28th Mar 2008 07:00
Afren PLC27 March 2008 Afren plc (AFR LN) Preliminary Results for the year ended 31 December 2007 - the Platform in Place to Deliver a Transformational Leap in 2008 Afren plc ("Afren" or "the Company"), the African independent oil and gasexploration and production company, announces its preliminary results for theyear ended 31 December 2007. Highlights Operational • Okoro Setu on-track for the Company's first organic oil production: • Key milestones achieved in 2007 include the approval of the Field Development Plan by the Government of Nigeria, reserves certified by Netherland Sewell & Associates, Floating Production Storage and Offloading Vessel ("FPSO") upgrade and completion of project long lead items • The Adriatic VI drilling rig, which has been contracted for a nine-month period, arrived on location on 22 January 2008 and development drilling has commenced • Targeted production of 15,000-20,000 bopd in 2008 from 5 development wells • Eremor field is on-track for first oil in Q4 2008 • First exploration well (Doungou-1) completed on the La Noumbi licence in Congo Brazzaville. The well was plugged and abandoned but proved a working hydrocarbon system in the pre-salt section • Testing operations on the Ofa-1 discovery well completed and decision taken not to proceed further with the development Corporate and acquisitions • Acquisition of Devon Energy's interests in Ghana, Angola and Cote d'Ivoire (post period-end): • Fully financed through debt, without shareholder equity dilution • In Ghana, a 95% working interest and operatorship of the Keta Block. A well is planned in Q4 2008 to test the Cuda prospect which is analogous to the Jubilee and Odum discoveries to the west in Ghanaian waters • In Angola, a 15% working interest in Block 16. Three exploration wells are planned, commencing in Q3 2008 on prospects in deep water, analogous to the discoveries in the adjacent Blocks • In Cote d'Ivoire, 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 ("LGP") • Subject to customary approvals • Continued progress on gas monetisation strategy, with a co-operation agreement signed with E.ON Ruhrgas AG and African LNG Holdings Limited and Production Sharing Contracts for OPL 907 and OPL 917 signed, within the gas rich Anambra basin onshore Nigeria, post period-end • Participation agreement signed with Excel Exploration & Production Limited for the development of the Eremor field in Nigeria. The field contains oil reserves of 2.9 mmbbl (1P) and 4.1 mmbbl (2P), according to an independent reserves audit by Netherland Sewell & Associates Financial • $230 million borrowing base rolling facility secured to finance the Okoro Setu Project• Completion of $80 million (before expenses) total equity fund raisings • Closed $50 million unsecured loan acquisition facility in Nigeria • Cash balance as at 31 December 2007 of $91.8 million (2006: $35.7 million) • Net loss of $39.0 million (2006: $15.8 million) due to increased operational, administrative and business development activities Outlook • Development drilling has commenced on Okoro Setu with expected production of 15,000-20,000 bopd in 2008 • Active drilling campaign, with up to 7 development and 5 exploration wells to be drilled during 2008 • Completion of the acquisition in Cote d'Ivoire, with an effective date of 30 June 2007, expected in H1 2008, providing the Company with 3,000 entitlement barrels of oil equivalent per day and increasing 2P reserves by 28 mmboe • Production start-up on the Eremor field in Nigeria expected in Q4 2008 • Active pipeline of New Venture opportunities to further consolidate Afren's position, particularly in West Africa Osman Shahenshah, Chief Executive of Afren Plc, commented: "Afren has delivered tremendous operational and acquisition-led progress in2007, putting the platform in place to deliver a transformational leap for theCompany in 2008. In less than 20 months from signing the agreement with ourindigenous partner to develop the Okoro Setu Project in Nigeria, we havecommenced development drilling and remain on-track for the company's firstorganic production, targeting 15,000 to 20,000 barrels of oil per day in 2008.We have expanded our indigenous partnerships to five in Nigeria and werehonoured to recently partner with the national oil company PETROCI in theimportant strategic entry into Cote d'Ivoire. Through our consistent and differentiated strategy, Afren today has a portfolioof 15 assets in 7 countries, with an exciting outlook for 2008 through acombination of development and high impact exploration drilling, near termproduction growth and significant opportunities to further consolidate asset andcorporate opportunities in Africa." 