Trading Statement and Operations Update

Afren plc (AFR LN)

Trading Statement and Operations Update

London, 20 July 2011 - Afren plc ("Afren" or the "Company") issues the following trading statement and operations update in advance of the Company's 2011 Half-yearly results which are scheduled for release on 30 August 2011. Information contained within this release is un-audited and is subject to further review.

Highlights

u Reservoir performance at Ebok and Okoro at upper end of expectations

u Average full year daily production revised to 25,000 to 30,000 boepd due to non reservoir related facilities downtime; on track for 50,000 boepd 2011 exit rate

u Strong financial position - first half revenue US$161 million; cash at bank US$320 million and net debt US$344 million

u First half capital expenditure US$254 million, with forecast full year expenditure at US$450 million

u Active exploration programme with nine wells planned targeting over 600 mmboe net to Afren

u Continue to prioritise value accretive acquisitions

Osman Shahenshah, Chief Executive of Afren plc commented:

"During the period, reservoir performance on the Ebok and Okoro fields has come in at the upper end of expectations. While we have revised the 2011 average production guidance, due to non reservoir related facilities downtime and simultaneous operations, we are expecting a 2011 exit rate of 50,000 boepd. Looking forward, we are targeting both organic and inorganic reserves growth, with up to nine exploration wells targeting over 600 million barrels net to Afren in H2 2011 and further value accretive acquisitions."

Notes to Editors

Afren is an African focused independent oil and gas exploration and production company listed on the main market of the London Stock Exchange and constituent of the Financial Times Stock Exchange Index of the leading 250 UK listed companies. Afren has a portfolio of 29 assets across 11 countries spanning the full cycle E&P value chain. Afren is currently producing from its assets offshore Nigeria and Côte d'Ivoire. Afren has exploration interests in Ghana, Nigeria, Côte d'Ivoire, Congo Brazzaville, the Joint Development Zone of Nigeria - São Tomé & Príncipe, Kenya, Ethiopia, Madagascar, Seychelles, Tanzania and South Africa.

An updated Corporate Presentation is available at www.afren.com.

TRADING STATEMENT

Net production

Group working interest production for the first half of 2011 averaged 13,000 boepd, owing primarily to the delayed start up of Ebok field production and greater than predicted facilities down time at the field. The increased downtime has been due in part to safety requirements as a result of managing simultaneous production and drilling operations and ongoing commissioning work associated with the power generation facilities and production processing equipment. Importantly, reservoir performance at the Okoro and Ebok fields has been at the upper end of expectations.

Tie in of Ebok Phase 2 production is also likely to take longer than initially planned as a result of customs and logistical delays experienced in country during the election period. Production at the Okoro field during the period reflects the impact of elective de-bottlenecking work to increase total liquids capacity from the current 27,000 bpd that has been undertaken.

The Company expects production to increase sharply during the second half of the year as facilities uptime is restored, and that net working interest production over the full year will average approximately 25,000 to 30,000 bopd (2011 guidance of 40,000 boepd), with an exit rate of approximately 50,000 boepd net to Afren. Production figures in this update are subject to final reconciliation.

Realised commodity prices

During the first half of 2011 the Company realised an average oil price of US$110.3/bbl (1H 2010 US$77.8/bbl), and an average gas price of US$8.0/mcf (1H 2010: US$5.2/mcf).

Capital expenditure

The Company invested approximately US$254 million in development, appraisal and exploration activities during the first half of 2011. Approximately US$231 million has been incurred in developing the Ebok and Okoro fields and US$23 million was incurred in relation to the on-going 2011 exploration and appraisal work programme. Forecast capital expenditure for 2011 remains at US$450 million.

Financing and net debt

Revenue during the first half of 2011 was US$160.8 million (1H 2010: US$214.8 million) and net debt as at 30 June 2011 was US$343.9 million (1H 2010: US$12.2 million) with cash at bank of US$320.4 million (1H 2010: US$194.0 million). 

OPERATIONS UPDATE

West Africa

* 100% pre cost recovery / 50% post cost recovery effective economic interest;

** Share of production from initial 7 wells; infill drilling costs to be recovered from 75% share of incremental production starting October 2011.

Nigeria

Ebok (Afren 100% / 50%, pre / post cost recovery economic interest)

Production experience to date from development Phase 1, targeting the Central Fault Block area of the field, has confirmed that reservoir properties and productivity of the D2 reservoir wells is at the upper end of expectations. In December 2010, three out of the five D2 reservoir production wells were tested at an aggregate rate of 12,500 bopd. Following the full commissioning and production start up of Phase 1, production increased to a rate of 17,000 bopd from all five wells.

