< "> 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

now then, now then, now then!
how greedy does one dare be?

Did you say that while smoking a large cigar

mis-timed that slightly but out again at 107.70

My average is 90p so still in profit... just, so will be holding for now. Could the bottom drop out of such a good comp......

We may know early next week exactly what has transpired with those directors ?

Whatever it is, to suspend the two most senior directors, it must have been a serious matter, and show a complete lack of trust. It may well lead to new directors being appointed, I guess.

I am hoping and waiting for a recovery price of ???? 120p over next few weeks.

What is your guess - the week end press may have some comments

From Soundbuy on another board regards Afren
A balanced summary


H/T FT AV

Cazenove


More details required, potential liability on Afren is a concern. The
statement explains that the issue that has come to light is the
responsibility of the directors and it is not directly associated with
Afren's assets. Needless to say, we believe the market will need more
emphatic confirmation that this is the case, and that no penalty/fine
arising from any conclusion of potential wrongdoing could fall on Afren.
Furthermore, we look for confirmation that no other officers of the firm
are exposed in this investigation.


Financial statements key for investor assurance on assets. Afren has
delayed its interim results from 4 August to a later date. We understand
that this is to give auditors time to review the accounts. We look for
assurance that Afren's statement that it “has no reason to believe that this
will negatively affect the Company’s stated financial and operational
position”, is a valid statement.



Potential for lasting reputational damage. In our view, this unexpected
announcement is disappointing and may well have a lasting reputational
effect on Afren – this could impact its ability to attract/retain staff and to
capture new business opportunities. There is also a risk that the execution
of Afren’s near term strategy suffers during this investigation, subject to
its duration.


Valuation collapse. We note that, assuming no impact on NAV, Afren is
now [intraday price of 111p/shr] trading at a 26% discount to core NAV,
the lowest level since mid-2012. Although such a discount to NAV might
trigger market speculation of a take-over, we expect potential predators
will wait to see the outcome of the investigation.

https://www.fitchratings.com/creditdesk/press_releases/detail.cfm?pr_id=843739

Fitch Puts Afren on Rating Watch Negative on Directors' Suspension

Ratings Endorsement Policy
01 Aug 2014 11:03 AM (EDT)
Fitch Ratings-London-01 August 2014: Fitch Ratings has placed Afren plc's Long-term Issuer Default Rating (IDR), senior unsecured and senior secured debt ratings of 'B+' on Rating Watch Negative (RWN).
The rating action follows Afren's announcement that it has temporarily suspended its CEO and COO pending the conclusion of an independent review which has suggested these individuals may have benefited from unauthorised payments by a third party that should have been disclosed to Afren's board of directors.

Based on discussions with the company, we understand that at this stage Afren believes that the payments were not made by or to Afren. Afren's board has stated it does not believe it will negatively affect the company's financial and operational position.

However, it is impossible to preclude more far-reaching and unpredictable consequences that may occur as third parties react to the situation and the eventual findings of the investigation.

It is not clear at this stage whether this incident would warrant a downgrade of Afren's ratings due to corporate governance concerns. On the one hand, any potentially inappropriate behaviour by key management is a concern; on the other today's action appears to have been a result of the company having structures and a governance environment which allowed independents to commission the independent review and act on possible inappropriate behaviour identified by it.

KEY RATING DRIVERS
Final Outcome of Independent Review
We expect to resolve the RWN after the company releases the final results of the investigation and we have sufficient clarity on the potential reaction of other market players. We expect this to be the case within the next six months.

Strong Operational Performance
In 2013, Afren's net production (working interest including cost recovery) averaged 47mboe/d, up 13% yoy and almost 2.5 times higher than in 2011, which was reflected in our June 2013 upgrade to 'B+' from 'B'. This growth was mainly attributable to Ebok, Afren's largest offshore field brought on stream in 2011. In 2013, Afren also had a sound 2P reserve replacement rate (155%) and maintained low lifting costs (below USD5/bbl). However, it had a relatively small proved reserve life (nine years overall; six years in Nigeria), typical for E&P companies of this size.

In 1Q14, Afren's net production went down to 35.5mboe/d as it recovered the initial investments at Ebok and its working interest in the field decreased. We expect Afren's 2014 net production to be within 35-40mboe/d, rebounding to 40-50mboe/d in 2015, mainly thanks to moderate output growth at Ebok and ramping up of OML26 in Nigeria and Barda Rash in Kurdistan.