28 March 2008 Enquiries: Afren plc +44 20 7451 9700 Osman Shahenshah Chief Executive Evert Jan Mulder Chief Operating Officer Galib Virani Investor Relations Jefferies International Limited +44 20 7029 8000 Toby Hayward Oliver Griffiths Tristone Capital Limited +44 20 7355 5800 Simon Ashby-Rudd Majid Shafiq Pelham Public Relations +44 20 7743 6673 James Henderson Alisdair Haythornthwaite Chairman and Chief Executive Statement Delivery on a clear and differentiated strategy When we come to write the story of the early years of Afren, we are sure that2007 will be regarded as a pivotal one: a year of portfolio expansion,operational achievement and demonstrable delivery for shareholders on a focusedand differentiated strategy: • A pure-play African venture. 2007 and 2008 year-to-date saw the increase in Afren's portfolio to 15 assets in 7 African countries. Our resources are not distracted or diluted by exploring opportunities elsewhere. We are focused on Africa, both geographically and in utilising the African expertise and experience in the Board, Management and at every level of the Company. • Partnerships with indigenous companies, governments and national oil companies. We are partnered with 5 indigenous companies in Nigeria and the national oil company in Cote d'Ivoire. • Growing African component in the shareholder base. The continued support by Nigerian financial institutions ($50 million loan and participation in the $230 million Okoro Setu Project Development Facility), including First City Monument Bank Plc and Guaranty Trust Bank Plc, is both a strong endorsement of Afren's established credibility in its principal operating region and to the maturity and funding capacity of the regional financial sector. We see increasing local participation from the growing African capital markets base in the near future. • Gas monetisation. We see a major opportunity here which is good business, good for local economic development and good for the environment. The confluence of these three factors will create an exciting and innovative platform for growth. To this effect, we have signed a co-operation agreement with E.ON Ruhrgas AG and African LNG Holdings Limited (post period-end) with the intention to jointly develop, collect and monetise gas for domestic and export purposes in Nigeria, and are building a rapidly expanding gas asset portfolio. In 2007, Afren put in place the drilling capability, financing structure,development plan and the production capacity for the Okoro Setu Project. Firstoil from Okoro Setu is expected shortly, marking Afren's first organic oilproduction, in less than 2 years from signing the agreement with our indigenouspartner. It is an exciting time for the Company as first oil production is areflection of our team's dedication, hard work and technical competence. Withdevelopment drilling under-way the Company is on track for a production targetof 15,000 to 20,000 barrels of oil per day in 2008. By industry standards, such progress is exceptional and illustrates the focused,yet entrepreneurial approach that we are bringing to this and other projects.It is also a testament to our ability to work across all functions anddisciplines - operational, financial, legal, and strategic - in pursuit of ourclear and defined goals. If the mark of a successful strategy is to identifythe correct courses of action, and to be consistent in implementing them, ourapproach has paid dividends. Afren - The African Consolidation Play We have established a unique position in Africa through our focused anddifferentiated approach, coupled with our entrepreneurial culture and strongcorporate governance principles. Africa is the fastest-growing global resource-base, with reserves having doubledover the last two decades. Currently, 15% of oil and gas supplied to the USoriginates from West Africa, and this is projected to rise to 25% over the nextdecade. The Nigerian Government has set ambitious targets for realising valuefrom its significant energy resources, and is looking to more than doubleproduction from 2.1 million to 5 million barrels per day. The Government'sambitious production targets are leading to a sharp focus on undeveloped assets,the majority of which are still owned by the major international oil companies.We are on the verge