< "> edit this post http://www.investegate.co.uk/afren-plc-%28afr%29/rns/trading-statement-and-operations-update/201301210700069619
http://www.investegate.co.uk/afren-plc--afr-/rns/2012-full-year-results/201303250700107200A/

In an attempt to cut down the header page,i've transferred some of the older news to Page1 post No.3.

http://www.oil-price.net/index.php?lang=en
http://www.ft.com/home/uk

http://www.investegate.co.uk/Article.aspx?id=201111020700081674R
http://www.investegate.co.uk/Article.aspx?id=201111150700250723S
http://www.investegate.co.uk/Article.aspx?id=201112010705051251T
http://www.investegate.co.uk/Article.aspx?id=201201170700146472V
http://www.investegate.co.uk/Article.aspx?id=201201230701479690V
http://www.moneyam.com/action/news/showArticle?id=4323758
http://www.investegate.co.uk/Article.aspx?id=201204170700164488B
http://www.investegate.co.uk/Article.aspx?id=201205140700212304D
http://www.investegate.co.uk/Article.aspx?id=201205210700407032D
http://www.moneyam.com/action/news/showArticle?id=4430164
http://www.investegate.co.uk/afren-plc-%28afr%29/rns/significant-new-seychelles-3d-seismic-programme/201212120700052973T/
http://www.investegate.co.uk/afren-plc--afr-/rns/2013-half-yearly-results/201308230700063334M/
http://www.investegate.co.uk/afren-plc--afr-/rns/ogo-drilling-and-resources-update/201311190700083404T/
http://www.investegate.co.uk/afren-plc--afr-/rns/trading-statement-and-operations-update/201401280700096280Y/
http://www.investegate.co.uk/afren-plc--afr-/rns/interim-management-statement/201405200700135209H/
http://www.investegate.co.uk/afren-plc--afr-/rns/interim-management-statement/201410300700116483V/
http://www.moneyam.com/action/news/showArticle?id=4942625
http://www.moneyam.com/action/news/showArticle?id=4943375

worth risk of these levels - will bounce

2014 Half-yearly Results

RNS


RNS Number : 2994Q

Afren PLC

29 August 2014










Afren plc (AFR LN)

2014 Half-yearly Results

London, 29 August 2014 - Afren plc ("Afren" or the "Group"), (LSE: AFR, FTSE 250 index), announces its Half-yearly Results for the six months ended 30 June 2014 and an update on its operations year-to-date 2014, in accordance with the reporting requirements of the EU Transparency Directive. Information contained within this release is un-audited and is subject to further review.

2014 Half-yearly Results Highlights

· 1H 2014 net production of 33,488 bopd; Full year production guidance revised to 32,000 to 36,000 bopd, removing Barda Rash, due to temporary suspension of activities

· Two rigs on location and drilling ahead offshore Nigeria on the Ebok and Okoro fields; Central Fault Block Extension platform to be installed in Q3 2014

· Approval received from the Department of Petroleum Resources for the initial five well development of the Ogini Field. Rig on location and development drilling well underway

· 3D seismic acquisition on OPL 310 complete and interpretation ongoing; further drilling to commence in Q4 2014

· Profit after tax of US$160 million (1H 2013: US$62 million) reflects tax exemption at Ebok offsetting reduction in pre-tax profit and revenue

· The balance sheet remained strong with net assets of US$1,972 million
(1H 2013: US$1,498 million)

Outlook - Targeting 5-year double digit production growth

· Production ramp up starts in 2H 2014

₋ Ebok - 6 new producers planned

₋ Okoro - 1 infill well and 1 side-track well

₋ OML 26 - 3 new producers planned, currently logging while drilling (LWD) on first well

₋ Okwok - commence fast-track development drilling

· Ebok deep exploration tail to spud in Q4 2014, targeting 50 mmbbls

· Transformational reserves potential

₋ Only 26% of total discovered 2P/2C barrels in production or under development



Toby Hayward, Interim CEO of Afren plc, said:

"Despite recent challenges Afren is totally committed to delivering on our work programme across the portfolio. With numerous growth opportunities expected to drive a step-up in near-term production, cash flow and reserves, we remain in a strong position to deliver shareholder value in 2014 and beyond. We believe we will come out stronger from the ongoing issues and I would like to thank all our shareholders for their continued support. "







Financial highlights





1H 2014

1H 2013

Change


Realised oil price (US$/bbl)

108

104

4%


Net working interest production (bopd)(1)

33,488

44,712

(25%)


Revenue (US$m)(1)

565

797

(29%)


Gross profit (US$m)(1)

194

377

(49%)


Profit before tax (US$m)(1)

133

260

(49%)


Profit after tax (US$m)(1)

160

62

158%


Normalised profit before tax (US$m)(1) (2)

127

309

(59%)


Operating cash flow (US$m)(3)

354

564

(37%)



(1) From continuing operations, for further details see Note 8 of the condensed financial statements

(2) See Note 4 of the condensed financial statements

(3) Operating cash flow before movements in working capital



Review Update

· On 31 July 2014, the Company announced the temporary suspension of the CEO, Osman Shahenshah and the COO, Shahid Ullah following the Board engaging lawyers Willkie Farr & Gallagher (UK) LLP (WFG) to carry out an independent review.

· The original scope of the review was to determine whether three transactions that took place in 2012 and 2013 should have been classified as class 2 transactions under the Listing Rules and disclosed as such to the market at the time of the transactions.

· During this review Willkie Farr & Gallagher identified evidence of the receipt of unauthorised payments made by a third party for the benefit of the CEO and COO, which led to their suspension. On 28 August 2014, the Company announced the temporary suspension of Iain Wright and Galib Virani, associate directors of the Company, who had also received unauthorised payments made by a third party. The review is ongoing and expected to conclude in September 2014. In addition, WFG have engaged KPMG, at the request of Afren, to undertake an independent review of the accounting for the three transactions. This investigation is also expected to conclude in September 2014.

· At this stage no misstatements have been identified. Furthermore, the Board's assessment is that based on facts to date the existing carrying values of the relevant assets in the balance sheet are unimpaired. Further details are given in Note 10.

rom Mr Poshman on another board.


Corruption is a dirty word but this ultimately looks like (as expected) kickbacks.

To me from what I can see and from the tone of the announcement is that accounting wise, Afren have actually recorded these transactions correctly.

"The amounts included in the balance sheet at 30 June 2014 which are expected to be covered by this independent review include:



§ US$39.9 million of advances to Partners in 2012 included in Prepayments and advances to Partners (31 December 2013: US$99.3 million);



§ US$93.3 million of amounts paid to Partners to secure agreement to field extensions included in Property, plant and equipment relating to the Okoro field (31 December 2013: US$98.5 million); and



§ US$1.9 million included in Property, plant and equipment relating to the Ebok field (31 December 2013: US$2.0 million), together with an associated amount of US$298.0 million attributed to deferred tax assets, reducing the deferred tax gain in the 2013 income statement. "

Seems to suggests there are some significant transactions that have been processed which the directors have received some of this cash back from Oriental. If so, there is yet to be any statement over illegal measures BUT these should have been disclosed at the time and either approved or not.

"The Company is currently assessing the potential for the recovery of unauthorised payments from the suspended directors."

As with the above and the fact that these payments were not authorised / declared the company is aiming to recover the cash from the directors.

The more I look at this, the more it looks like they have paid themselves additional bonuses just through the back door, probably for achieveing milestones with Oriental (2012 and 2013 seem like production milestones to me that Oriental have paid the directors that perhaps this cash should have been Afrens).

Its the full year production guidance that has spooked the market, the entire production drop in H1 is basically due to Ebok which we knew about, but I guess it was always going to be difficult for them to generating the excess in the 2nd half.

I suspect they will outperform the new target by end of year but not by a lot.