Concentrated Production
Afren's production remains highly concentrated. In 1Q14, Ebok accounted for 73% of Afren's total production, and only 1% of oil was produced outside of Nigeria. Afren has significant 2P reserves in Kurdistan (114 million barrels, 40% of its total) and is hoping to boost production at its Barda Rash field soon. However, any significant progress will only be possible if Afren gets access to a secure export channel. We now assume that Nigeria is likely to dominate Afren's output in the medium term. This concentration exposes Afren to elevated emerging market country and tax risks.

Tax Holiday Benefits Cash Flows
Oil companies are generally heavily taxed in Nigeria. They pay substantial royalties and are subject to the Petroleum Profit Tax (PPT), which normally varies from 50% to 85% of the bottom line. Afren's Ebok field is exempt from paying PPT until May 2016, which significantly benefits Afren's cash flows and should allow it to finance new projects, while keeping leverage relatively moderate for the 'B' rating category. The company believes that the Petroleum Industry Bill (PIB), if finally passed by the local parliament, should not affect the tax holiday. At the same time, we believe that the proposed oil industry reform creates some uncertainty over Afren's future tax payments and makes its cash flows less predictable, since the reform's key parameters have not been finalised. The PIB, which calls for an increase of the government's revenue from the sector and changes in taxes and royalty structures, has been debated since 2009 and re-drafted several times. We have no views regarding the timing of the bill's passage into law.

Country Risks Remain
Afren is exposed to high emerging market country risks as its operations are concentrated in Nigeria (BB-/Stable). Historically, development of the oil and natural gas sector has been constrained by instability in the Niger Delta, with local groups often attacking companies in the area leading to shut-in production, as well as by oil bunkering, or theft. Afren is less vulnerable to these risks as all of its largest assets in the country, excluding OML 26, are offshore. The company is also exposed to high regulatory and especially tax risks in Nigeria. Afren's entry to Kurdistan should partially mitigate these risks over time, but we will only be able to give the company credit for some geographical diversification when it manages to boost production outside Nigeria to more than 30%-40%.

Uncertainty Over Kurdistan
In order to monetise its massive oil reserves in Kurdistan, Afren needs to access a secure export channel. In 1Q14 its Barda Rash field yielded around 500 barrels of oil per day, all sold domestically, and ramping-up production to above 5mboe/d may not be feasible without access to a pipeline. The central government of Iraq and Kurdistan Regional Government (KRG) have been in a dispute over the regulation and taxation of the oil industry in Kurdistan, prompting Kurdistan to build an alternative 300mbbl/d export pipeline to Turkey, which was commissioned in 2013 but has remained mostly idle due to political concerns. We believe that Afren's growth strategy in Kurdistan may be affected by highly unpredictable political factors and assume in our modelling that progress there will be rather slow.

Substantive Exploration Portfolio
Afren has a wide exploration portfolio, including seven licence blocks in East Africa. Its exploration activity has had some success, in 2013 the company announced it made a significant oil discovery at the Ogo prospect in Nigeria, which could potentially enhance its reserve base and production prospects. Afren's relatively low proved reserve life relative to peers means that the company needs to constantly replenish its reserves, and the vast exploration portfolio may be helpful in this respect.

Solid Financial Profile
Afren has a relatively low debt burden for the 'B' rating category. Funds from operations (FFO) adjusted gross leverage stayed at 1.8x at end-2013, and although we believe it may moderately increase on the back of high capital intensity, it should stay below 2.5x on a sustained basis under our conservative assumptions, including declining price deck and no substantial production upside. Afren can also be free cash flow negative in some periods. We do not expect Afren to pay any dividends in the medium term, as per its dividend policy.

RATING SENSITIVITIES
Positive: Future developments that may, individually or collectively, lead to the removal of the RWN and affirmation of the IDR at 'B+'/Stable:
- Final results of the independent review and further understanding of the events and circumstances surrounding it which suggest institutional corporate governance practices materially in line with industry peers at a similar rating level.
- Further evidence that the review and related market reaction will not materially affect Afren's operational and financial performance.

Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- Final results of the independent review and further understanding of the events and circumstances surrounding it which suggest institutional corporate governance practices compare weakly with industry peers at a similar rating level.
- Evidence that the review and related market reaction will materially affect Afren's operational and financial performance.
- Deterioration in the business, financial or operating environment related or unrelated to the independent review leading to FFO adjusted gross leverage exceeding 2.5x on a sustained basis; net production declining and settling below 35mboe/d; unfavourable tax changes in Nigeria having a direct impact on Afren's cash generating ability, or; significant project delays and cost overruns.

LIQUIDITY AND DEBT STRUCTURE
At 31 March 2014, Afren had no short-term debt, and cash of USD361m. In 2013, the company improved its debt maturity profile by issuing a USD360m secured bond due 2020 and partially repaying its USD500m bond due 2016 (currently outstanding: USD253m) and USD300m bond due 2019 (currently outstanding: USD250m).

Contact:

Principal Analyst
Dmitry Marinchenko
Associate Director
+44 20 3530 1056
Supervisory Analyst
Jeffrey Woodruff, CFA
Senior Director
+44 20 3530 1281
Fitch Ratings Limited
30 North Colonnade
London E14 5GN

Committee Chairperson
Peter Archbold, CFA
Senior Director
+44 20 3530 1172
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.

Additional information is available on www.fitchratings.com

Applicable criteria, 'Corporate Rating Methodology', dated 28 May 2014, are available at www.fitchratings.com.

Applicable Criteria and Related Research:
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

Additional Disclosure
Solicitation Status


ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: http://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Is there any more news about the CEO and COO directors "milking" Afren yet ?
Did the week-end papers write anything ?

Still sunny here in Benidorm - I would like to see a bit of rain now, to cool things down

From Mr Poshman on another board.
Thanks to the guys over on LSE for the link.

http://www.thesundaytimes.co.uk/sto/business/Industry/article1442084.ece

So it looks as if it was payments from Oriental (partner at Ebok, Okwok and OML115) that has triggered the suspension.

I've looked over the RNS again and it clearly states unauthorised rather than illegal payments (and the article states that Oriental is not accused of any wrongdoing) so IMO this sounds less and less likely to be bribes / kickbacks etc, because if so, then Oriental would also be found to have done something wrong.

The statement in the 2nd paragraph of the RNS states "In the course of an independent review on the Board's behalf by Willkie Farr & Gallagher (UK) LLP of the potential need for disclosure of certain previous transactions to the market,".

I think its been well known that Afrens corporate governance has always had a bit of a cloud over it, and from the wording and knowledge that its Oriental thats the otyher party, it suggests that these were potentially conflicts of interest that may have not been declared to Afren. For example, did the directors advise Oriental on the farmins that Afren took? Was this illegal (I don't think so) or was it a major conflict of interest (absolutely).

As a worse case, (if the above is the issue) then maybe the government could take the blocks off us. Do I think thats likely, well no, but there could be a fine, but I guess this depends on what other companies were involved in the farm in discussions. It may lead to having to pay compensation to these companies or it may lead nowhere as it may mean that Afren were the best company available to farm in to the blocks anyway.

I'm sure more will come out in time, but IMO it looks like payments for advice to Oriental which should have been provided to the market (and the company) at the time.

Derwent - Thanks for your post - we may soon have the answer.

if you think that this does not reek of backhanders and similar, then you must be an awful lot more naive than i thought possible

assuredly no hurry to buy

Mr Cynic - Of course it reeks of backhanders etc we all know that.
- That will be the outcome no doubt -

I worked two years in Saudi ( Khobar / Damam ) and two years in Nigeria ( Calabar / Port Harcout / Lagos ), besides many other dodgy countries.
I used to pay out the bribes and backhanders and kept the local police sweet. etc

The question is, will the "deals" have a material effect on the core Company or not.
I am presently betting that it will not, that a few heads should roll, and things will
carry on pretty much as usual.

One big problem is - how long will it take to get some answers, as uncertainty will only adversely effect the share valuation.
We could see a sharp upward move when information is known ?

Unfortunately I do not have a crystal ball, and can not predict the future.
For today I am staying in at 110p a share.
Lets see if you are right

bribes and backhanders?????
tut tut tut ...... merely secondary commission to keep the wheels oiled and turning :-)

Seems you also know how business is done in reality in the Middle East.
Fair practice and moral standards are mainly high ideals for the UK Government.