of witnessing the emergence of a secondary market, similarto that previously seen in the North Sea and the Gulf of Mexico. Additionally,acreage is being increasingly awarded to indigenous companies who, in turn, arelooking to partner with independents who can offer a combination of technicalexpertise and/or financial resources. This presents a compelling opportunity forAfren to make a significant contribution to the Country's production ambitions,through its partnership approach. With our credentials in Africa now wellestablished, Afren is an attractive partner. In 2007 and into 2008, we formed 3 additional partnerships in Nigeria andannounced the acquisition of Devon Energy's assets in Ghana, Angola and Coted'Ivoire, capitalising on established relationships in each of the threecountries. Key Partner Relationships At the heart of Afren's growing success has been our ability to attract partnersof the highest calibre, whether they be indigenous companies, national oilcompanies, or major utility and oil and gas companies. The followingpartnerships were formed over the period into 2008: Afren and PETROCI: strategic entry into Cote d'Ivoire We announced after the period-end (expected completion in H1 2008), theacquisition of Devon Energy's interests in Cote d'Ivoire, comprising 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 theundeveloped Block CI-01; and a 100% interest in the onshore Lion Gas Plant. This offered a clear strategic fit with Afren's existing portfolio, and theCompany has both acquired a fully functioning business in Cote d'Ivoire, with120 experienced staff, and established a strategic partnership with PETROCI (theNational Oil Company of Cote d'Ivoire). The acquisition offers a combination ofproduction, near-term development, appraisal and exploration upside, as well asmidstream interests and a full local workforce that we will now look to expandfurther. The acquisition significantly strengthens Afren's existing portfolio: • Increases Afren's existing 2P reserve base by 28 mmboe (operator estimates as at 30 June 2007); • Immediate production and cash flow alongside production start-up at the Okoro Setu project in Nigeria; • A material and balanced platform in a new country with significant upside; and • Portfolio and product diversification with oil, gas and high-value liquid extraction. Afren, E.ON Ruhrgas AG and African LNG holdings In January 2008, we announced a major co-operation agreement with E.ON RuhrgasAG ("E.ON Ruhrgas") and liquefaction partner African LNG holdings ("African LNG"), to investigate the availability and accessibility of gas in Nigeria, with afocus on the Anambra Basin and South Eastern regions. The parties have theintention to jointly develop, collect and monetise the gas for domestic andexport purposes. Afren and Global Energy Company Limited Through a Joint Venture with Global Energy Company Limited, a leadingNigerian-based international oil and gas company active across the Gulf ofGuinea, Afren has signed Production Sharing Contracts for OPL 907 and OPL 917(post period-end). The JV partnership, Afren Global Energy Resources, has takena 41% interest in OPL 907 and a 42% interest in OPL 917, and will act asoperator of both assets. Afren has a combined 50% interest in the JV, with GECholding the remaining 50%. The licences are located in the gas rich Anambra Basin, the second mostprospective basin in Nigeria, with estimated remaining gas resources in excessof 5 trillion cubic feet of gas. Despite this potential, the basin remainslargely unexplored with only 30 wells drilled to date, leading to sixdiscoveries. This exciting venture, coupled with our other indigenous partnerships with AmniInternational Petroleum Development Company, Bicta Energy, Excel Exploration &Production Limited and Independent Energy Limited, form an integral part of ourgrowth strategy as we continue to develop a broad asset base. Afren - A Leading Participant in Gulf of Guinea Gas Monetisation The Gulf of Guinea has over 200 trillion cubic feet of gas reserves, with morethan 80% of those reserves situated in Nigeria. The Nigerian Government's 2008Gas Master Plan focuses on diversifying gas usage between domestic and exportpurposes. Exploration, aggregation and reduction of flaring are integral to theGas Master Plan. Against this background, any future joint efforts through theco-operation agreement with E.ON Ruhrgas and African LNG, will work towards amulti-faceted gas solution including an LNG export facility. Afren