Liberum note:
"We have incorporated the lower production guidance into forecasts and stripped Kurdistan out of our valuation, bringing our NAV back to 121p. This could be a realistic medium term target but we have moved our recommendation to Hold ahead of the conclusion of the investigations into the payments issues.
The investigations into unauthorised payments and accounting will complete by end September. Until details become clearer, uncertainty + risk make an active rec difficult.
The September reports will be critical for assessing the damage, if any, to Afren. New management and perhaps a new risk / reward profile could impact the share’s attraction.
We have stripped Barda Rash out of forecasts given the security situation and adjusted for updated guidance. 2015-16 CFFOps has come back 20-25%.
The revisions have cut our NAV to 121p (from 162p) and form the basis for our TP ahead of greater clarity on reinvestment priorities. Given the risks, we move to Hold (from Buy)."

8 Sep Credit Suisse 132.00 Outperform
8 Sep Westhouse... 110.00 Neutral
8 Sep Deutsche Bank 130.00 Hold.
-----------------------

South Atlantic Petroleum (SAPETRO), a privately held Nigerian oil & gas exploration and production company with a portfolio of assets in West, Central and East Africa declares a 3.14% holding in AFR.

RBC comment:"With a focus on Nigeria and acreage in the Republic of Benin, Central African Republic, Juan de Nova and Madagascar; SAPETRO and Afren’s strategies in Africa are similar; but it is unclear at this stage whether the private company is taking a view on the equity or the wider portfolio – not least because Afren's wider portfolio includes a material position in Kurdistan, Iraq.
The expanded investigation by Willkie Farr & Gallagher (WFG) into Afren's activities is expected to conclude this month. In addition, WFG has engaged KPMG, to undertake an independent review of the accounting for three transactions that were the focus of the WFG review; this investigation is also expected to conclude in September."

StockMarketWire.com
Afren has begun the process of returning staffing levels to normal at the Barda Rash field following an improvement in the security situation in the border region of the Kurdistan Region of Iraq.

Afren says the aim is to resume drilling and production activities as soon as possible with the expectation that operations will be fully resumed by end October.

This follows the temporary and precautionary step of implementing a phased withdrawal of field personnel as announced on 8 August.

Field operations at Ain Sifni, operated by Hunt Oil, have already resumed to normal levels.

Afren says its primary consideration is the safety and wellbeing of employees. The decision to resume full operations at Barda Rash has been made following a close monitoring of the situation and in close consultation with the relevant authorities.

Afren Plc, Ophir Energy Plc And Tullow Oil plc Could All Double!
By Motley Fool | Fri, 10th October 2014 - 14:50

oil rigInvestors have been caught by surprise as the price of oil has just slumped to a four year low, something very few investors predicted.

Unfortunately, the collapsing oil price has caught investors by surprise and as a result, investors have rushed to sell the shares of oil producers. On the other hand, these fire sales have created opportunities and after recent declines, Afren (LSE:AFR), Ophir Energy (LSE:OPHR) and Tullow Oil (LSE:TLW) all look attractive.
Perfect storm

Afren has been hit by a constant stream of bad news this year. Unfortunately, as the price of oil continues to decline it appears as if things are only going to get worse for the company in the near-term.

Nevertheless, for long-term investors Afren is a great pick. You see, depending on which broker you listen to, Afren's net asset value is somewhere in the region of 130p to 150p per share, 30% to 50% higher than current levels. This a base case and assumes a worst-case scenario so the best case could be significantly higher.

Further, Afren is still a cash-generative business and despite short-term headwinds, the company has an exciting exploration pipeline lined up, which will yield results over time.

Even without additional production Afren is expected to report earnings per share of 14.10p this year, which means that the company is trading at a forward P/E of 7.4. In comparison, the wider oil & gas producers sector trades at an average P/E of 12.8, indicating that Afren's shares should be trading at 180p.
Valuable assets

Ophir Energy has been commended by analysts in the past for the company's attractive portfolio of hydrocarbon reserves. However, due to a number of well failures and a disappointing exploration campaign offshore Gabon earlier this year, the company's share price has plummeted.

