< "> 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

I don't think so ,i have a buy a third higher than here but am going to ride it out ,i usually use a fairly strict stop .Going against the grain here for now.

I can't see any problem with investing in either AFR or GENL for the medium term. When the price of crude starts to rise again, which it inevitably will, then the sp of both of these, plus many other oil producers, will rise accordingly. It's almost impossible to pick the very bottom or the very top of a chart, so for holders (investors) at whatever price, surely it's just a case of either sitting tight or averaging down?

Big oil will wait until oil hit's rock bottom or near, before bidding for other company's. $40 to $55 i think would be near to bottom.

Run for the hills..!

some comfort with a touch of realty.
------------------------------------------------------------------------------

A quick look at some figures.

We know that Afren has production costs somewhere around $40pb area.

Assuming 30% hedged at $90 on 32k bopd is 9900 barrels

Thus 9900 bopd at $90 = $891000 per day or

at $50 profit per barrel = $495000 per day.

The remaining say average $60 per barrel over one year = 22.1k bopd * $60 = $1326000 per day

or at $20 profit per barrel = $442000 per day.

So profit of $937000 or £597825 per day.

Allow 330 days per year for a bit of downtime = $309.2m or £197.3m profit for the year or approx 18p profit per share.
----------------------------------------------------------------------
Just one point: Everyone is assuming that we can actually sell or have contracts for all the oil we are producing at the moment. If there is a glut, then either it is not sold or it keeps getting cheaper. The latter is not a problem for Afren at current prices.

Admittedly it was due to the financial crisis in 2008/9, but 14p seems to be the bottom!!!

Stocks yet much cheaper today

Best time to buy oil stocks since 2009" - Fri, 5th December 2014 -

Since the middle of the year oil prices have lost over $40 a barrel (bbl), and as sentiment turned ugly the last of the downgrades followed suit. But for long-term investors with a horizon of over 12 months, this could provide a perfect entry point to "sensible" oil plays, says Numis.

Brent fell to $69/bbl on Friday afternoon, down from $110/bbl less than six months ago. Mirroring this trend, the Numis analysts reduced their price guidance from $100/bbl to $80/bbl. So why are they advising investors open their portfolios to oil?

E&P companies are known for outperforming the market as oil prices rise but underperforming at stable levels, says Numis, arguing that now is the perfect time to lock in. In fact, they reckon there hasn't been an investment opportunity like this since 2009, which was followed by two years of outperformance with returns from E&P mid-caps averaging 150%.

"We believe we are close to the bottom of the current cycle and that generalist fund managers will look to close their underweight stance and move towards a consensus 'neutral/overweight' in the coming months," explains Numis. "We believe investors should be looking to buy E&Ps when the oil price is well within the cost curve and the commodity market is pricing in minimal scarcity or supply risk premium."

The recommendation changes, see table below, include Tullow Oil (TLW) from 'hold' to 'add', Genel Energy (GENL) from 'add' to 'buy', Premier Oil (PMO) from 'hold' to 'buy' and Salamander Energy (SMDR) from 'hold' to 'buy'.

As we reported last week, Panmure Gordon still reckons OPEC will decide to cut its production to increase prices, but at a larger rate than if it had already done so to compensate for the delay. However, Numis also sees the tightening of supply being driven by US shale in the short term - as it will be uneconomic for US shale companies to maintain the number of rigs that are in production - and the abandonment of non-OPEC projects - like ultra-deep water, oil sand, Arctic and small-field developments.

"This will inevitably have a negative impact on non-OPEC supply growth expectations two-five years out and drive the next oil price cycle," said the analysts. "With oil price well within the top-end of the crude oil cost curve and with minimal scarcity or risk premium in the price we see this as an opportunity to add to E&P exposure."

However they do not rule out a change to OPEC production targets, warning that a ramp-up in Libyan production, Iranian sanctions and lower fourth-quarter output from China could impact short-term oil prices.