remains atthe forefront in contributing to the Government's ambitions to develop Nigeriainto a major gas producer and assist with the reduction of gas flaring in theregion. LNG will be a key source of new supply to meet increasing global gas demand andis highlighted as a key element in diversifying E.ON Ruhrgas gas supply base.Combined with depletion of indigenous supplies from US and Europe and lack offlexibility of piped alternatives, LNG is emerging as a swing supplier in anincreasingly global market. The co-operation agreement with E.ON Ruhrgas and African LNG to developdownstream solutions allows Afren to capitalise on the anticipated growth inglobal LNG demand, without diluting its upstream focused strategy. Operations Update Near term development and production expectation Nigeria The flagship Okoro Setu Project In May 2007, a 5-year contract was awarded to Bumi Armada Berhad for the ArmadaPerkasa FPSO. It has an oil storage capacity of 360,000 barrels and aprocessing capacity of 27,000 barrels of liquids a day. The vessel crew is madeup mainly of Nigerian nationals, the majority from the onshore community localto the Okoro Setu fields. The necessary upgrade work was completed and the10-point fixed mooring system for the FPSO was installed in January 2008, andthe vessel is due to arrive on location shortly. A rig-installed platform to provide the well-head access for the productionwells will be utilised. The structures were fabricated in Nigeria at the Navaldockyard on Victoria Island. The sub-sea drilling template was installed inJanuary 2008 and the jacket and main decks will be installed shortly. Pipelinesconnect the Well Head Platform to the FPSO and will transport oil and gas-liftgas. Manufacture of the flexible flow-lines is almost complete and installationis planned immediately following the mooring-up of the FPSO. Reservoir modelling suggests that a field recovery factor in excess of 30% isachievable with an initial five-well development, supported by a reservoirenergy enhancement programme. Initial individual well flow rates of 3,000 to4,000 bopd are expected to be achieved with the proposed completion design.Development modelling work on the Setu field is ongoing. Eremor The Eremor-1 well will be re-completed as a production well with standarddown-hole sand control. A second production well is planned to follow soon afterproduction has commenced and initial field performance has been established. Weexpect first oil production in Q4 2008, with the initial two-well developmentprogramme expected to produce at an initial production rate of 3,000 to 4,000bopd. Netherland Sewell & Associates recently issued a certified reserves reportwith oil reserves of 2.9 mmbbl (1P) and 4.1 mmbbl (2P). Ogedeh Several development options are being evaluated together with the owners of theadjacent marginal fields Ajapa and Akepo. A cluster development of the threefields is considered to be the optimal approach, with appraisal drillingprovisionally scheduled for Q4 2008. Ofa In 2007, Afren and IEL carried out a test programme on three of the eightpotential oil zones using a hydraulic work over rig. An Electric SubmersiblePump ("ESP") was used to supplement the natural flow. The lower-most zone (N4000) initially produced oil at rates of up to 1,000 bopdbut production was not sustained due to water production. A second test of theN1000/M8800 zones was undertaken and despite initial minor oil production, thezones only produced formation water. The test programme demonstrated thatcommercial oil production from the Ofa well is not supportable and thus Afrenhas taken the decision not to proceed further with any potential developmentplan. Exploration The addition of the Keta Block in Ghana and Block 16 in Angola to the portfolioin 2007, has significantly upgraded the high impact nature of the explorationportfolio, and together offer significant oil resource potential. Ghana: Keta Block In November 2007, Afren announced the acquisition, subject to final approvals,of a 95% operated interest in the Keta Block located offshore eastern Ghana, inthe Volta River Basin, which covers a total area of 5,500km2. The play type isvery similar to that successfully proven by recent drilling to the west in Ghanain the Jubilee and Odum discoveries. The block is covered by 1,600km2 of 3Dseismic that has recently been re-processed, with a marked improvement in dataquality. Further technical evaluation of the re-processed seismic data isongoing. A commitment well is