Still, Ophir has plenty of eggs in its basket and has continued on with its exploration campaign offshore Equatorial Guinea and Tanzania. City analysts have put the company's net asset value at around 240p per share, although this figure does not account for any better-than-expected results in the company's exploration programme -- initial results indicate that Ophir has had some success in its exploration for hydrocarbons Tanzania, so the company's net asset value could be revised higher in the near future.
Market darling

Tullow oil used to be one of the market darlings, having seen its share price skyrocket 1,450% during the 10-year period from 2002 to 2012. Unfortunately, now the company's share price has fallen back to earth but for savvy investors, it could be the time to buy.

Indeed, at present levels Tullow's share price is 50% below the company's net asset value, which according to City analysts is in the region of 1,000p per share.

Of course, these figures are estimates, no one is able to tell the true value of Tullow's oil reserves. Still, Tullow has long been considered to be a takeover target and the wider the gap between the company's implied net asset value per share, and the actual share price, the more attractive the company is to predators.

StockMarketWire.com
Afren has decided to terminate the employment and directorships of chief executive Osman Shahenshah and chief operation officer Shahid Ullah with immediate effect for gross misconduct.

Afren said the decision to terminate their employment and directorship was based on evidence identified by Willkie Farr & Gallagher (UK) of breaches by Shahenshah and Ullah of their obligations to Afren as employees and directors, in particular the receipt of unauthorised payments from third parties.

And it says the board has instructed counsel to commence legal proceedings against Shahenshah and Ullah, if necessary, to recover sums in respect of unauthorised payments.

The board has also decided to terminate the employment of the Associate Directors, Iain Wright and Galib Virani with immediate effect. It said Wright and Virani received payments in breach of the company's approved remuneration policy and the company will seek to recover of such sums.

The Board has commenced an executive search for the replacement of senior executives and an update on this will be provided in due course. Egbert Imomoh remains Executive Chairman and Toby Hayward Interim-CEO.

South Alantic Petroleum increase their holdings to 5.31%

So what are the amounts of money they stole from us the shareholders ?

I don't think they have been stealing from the company. I think they have been taking 'backhanders' from people outside the company.
" ............these individuals may have benefited from unauthorised payments by a third party that should have been disclosed to Afren's board of directors."

that looks to be the case for the two head honchos, but the two lesser directors may just have been used as conduits as it seems they are not being prosecuted

however, a reality check should alert you to the fact that it is necessary in may parts of the world to "keep the wheels oiled" if you want to do business, whether that is via "commission" or other "treats"
even being invited to participate in some prestigious golf tournament can be so interpreted
is that bribery and corruption?
arguably so

You play a lot of golf don't you Mr C? ;o)

i do indeed but never get the chance to invite clients to participate in prestigious events .... closest i get is a jolly for about a dozen of us at the BMW

Deutsche

View: Concluding the investigation draws a line under 3 months of uncertainty, enabling Afren to initiate the search for a new management team and start to rebuild investor confidence in the underlying business. To the extent that the findings confirm nothing substantially worse has been uncovered, today's announcement should reassure. There is also potential for Afren to recover up to $45m of misappropriated funds, subject to legal proceedings. As a consequence, we would expect the current discount to fair value to begin to close. Afren shares currently trade at 0.68x P/NAV (using spot Brent) versus a historic 0.75x P/NAV which suggests ~10% of upside should the historic multiple be restored. However, until a new management team is in place and strategy outlined, we see more favourable risk/reward elsewhere in the sector.

Liberum

'It appears to us that the damage to Afren should be limited. The economic loss looks relatively small, the only illegitimate contracts were entered into by the CEO and COO for their own benefit and partner bank government relationships should be intact.'

What now for Afren as bosses sacked?
By Harriet Mann | Tue, 14th October 2014 - 12:32
What now for Afren as bosses sacked?
Afren (AFR) has shown its chief executive, chief operating officer and two associate directors the door after an independent review confirmed all had received illegal payments from a Nigerian oil company. Clearly, there's relief that the review is over, but the company must begin the difficult task of restoring trust.

The scandal certainly raised concerns over Afren's internal controls, and the search is now on for a new management team. With stricter processes in place and a new king of the roost, Afren should emerge as a stronger company, crucial at a time when oil prices have sunk close to a four-year low.