"Taking a longer-term view, we believe investors should be looking to buy sensibly-managed, resource rich E&Ps when the commodity price is well within the cost curve. We believe that investors need to be selective and gain exposure to high quality resource portfolios that would appeal to strategic buyers even if the current oil price was to prevail. Genel is one of our top picks given this investment filter."

From Mr Poshman on another board

Forecasts of $10-20 is ridiculous. The only fields in the world that would be cashflow positive would be in Saudi Arabia!!

There has been a lot of talk regarding shale vs onshore vs offshore breakeven points, but this is where people are looking at this all wrong and just looking on a profit basis. In order to ride it out, most companies will be looking at their cashflow production from ops to determine where they go.

There is a significant difference between offshore and the other 2 (shale and onshore). 1 is highly capital intensive (offshore) the others are opex intensive. Generally due to shale and quite a lot of onshore wells being shallow (I know not all are) the capital costs are relatively light, I think you can drill some shallow onshore for less than $5m, you wouldn;t get anywhere spending $5m offshore, generally even shallow offshore wells will cost north of $30m with the deeper wells costing anywhere upto $100m.

Where people are getting it wrong is purely looking at profit breakevens and not cash breakevens. Profit breakevens on onshore and shale are known to be higher than offshore wells, but the difference between the 2 in terms of cash breakevens further diverges.

I believe Afrens cash operating costs to be somewhere in the region of $30 (operating costs were $14 in 2013, add on royalties etc and you get somewhere around the $30 region). I doubt there is 1 shale field in the world that can compete on a cash basis with that.

The big difference comes from the effiiciencies in flow rates from offshore fields compared to those onshore.

Offshore oilees can absorb lower oil prices through their cashflow (doesn't look great reading for profit, but at least they have that cashflow protection) and why Exxon recently said they can absorb prices down to $40 for a period.

I don't think these prices are going to be around for long (oil prices that is) as onshore producers / shale producers are going to be coming under some intense cashflow pressures in the short term and due to the nature of having to spend more and more capital to maintain their flow rates, production is likely to drop baring any outside influence from their governments.

Likewise if oil prices continue to drop, expect some of the majors to start putting some of their fields on C&M, which in turn will again reduce supply. This is a game of cat and mouse for whatever reason (starving the shale producers, reducing IS income, putting pressure on the Russians, take your pick) but at some point the balance will be tipped and production will be cut. Remember this isn't just about Opec, the majors produce a significant amount of worldwide supply and unlike the governments that can quell public unrest, the large oil companies have shareholders interests to protects (and likewise their own jobs) so will have no issues with cutting production.

I'll be emailing Afren about their relentless silence (hardly helping) and asking what their capex plans are now for 2015. They can still makes 100's of $m in cashflow next year baring a complete collapse in the price (which will then be pushed up with fields going into C&M or companies becoming insolvent) its whether they spend this next year I'm not sure about, what buffers do they build in? I assume they will continue to develop Ebok, it makes sense with the tax exemption, but I suspect development of Okwok will be cut, and most of the exploration will be cut, and if any breaches licence conditions I would think they will gain extensions from the countries in question bearing in mind the current volatile oil price and the need to conserve capital.

Does anyone have any information on the covenants relating to Afren's debt, primarily the senior secured notes?

Off 5% this morning.

NAV of £1.20.
4.8mboe hedged between $90 and $95.
$266m in cash.
Production increasing towards 40000boe/day(cash generating).
SAP have 7% ( possible bid).
P2s due to increase.
Kurdistan conditions improving.

http://www.bloomberg.com/news/2014-12-12/record-oil-tankers-seen-sailing-to-china-amid-stockpiling-signs.html?hootPostID=704aec2b8d7163ae8d2ad7167103a4e6

The International Energy Agency, a Paris-based adviser to 29 nations, said in a report today that China may have added to strategic crude stockpiles last month, after pausing the activity in October. Oil plunged into a bear market this year, with Saudi Arabia and other nations in the Organization of Petroleum Exporting Countries offering few signs they will tackle a global glut

Apart from the crash 2009 reaction this is the lowest in 10 years,looking extremely oversold,might take a position next week? Even if it drops lower it will recover in time so
a fair bet imho?