planned for Q4 2008 and the Transocean DeepwaterDiscovery has been contracted, with the first well targeting the Cuda prospect,estimated by Afren to contain over 300 mmbbls of mean Prospective Resources. Angola: Block 16 The acquisition of a 15% stake in Block 16, subject to final approvals, providesAfren with entry into acreage with high-exploration potential. Block 16 islocated offshore Angola within the Lower Congo Basin and covers an area of 4,936km2. The Block is covered by a total of 3,764km2 of 3D seismic. Threecommitment wells are scheduled to be drilled, commencing in Q3 2008. In relation to Cabinda Block B, Afren allowed its option over a 5% stake tolapse, following the Government's decision to include the block in the up-cominglicencing round. Gabon: low-cost exploration The THAM-1 well was completed earlier this year, and was plugged and abandonedwith oil shows. The current licence period expired in March 2008 and a decisionhas been taken by the Joint Venture to relinquish the Themis Marin block. Afren increased its equity interest in the Iris Marin permit from 12.86% to16.67%. The Charlie prospect on the Iris Marin permit will be drilled inmid-2008, and Afren estimates the prospect to have gross potential resources of35 mmbbls. Afren is also currently negotiating an Exploration Production SharingContract with the Gabonese authorities in respect to the Ibekelia licence whichis expected to be finalised in 2008. Congo: La Noumbi Afren holds a 14% interest in this high-impact exploration licence, withmultiple reservoir targets covering a vast area of 2,830km2. Despite poorreservoir permeability at the Doungou-1 well, the drilling revealed a workinghydrocarbon system in the primary sub-salt target levels. Preliminaryinterpretation of the new seismic data set has identified several attractiveprospects mapped at several stratigraphic levels. Economic evaluation of themore promising prospects confirms Afren's view in relation to the prospectivityof the block. Technical evaluation is ongoing and the partners on the field planto drill one to two exploration wells in Q4 2008, subject to rig availability. Nigeria: OPL 907 and OPL 917 The two licences cover an area totalling over 3,500 km2 and contain existingdiscoveries that require further appraisal. A number of additional leads andprospects have been identified. The near term work programme includesadditional data gathering and analysis on the existing discoveries. Additionalhigh resolution 2D seismic data will be acquired over the existing discoverieslater in 2008, prior to appraisal drilling in 2009. The seismic will alsoevaluate the identified exploration leads and prospects. Nigeria and Sao Tome & Principe: JDZ Block 1 Further drilling on Block 1 is expected following the exploration wells to bedrilled on the adjacent Blocks 2, 3 and 4, scheduled to begin in late 2008. Financial Review Afren raised over $360 million in equity and debt financing over the course ofthe year. Cash reserves across the Group amounted to $91.8 million at the end ofthe year, with long term debt of $146.7 million. The Group made a loss of $39.0million compared with a $15.8 million loss in 2006. The increased loss waslargely due to the inclusion of an exploration write-off of $12.0 million (2006:$nil) consisting of $7.1 million relating to the Ofa well test operations inNigeria, $2.1 million associated with drilling of the Doungou-1 well on the LaNoumbi licence in Congo, $2.4 million for the THAM-1 well on the Admiralprospect and other associated costs in Themis Marin and the costs incurred withthe lapsed option over Cabinda Block B ($0.4 million). In addition, anaccounting loss on hedging of $6.0 million was incurred, reflecting themarked-to-market position of certain instruments taken out by Afren to protectagainst low oil prices for a proportion of Afren's oil sales from the Okoro SetuProject, as required under our loan agreement. There is no cash impact of theseinstruments until after production start-up. Total administrative expenses for the group were $18.1 million, an increase of$5.5 million from 2006, mainly due to the Company's expanded operational andbusiness development activities, reflected in an increase in staff numbers froman average of 25 in 2006 to 38 in 2007. Net interest and financing costs for theGroup in 2007 amounted to $2.7 million (2006: $2.9 million). Overall costs aresimilar despite increased debt levels, reflecting the fact that the majority ofthe interest cost is related to