Post period end, the Company has also completed and brought onstream a production well targeting the D1 reservoir, also in the Central Fault Block area. The well has produced significantly ahead of expectations, delivering a rate of 4,000 bopd with a down-hole pump installed. As a consequence the partners have elected to prioritise the further development of the D1 reservoir at this location.

Production during the period has, however, been impacted by non-reservoir related periods of facilities down time. This has been due to a longer than anticipated commissioning period for the Mobile Offshore production Unit (MOPU), necessary suspension of production during simultaneous drilling and production operations, fine tuning of the process facilities and commissioning of the gas turbines and related systems to deliver water injection capability. As a consequence, production at the field during the first half of the year was lower than anticipated at 3,300 bopd. Production from Phase 1 is anticipated to be fully restored to a rate of between 15,000 bopd to 17,000 bopd.

Development drilling at Phase 2, targeting the West Fault Block area of the field, is underway with the GSF High Island Vll drilling rig, and comprises of four horizontal production wells and up to two water injection wells. Drilling results to date have been better than expected, giving longer oil bearing sections and better reservoir properties in the LD-1E reservoir in particular. Up to three wells will be bought on-stream during September, with Phase 2 expected to add 20,000 bopd to gross field output once all four wells are onstream in October.

Post completion of Phase 2, the GSF High Island Vll rig will proceed with the drilling of three production wells targeting the South West area of the field. These will be drilled from its current location at the West Fault Block wellhead platform. The Adriatic lX rig is next scheduled to commence the drilling of three D1 production wells from the Phase 1 wellhead platform location, followed by an exploration well to test the 35 million barrel resource Ebok North prospect.

Okoro (Afren 50% economic interest / 75% economic interest on infill well production pre cost recovery reverting to 50% thereafter)

During the period the Company successfully completed a two well infill drilling campaign, bringing the Okoro-11 and Okoro-12 horizontal production wells onstream. The resultant production impact was to increase gross output at the field to 21,000 bopd. Elective de-bottlenecking work at the Floating production Storage Offloading vessel (FPSO) has been undertaken to increase gross liquids handling capacity from the initial 27,000 bpd. The increased total fluid handling capacity will allow for oil production to be maintained at higher levels for longer. As a result of this work and the necessary period of production suspension, gross output at the field over the first half of the year averaged 14,600 bopd.

Ongoing studies of the field and immediate surrounding area have identified additional future drilling targets. In particular, the Okoro East prospect has similar sub surface characteristics to the main Okoro field, and is estimated by management to have similar resource potential. The Company is exploring options that could potentially result in the accelerated drilling of this attractive near field target.

Okwok (Afren 70% / 56%, pre / post cost recovery economic interest)

Having established the Okwok field as a commercial development, with NSAI ascribing 51.8 mmbbls of gross recoverable resources, an extensive multi component ocean bottom cable (OBC) 3D seismic survey is now underway across the broader Ebok / Okwok / OML 115 area that will provide important additional data to assist with field development planning and optimal placing of one further appraisal well. The Company expects seismic acquisition to conclude in September, and following a period of interpretation and integration with existing data intends to spud an appraisal well late 2011 / early 2012 with formal submission of a Field Development Plan (FDP) anticipated in mid 2012.

OML 115 (Afren 100% / 40%, pre / post cost recovery economic interest)

Post completion and interpretation of the seismic programme currently underway across the area, an exploration well is planned on OML 115 with expected spudding late 2011. The Ufon prospect is a 60 mmbbls target that is interpreted to have oil prospectivity in the same D series reservoirs that have been proven to be oil bearing at the nearby Ebok and Okwok fields.  

OPL 310 (Afren 91% / 70%, pre / post cost recovery economic interest)

The Company has launched a formal process to farm down a portion of its current 70 per cent. interest and attract an industry partner to participate in future exploration of this high potential block. Plans are also in place to acquire additional seismic on the block.

First Hydrocarbon Nigeria

Post completion of the acquisition of a 45 per cent. interest in OML 26, Afren and FHN will seek to establish together with NNPC a three phase development plan for the Ogini and Isoko fields, with the goal of ultimately increasing gross production to a rate of 50,000 bopd. Under the proposed development plan, initial work will be focused on certain "quick-win" opportunities including low-cost workovers of existing wells and re-activation of gas lift. Once implemented, these measures are expected to increase gross field production by around 50 per cent. on current levels (ca 5,000 to 6,000 bopd). The partners will then seek to mobilise a land rig to the field location and commence the initial drilling of six horizontal production wells.

Côte d'Ivoire

CI-11 (Afren 47.9592%) and Lion Gas Plant (Afren 100%)

Gross production during the first half of the year at the CI-11 field offshore Côte d'Ivoire was 16.3 mmcfd and 900 bopd. NGL output at the Lion Gas Plant during the period was 600 boepd.