Shame on me, but we made a profit and had some questionable issues settled amicably.

we don't deal directly in nigeria or even angola, but have lots of biz in both far east and middle east

What the City thinks of Afren
By Harriet Mann | Tue, 5th August 2014 - 09:42
What the City thinks of Afren
With Afren's (AFR) chief executive and chief operating officer suspended for allegedly benefitting from unauthorised payments, the City is taking no chances and the oil explorer's share price has plunged by almost 30%. But with the underlying business apparently unaffected by the shenanigans, there are some who think this could be a great buying opportunity.

Admittedly, bargain hunting on Monday morning provided only a brief respite, and further selling during the afternoon session left the share price at just 107p, a two-year low. Those multi-year highs registered in December seem an age away.

And the conclusion of an investigation or release of Afren's delayed interim results is unlikely to happen any time soon. Analysts at JP Morgan estimate that the debacle has lost around $700 million (£416 million) of shareholder value. "In a sector which has been struggling to find friends, this is the last type of news it needs," said the broker.

But Marc Anis-Hanna, an oil & gas analyst at VSA Capital, told Interactive Investor that he thought the market had acted irrationally to the news.

"We think the market has over reacted, valuing the potential financial impact of possible fines (there is nothing affecting the company operationally) at around £400 million Afren was appealing before this negative news and is now even more attractive in our view as it is trading just below its core NAV [net asset value] with potential for more Nigerian production coming on stream during the year."

Interactive Investor also hears that a large number of brokers have been buying shares for their customers with a high-risk tolerance.

"The company assets are worth more than the current valuation, plus the very low market cap opens some room to possible takeover of Afren by another firm," adds Anis-Hanna. "Therefore, at these levels I see more positive upside rather than negative, including the legal risk which has obviously been taken into consideration into the share price."
Underperformance

A week before the announcement, Afren had underperformed the European exploration and production sector by 10%, posting total returns in the year so far of 13%, "triggered...by a relative dearth of well results and lighter-than-anticipated production in the first-quarter of 2014, casting some doubts on Ebok production potential," said James Thompson at JP Morgan.

He was ready to take advantage of any negative share price reaction to the, now-delayed, interim results, anticipating that weaker production results would drag down the share price. He pencilled in first half production of 36,000 barrels of oil per day (boepd), from 35,500boepd in the first quarter, and revenue in the period of $600 million, assuming a Brent crude price of $109/bbl. Gross profit was expected to be down 34% year-on-year to $247 million and pre-tax profit down 37% to $164 million. These numbers don't look good, but Thompson was confident of a better six - nine months ahead; with re-risking of discovered resource, particularly in Nigeria - one of 2013's stand-out discoveries - and news on Ain Sifni in Iraq.

Assuming no impact on net asset value (NAV), Afren is trading at a discount of around 26% to core NAV, "the lowest level since mid-2012", added Thompson. Although this has triggered take-over speculation, Thompson expects "potential predators" to await the investigation outcome before pouncing. That would seem sensible.

While Investec downgraded Afren to 'hold' and put its target price under revision, others upgraded or reiterated their positive stance on the company. JP Morgan stayed 'overweight' and Westhouse Securities reiterated its 'buy' recommendation.

Westhouse said: "This does not affect the operations and financials of the company. We note that this independent investigation was executed on behalf of the board and very little detail is known, but the payments were not made by Afren.

"Until there's more clarity on the issue and further steps by the board, the stock may be volatile. But this may be a sign of improving corporate governance and we will wait for the outcome of the investigation. Fundamentally, the company has a self-sufficient business in Nigeria and promising set of assets in Kurdistan."

Whether investors take advantage of this share price dip depends on their risk/reward profile. Remember, bargain hunting pushed up the share price Monday morning, but reversed later in the day. Afren shares will remain incredibly risky. True, if there's no impact on net assets, the shares might look cheap, but all analysts agree we need more information. When it comes - and it will - the shares will either rally hard or sink like a stone. We'll find out soon enough.

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.

just dipped back in at 100.10, but if i see 110 any time soon, i'll be out once more, and perhaps at even a bit lower than that

Brave call Mr C. If 95p doesn't hold then you have to go back a couple of years to find chart support.

PE ratio is now probably about 2.5 or 3 years earnings to equity price .. ouch

It is now priced at catastrophy value, ready for break up and scrapping !