the development of the Okoro Setu Project, andis therefore capitalised. Risks and Responsibilities Afren has made a commitment to perform responsibly and positively towards itsstaff and contractors, the physical environments and the host communities thatits business may affect. In 2007, our operations focused on the development ofthe Okoro Setu Project. We worked closely with key contractors to manage EHSSand security issues which resulted in excellent performance; no injuries,environmental or security incidents. Within the Okoro Setu Project CommunityDevelopment Programme, we awarded 78 secondary and tertiary scholarships to theyouth of Eastern Obolo. We also contributed towards a community developmentmicro credit scheme and our contribution resulted in a 30% increase of availablemicro credit funds. 2008: A Transformational Leap in Afren's Development Through our focused and differentiated strategy we have built a diversifiedportfolio of 15 assets in 7 African countries in less than 36 months;representing unparalleled portfolio growth amongst the peer group ofinternational independents. Operationally, the team has demonstrated its technical competence, energetic andentrepreneurial approach, with development drilling on the Okoro Setu Project inNigeria having commenced a mere 20 months from signing the agreement with ourindigenous partner. Financially, we remain in a strong position, and will benefit during the courseof 2008 from maiden revenue from Cote d'Ivoire and Nigeria. We have provedprudent in financing our expansion, optimising the capital structure to maximiseshareholder value growth. The Company will continue to seek opportunities tofurther increase local participation from the growing African capital marketsbase. We believe that the Afren story has only just begun. The acquisition andstrategic entry into Cote d'Ivoire provides immediate production, we expectproduction ramp-up from the Okoro Setu Project and the Eremor field and lookahead to an exciting high impact exploration programme from the existingportfolio. Through our partnership based approach, we will continue toconsolidate asset opportunities and, where appropriate, to create furthershareholder value through participating in selective corporate consolidation,while continuing to increase local participation from the growing Africancapital markets base. In summary, Afren has built an exciting foundation toachieve transformational growth, and create substantial shareholder value,through 2008 and beyond. Dr Rilwanu Lukman Chairman & Founder Osman Shahenshah Chief Executive & Founder GROUP INCOME STATEMENT (unaudited)For the year ended 31 December 2007 2007 2006 Notes $000's $000's Revenue - -Administrative expenses (18,100) (12,563)Other operating expenses - derivative financial (5,983) -instrumentsOther operating expenses - exploration costs written (12,037) -off Operating loss 2 (36,120) (12,563)Investment revenue 2,515 2,277Finance costs (5,171) (5,155)Other gains and losses - foreign currency losses (263) (400) Loss before tax (39,039) (15,841)Income tax expense - -Loss after tax (39,039) (15,841) Loss per shareBasic and diluted 3 16.5c 8.3c All operations were continuing throughout both years. GROUP BALANCE SHEET (unaudited)As at 31 December 2007 Notes 2007 2006 $000's $000'sAssetsNon-current assetsIntangible assets 4 49,656 87,846Property, plant and equipment - Oil and gas assets 5 140,926 - - Other 1,545 1,305Available for sale investments 1,475 1,224 193,602 90,375 Current assetsInventories 3,090 3,090Trade and other receivables 12,626 5,325Cash and cash equivalents 91,783 35,665 107,499 44,080Total assets 301,101 134,455 LiabilitiesCurrent liabilitiesTrade and other payables (40,019) (15,951)Net current assets 67,480 28,129 Non-current liabilities 6 (151,266) (64,540) Net assets 109,816 53,964 EquityShare capital 5,365 3,752Share premium 146,245 58,266Other reserves 16,872 16,042Accumulated losses (58,666) (24,096)Total equity 109,816 53,964 GROUP CASH FLOW STATEMENT (unaudited)For the year ended 31 December 2007 2007 2006 $000's $000's Operating loss for the year (36,120) (12,563)Depreciation of property, plant and equipment 973 338Other operating expenses - derivative financial instruments 5,983 -Other operating expenses - exploration costs written off 12,037 -Share based payments charge 1,995 1,764Operating cashflows before movements in working capital (15,132) (10,461)Increase in trade and other operating receivables (4,287) (381)Increase in trade and