 2008	7,293	374,367	21,541	(83,246)	319,955

Afren plc

Notes to the interim financial statements (unaudited)

These condensed interim consolidated financial statements are for the six months ended 30 June 2008. The interim financial report, which is unaudited, has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) adopted for use in the European Union. The accounting policies and methods of computation used are consistent with those used in the Group annual report for the year ended 31 December 2007. 

The financial information for the year ended 31 December 2007 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for the year has been delivered to the Registrar of Companies. The auditors report on these accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

The calculation of the basic loss per share is based on the loss for the period after taxation of US$26,793,000 (1H 2007 - US$10,205,000) and a weighted average number of shares in issue of 313,136,157 (1H 2007 - 203,315,123). As there is a loss for all periods presented there is no difference between the basic and diluted loss per share.

 

6 months to  30 June 2008				West Africa	Unallocated	Consolidated
				US$'000	US$'000	US$'000
Operating loss before derivative financial instruments				(7,435)	(17,059)	(24,494)
Derivative financial instruments losses				(1,160)	-	(1,160)
Segment result				(8,595)	(17,059)	(25,654)
Investment revenue						2,546
Finance costs						(3,297)
Other gains and losses						(388)
Loss before and after tax						(26,793)
Segment assets				444,215	226,805	671,020
Segment liabilities				(265,210)	(85,855)	(351,065)
Capital additions- oil and gas assets				154,295	-	154,295
Capital additions- exploration and evaluation				17,252	-	17,252
Capital additions- other				88	546	634
Depreciation				211	240	451
12 months to December 2007
Operating loss before derivative financial instruments				(15,015)	(15,122)	(30,137)
Derivative financial instruments losses				(5,983)	-	(5,983)
Segment result				(20,998)	(15,122)	(36,120)
Investment revenue						2,515
Finance costs						(5,171)
Other gains and losses - foreign currency losses						(263)
Loss before and after tax						(39,039)
Segment assets				256,247	44,854	301,101
Segment liabilities				(111,296)	(79,989)	(191,285)
Capital additions - oil and gas assets				92,450	-	92,450
Capital additions - exploration and evaluation				21,946	-	21,946
Capital additions - other				488	728	1,216
Depreciation				298	675	973
6 months to June 2007
Operating loss before derivative financial instruments				(402)	(6,213)	(6,615)
Derivative financial instruments losses				(1,128)	-	(1,128)
Segment result				(1,530)	(6,213)	(7,743)
Investment revenue						596
Finance costs						(3,165)
Other gains and losses						107
Loss before and after tax						(10,205)
Segment assets				171,910	70,387	242,297
Segment liabilities				(37,553)	(74,916)	(112,469)
Capital additions				39,563	151	39,714
Depreciation				129	172	301

Notes to the interim financial statements (unaudited) (con't)

During the period, the Okoro field's wellhead platform was installed and the drilling of some of the wells completed. A provision for decommissioning has been made in the period to 30 June 2008 as an environmental impact has occurred such that work would be required to restore the area to how it was prior to the installation.

On 17 July 2008 Afren announced it had sent an offer to all the holders of the convertible bonds. Under the terms of the offer, bond holders that submitted conversion notices by 24 July 2008 would receive a cash payment equal to 11.5% of bond face value. On 25 July 2008 Afren announced that all the bond holders had submitted conversion notices representing the full face value of the bonds of £41.25 million. The conversion led to an increase in share capital through the issue of 71,120,683 new ordinary shares and to derecognition of the convertible bond liability from the balance sheet.

On 1 August 2008 Afren noted an announcement by Sterling Energy Plc that the ICM-1 well, in the Iris Marin permit offshore Gabon, had been drilled to a depth of 1,640 metres. The reservoir was encountered as planned, but was found to be water bearing, and the well was plugged and abandoned. Approximately $1.9 million costs relating to the well will be charged to the income statement in the second half of 2008.

The farm-in arrangement with Oriental Energy Resources Limited for the development of Ebok field that was announced on 31 March 2008 completed on 22 August 2008 and as a result $12.5 million was paid by Afren in line with the contractual terms of the farm-in.

On 25 September 2008 Afren announced it had completed the acquisition of Devon Energy Corporation's interests in Côte D'lvoire and had received full Governmental and regulatory approvals. The acquisition comprises existing production (47.96% participating interest and operatorship of Block CI-11), development (80% participating interest and operatorship in Block CI-01) and a 100% interest in the onshore Lion Gas Plant (''LPG''). Adjusted consideration for the acquisition of US$164 million is fully funded through a debt financing package arranged by BNP Paribas. The acquisition has an effective date of 30 June 2007. Due to the timing of the completion it is not practicable to include disclosures of the fair values of the assets and liabilities acquired.

 

The directors do not recommend the payment of a dividend.

 

These interim accounts (unaudited) were approved by the Board of Directors on 29 September 2008.

ENDIR ILFLAAAIAFIT

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