Industry analyst and blogger Malcolm Graham-Wood believes what happens next for Afren is crucial.

"There is no doubt that this has seriously damaged Afren in a number of ways but if this really is the end of the matter there might just be a way back," he said. "The company will be vulnerable to a potential bid or competitors attempting to buy their assets on the cheap but it doesn't look terminal to me."
Illegal payments

In a review by Willkie Farr Gallagher, 11 employees - both past and present - were found to have benefited from payments from Nigeria's Oriental Energy Resources, including CEO Osman Shahenshah, COO Shahid Ullah and associate directors Iain Wright and Galib Virani.

In exchange for multi-million dollar funding (see below), Oriental paid 15% of the agreed net cash flows from its Ebok project into Ntiti Limited, a special purpose vehicle owned and/or controlled by CEO Shahenshah and COO Ullah. From the $45 million (£28.2 million) paid in for 2013, "extraordinary" bonuses were paid to themselves and other members of staff they didn't want to lose, the statement said. The CEO and COO paid themselves $17.1 million in bonuses that year. The Afren board are not thought to have known about the arrangement.

The review also looked into three instances of Afren allegedly failing to comply with reporting obligations; with two being found to have breached rules by WFG.
Avoiding disclosure

In 2012, Afren agreed to pay $100 million to Oriental and, in an effort to avoid disclosing the agreement under listing rules, Shahenshah organised the two tranche payments to be in lieu of oil from Oriental's Ebok project, thus a seemingly ordinary source of revenue. With the payment agreed to represent up to 5% of Afren's market capitalisation, the first payment of $93 million was followed by a further $7 million due to a rise in its share price. But due to an accounting error, this was an over payment representing 5.3% of Afren's market cap.

"The true nature of the First Oriental Agreement was not, in reality, an agreement for the prepayment of oil, nor was it a way of funding Oriental's costs in developing Ebok in a manner which might be considered to be in the ordinary course of business," the statement said. "It was a loan of $100 million to Oriental and was included in Afren's balance sheet for 31 December 2012 under the line 'prepayments and advances to partners'. Accordingly it was neither in the ordinary course nor of a revenue nature and should have been announced as a class 2 transaction on 25 July 2012 once the second tranche of $7 million was paid."

The second agreement with Oriental saw Afren Resources Limited (ARL) paid $300 million, around 12% of its market cap, for tax allowances and increasing the Afren's share of oil revenues from Ebok. Again, this was disguised as "ordinary" of Afren's business, but the review concluded that due to its size and incidence, it should have been declared. From the two-tranche payment $180 million has been returned and $120 million of tax benefits were noted in its financial statements.
Reassurance

From the $100 million loaned in the first Oriental agreement, $90 million has been returned to Afren, with the remaining $10 million expected by the end of the year.

Suggesting that today's news adds nothing substantial to the mix other than a degree of reassurance, Deutsche Bank reckons the current discount to fair value will start to close. With the shares currently trading on 0.68 times price/net asset value (NAV) using spot Brent against a historic 0.75 times, Deutsche believes the shares could rise by about 10%.

"However, until a new management team is in place and strategy outlined, we see more favourable risk/reward elsewhere in the sector," the analysts said.

VSA Capital doesn't seem convinced with a 'sell' recommendation and 90p target price on the stock.

The analysts said: "Having fallen by -43% year-to-date, Afren's share price is now trading near its core NAV. This is largely due to the legal issue described above negatively impacting the company but also accounts for slower than expected production growth with guidance revised by -15%, as well as weakening oil prices."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Article on Reuters at the moment titled "IEA sees 2015 oil demand growth much lower, supply hitting prices," so not sure drillers / producers are the place to be for the next year. Interesting to see which pumpers will be getting to the point at which it is unprofitable to produce. Around $80 pb (Brent Crude) seems to be the first critical level.

The shale gas producers will be the first to fold if the oil price drops to $80. This could be why OPEC is in no rush to cut production.

Afren have also hedged 5.2m bbl at a floor of $90 to $95 thro to June 2015