other operating payables 10,183 75Currency translation adjustments (171) (26)Net cash used in operating activities (9,407) (10,793) Purchases of property, plant and equipment: - oil and gas assets (63,060) (58,433) - other (1,216) (740)Exploration and evaluation expenditure (24,538) -Increase in inventories (spare parts) - (2,889)Purchase of investments - (916)Investment revenue 2,372 2,277Net cash used in investing activities (86,442) (60,701) Issue of ordinary share capital 84,625 551Costs of share issues (3,219) -Proceeds from borrowings 84,000 -Borrowing costs (7,338) -Issue of convertible bonds - 76,121Costs of convertible bonds - (1,807)Interest paid (6,855) -Net cash provided by financing activities 151,213 74,865 Net increase in cash and cash equivalents 55,364 3,371 Cash and cash equivalents at beginning of year 35,665 29,539Effect of foreign exchange rate changes 754 2,755Cash and cash equivalents at end of year 91,783 35,665 GROUP STATEMENT OF CHANGES IN EQUITY (unaudited)For the year ended 31 December 2007 Share Share premium Other Accumulated Total capital account reserves losses equity $000's $000's $000's $000's $000'sGroupAt 1 January 2006 3,703 57,725 (2,212) (9,669) 49,547Issue of share capital 49 541 - - 590Share based payments for services - - 1,764 - 1,764Other share based payments - - 699 - 699Issue of convertible bond - - 15,677 - 15,677Reserves transfer relating to convertible bonds - - (1,414) 1,414 -Revaluation of available for sale investments - - 245 - 245Exchange differences arising on translation of - - 1,283 - 1,283overseas operationsNet loss for the year - - - (15,841) (15,841)Balance at 31 December 2006 3,752 58,266 16,042 (24,096) 53,964 Issue of share capital 1,613 91,198 - - 92,811Deductible costs of share issues - (3,219) - - (3,219)Share based payments for services - - 1,936 - 1,936Other share based payments - - 3,454 - 3,454Reserves transfer relating to convertible bonds - - (2,974) 2,974 -Reserves transfer on exercise of options - - (1,495) 1,495 -Revaluation of available for sale investments - - 227 - 227Exchange differences arising on translation of - - (318) - (318)overseas operationsNet loss for the year - - - (39,039) (39,039)Balance at 31 December 2007 5,365 146,245 16,872 (58,666) 109,816 Notes to the consolidated financial information (unaudited) 1 GENERAL INFORMATION The financial information set out in this announcement does not constitute thecompany's statutory accounts for the years ended 31 December 2006 or 2007. Thefinancial information for the year ended 31 December 2006 is derived from thestatutory accounts for that year which have been delivered to the Registrar ofCompanies. The auditors reported on those accounts; their report wasunqualified, did not draw attention to any matters by way of emphasis withoutqualifying their report and did not contain a statement under s237(2) or (3)Companies Act 1985. The audit of the statutory accounts for the year ended 31December 2007 is not yet complete. These accounts will be finalised on the basisof the financial information presented by the directors in this preliminaryannouncement and will be delivered to the Registrar of Companies following thecompany's annual general meeting. While the financial information included in this preliminary announcement hasbeen prepared in accordance with the recognition and measurement criteria ofInternational Financial Reporting Standards (IFRS), this announcement does notitself contain sufficient information to comply with IFRS. The Company expectsto publish full financial statements that comply with IFRS in April 2008. The accounting policies applied are consistent with those adopted and disclosedin the Group's annual financial statements for the year ended 31 December 2006,with the exception of adopting IFRS 7 - Financial Instruments: Disclosures andthe revision to IAS 23 Borrowing Costs. These did not have any impact on thefinancial position of the Group. This preliminary announcement was approved by the Board on 27 March 2008. 2 Segmental reporting Geographical segments The Group currently operates in only one geographical market: West Africa. This is the basis onwhich the Group records its primary segment information. Unallocated operating expenses, assetsand liabilities relate to the general management, financing and administration of the Group. 