CI-01 (Afren 65%)

A full technical evaluation of the Kudu field has been completed, following on from previous work undertaken at the Ibex field. Afren and its partners on the block intend to acquire new block wide 3D seismic grid in order to provide a greatly expanded contiguous data set with a view to ultimately defining optimal appraisal drilling locations for the existing discoveries on the acreage.

Ghana - Keta Block (Afren 35%)

The Government of Ghana has formally approved the assignment of a 35 per cent. interest in the block from Afren to ENI. The partners plan to drill an exploration well targeting the 325 million barrel Cuda prospect this year. The well was provisionally scheduled, at the time of farm down, to spud during the third quarter with the Marianas semi-submersible drilling unit. However the rig was reported to have been damaged whilst under mobilisation in July, which is likely to have an impact on the expected spud date. Under the terms of the farm down Afren will receive a carry through the drilling of one exploration well, back costs and carry through future seismic acquisition and a milestone bonus payable upon the achievement of first oil on the block.  

Nigeria São Tomé & Príncipe JDZ

The new operator, Total, is seeking to reprocess existing seismic data and has proposed the drilling of one appraisal well on the Obo discovery in 2011 and one exploration well in 2012. Afren has a 4.41 per cent interest.

East Africa

Kenya

L17/L18 (Afren 100%)

Following completion of a 400 km 2D seismic acquisition programme in 2010, a number of newly defined prospects and leads have been identified on the acreage. The Company intends to acquire additional 2D seismic over parts of the blocks in 2011 as well as in the deeper water parts of the block and is seeking to commence exploration drilling by year end, dependent on rig availability. Given the geographical proximity and geological similarities between Kenyan blocks L17/L18 and the Tanga block in Tanzania, the Company is assessing options to co-ordinate future drilling plans across the blocks.

Block 10A (Afren 20%)

The Tullow Oil operated joint venture acquired 750 km of 2D seismic over the block during the first quarter of 2011 to supplement the existing 2D coverage of 2,631 km. Integration of the new data and interpretation is underway. This work satisfies all seismic obligations for the current exploration period. The operator has proposed the drilling of one exploration well during the fourth quarter 2011.

Block 1 (Afren 50%)

The partners on Block 1 have defined a work programme that involves the acquisition of up to 1,200 km of 2D seismic data in addition to airborne gravity and magnetic data in 2011. Several major structures have already been mapped on the block that currently has 850 km of 2D seismic coverage.

Tanzania - Tanga Block (Afren 74%)

On 24 March 2011, Afren announced the acquisition of a 74 per cent. operated working interest in the Tanga Block, located offshore Tanzania. Immediately post completion, Afren undertook and completed a 751 km shallow water 2D seismic programme. Early results are encouraging, and provide excellent definition of several large scale prospects and leads that have been identified to date, together with new zones of additional potential. Dependent on securing a drilling rig, the partners on the block intend to commence exploration drilling in H2 2011. Additional deep water seismic is planned to be acquired on the block during 2011.

Madagascar - Block 1101 (Afren 90%)

The partners have concluded a reassignment of interests, whereby Afren is now the operator with a 90 per cent. interest, subject to Government approvals. Former operator Candax holds the remaining 10 per cent. interest. A revised work programme has been agreed that will result in the acquisition of and airborne gravity magnetic survey over the block, additional targeted seismic acquisition and the drilling of an exploration well.

Ethiopia - Blocks 2,6,7,8 (Afren 30%)

During 2010 a 2D seismic acquisition programme was completed across the onshore Blocks 2, 6, 7 and 8. Within the current exploration period, the partners have obtained 15,000 km of airborne gravity and magnetic data, 551 km of 2D seismic data and are required to drill one exploration well. Work is ongoing to further interpret the prospectivity of the blocks ahead of expected drilling in 2012.

Seychelles - Blocks A,B,C (Afren 75%)

Seismic data acquired to date by the partners have revealed the presence of several large scale structures in all three licence areas, in addition to new basins that could also contain significant Jurassic sedimentary sections. The partners have a tender process underway as a precursor to acquire new seismic data during the second half of 2011 over Blocks A,B and C, ahead of expected exploration drilling in 2012/13.

South Africa - Block 2B (Afren 25%)

The near term work programme involves the acquisition of 350 km2 of new 3D seismic data, with reprocessing of existing 2D seismic and ongoing seismic inversion and regional biostratigraphy studies ahead of expected exploration drilling in 2012.

Forward exploration and appraisal drilling schedule

* Pre/post cost recovery economic interest ** Awaiting confirmation from operator

Ends.