2007 West Africa Unallocated Consolidated $000's $000's $000'sOperating loss before derivative financial (15,015) (15,122) (30,137)instrumentsDerivative financial instruments (5,983) - (5,983)Segment result (20,998) (15,122) (36,120)Investment revenue 2,515Finance costs (5,171)Other gains and losses- foreign currency (263)lossesLoss before and after tax (39,039) Segment assets 256,246 44,855 301,101Segment liabilities (111,295) (79,990) (191,285)Capital additions - oil and gas 92,450 - 92,450assetsCapital additions - exploration and evaluation 21,946 - 21,946Capital additions - other 489 728 1,217Depreciation (298) (675) (973) 2006 Segment result (1,834) (10,729) (12,563)Investment revenue 2,277Finance costs (5,155)Other gains and losses- foreign currency (400)lossesLoss before and after tax (15,841) Segment assets 91,710 42,745 134,455Segment liabilities (7,499) (72,992) (80,491)Capital additions 72,345 404 72,749Depreciation (84) (254) (338) Business segmentsThe operations of the Group comprise one class of business, being oil and gas exploration,development and production. 3 Loss per ordinary share The calculation of basic loss per share is based on the loss for the year after taxation of$39,039,000 (2006: $15,841,000) and 236,862,944 ordinary shares (2006: 190,356,208), being theweighted average number of shares in issue for the year. As there is a loss for the year, thereis no difference between the basic and diluted earnings per share. 2007 2006 Basic and diluted 16.5c 8.3c 4 Intangible assetsCosts of exploration - pending determination $000's At 1 January 2006 18,314Additions 71,958Foreign exchange differences (2,426)At 1 January 2007 87,846Additions 21,946Transfer to tangible oil and gas (48,476)assetsAmounts written off (11,660)At 31 December 2007 49,656 The Group's carrying value at 31 December 2007 includes $ 28.0 million relating to the La Noumbipermit in Congo Brazzaville and $16.8 million in respect of JDZ Block One of the Nigeria - SaoTome & Principe Joint Development Zone ('JDZ Block One').In April 2007, following receipt of final approvals for the development of the Okoro field, thecarrying value at that time ($45,869,000) was transferred to property, plant and equipment - oiland gas assets. In December 2007, the carrying value for the Eremor development ($2,607,000) wasalso transferred following the booking of 2P reserves for the asset. 5 Property, plant and equipment - oil and gas assets $000'sCostAt 1 January 2006 -Additions -At 1 January 2007 -Transfer from intangible 48,476assetsAdditions 92,450At 31 December 2007 140,926 6 Borrowings and derivative financial instruments 2007 2006 Current Non-current Current Non-current $000's $000's $000's $000'sConvertible bond - 69,207 - 64,540Bank borrowings - 77,484 - -Derivative financial 1,408 - -instruments 4,575 1,408 151,266 - 64,540 Bank borrowings at 31 December 2007 represent $32.4 million relating to the $230million Okoro development facility from BNP Paribas and $45.1 million relating to anunsecured loan from First City Monument Bank Plc. 7 Post balance sheet events On 22 January 2008, Afren announced that it has signed a co-operation agreement withE.ON Ruhrgas and African LNG Holdings Limited to investigate the availability andaccessibility of gas in Nigeria, with a focus on the Anambra Basin and South Easternregions. The parties have the intention to jointly develop, collect and monetize thegas for domestic and export purposes in line with the Nigerian Government's Gas MasterPlan. On 3 March 2008, Afren announced that it had signed Production Sharing Contracts (PSC)for OPLs 907 and OPL 917 and a signature bonus of $1.6 million for each licence hadbeen paid by the licence participants. The licences are located in the Anambra Basinin Nigeria. On 6 March 2008, Afren announced that it had entered into a conditional agreement withDevon Energy Corporation to acquire its interests in Cote d'Ivoire, comprising a47.96% working interest and operatorship of the producing Block C1-11, a direct 65%interest and operatorship with rights over an additional 15% interest in theundeveloped Block C1-01 and a 100% interest in the onshore Lion Gas Plant, effective30 June 2007. The agreed consideration for the acquisition is $205.0 million fundedthrough a financing package arranged by BNP Paribas. The acquisition is subject toregulatory and governmental approvals. The transaction will take the form of anacquisition of a 100% interest in the Ordinary Shares of Devon Cote d'Ivoire Ltd,Devon CI One Corporation and Lion G.P.L., S.A.. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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