I would wait awhile Cyril it could fall 50% next week.

If so i'm afaid it'll be throwing the kitchen sink at it.Anything below 20p would be
amazing value. aimho

Looks a buy at 14p Cyril.gl.

I bought it many years ago around that price (on a Spread bet) ,but i think it most unlikely.I would consider a spread bet if it reached such levels,but it's a long time since i traded in this way.They altered the rules,something to do with the risk,so i've never bothered since.
Any input on S/B would be more than welcome,as i'm a little wary of such transactions nowadays.

http://www.aljazeera.com/programmes/insidestory/2014/12/what-driving-oil-prices-down-20141212191627605113.html

Some of the points which i found interesting,

Some of hedge funds are closing their positions.
The 7.2% of growth (if true)means that in less than 10 years demand will Double.
A figure of 70/7.2= 9.72 years or 10% would be, 70/10 = 7.

The point of supply against demand being the issue seems be the most criticle and will
decide the future?

Mention of AFREN in the Sunday Times

Sunday Times -

hxxp://www.thesundaytimes.co.uk/sto/business/Industry/article1495615.ece

THE plunging oil price has unleashed chaos on the London market, with some listed oil explorers trading for less than their cash reserves and others eyeing takeovers at levels that were unthinkable just a few months ago.

Since hitting nearly $115 a barrel this summer, the price of oil has plummeted 45%. Brent crude closed on Friday at $61.5.

The fall is likely to lead to a flurry of collapses and long-coveted deals amid predictions that the swoon will continue into 2016 and could see the oil price dip to $50 or even lower.

Spain’s Repsol, for example, is closing in on a bid for Talisman, which is listed in Canada and has operations in the North Sea.

The companies held talks in July but called them off because they couldn’t agree on price. After that, Talisman’s share price collapsed by two-thirds before jumping this week on hopes of a new deal. It is thought that Repsol is looking to take out the company for as little as C$6 (£3.30) a share, or C$6bn — less than half its value a year ago.

Anthony Lobo, head of oil and gas at KPMG, predicted that many of the industry’s small and medium-sized players could be gobbled up, especially in all-share deals.

The share prices of industry heavyweights such as BP and Shell have fallen far less dramatically than those of their small rivals.

Lobo said: “Their shares now hold much greater value as takeover currency. We are going to see a lot of corporate activity. The majors are geared up for it.”

The pain for some is extreme. Shares in Ophir Energy, the London-listed explorer, have plunged by two-thirds this year. On Friday the company’s market value was £700m, which is less than the $1.5bn in cash it had on its balance sheet in June.

The plunge has thrown into doubt its takeover of rival Salamander Energy because the companies’ share prices have begun to diverge widely from the intended swap ratio.

Tullow Oil is also seen as one of the most vulnerable to an opportunistic offer. Its portfolio of big fields in Africa has long been coveted by larger rivals but its share price was seen as prohibitively high. From a high of £15.66 three years ago, it closed on Friday at £3.67.

Another big faller has been Afren. Its share price has dropped 80% this year to 35p. The Nigerian producer’s stock was first laid low after it uncovered a big unauthorised payments scheme engineered by its chief executive and other directors.

Its problems have been exacerbated by concerns over its $1.2bn debt pile. It is thought that at least two suitors are circling the company at present.

Providence Resources, meanwhile, is close to signing a deal with Sequa Petroleum to fund the development of its Barryroe reservoir in the Celtic Sea.

Providence, 15% owned by beleaguered tycoon Sir Anthony O’Reilly, is running out of time. It took out $24m in loans from Melody Business Finance, a New York hedge fund, and it must repay the money in June

From the Telegraph regards
Oil price crash means £55bn of projects face axe
32 developments and 5bn barrels affected with North Sea oil plans in doubt


By Andrew Critchlow

8:40PM GMT 13 Dec 2014

Dozens of new oil projects in the North Sea and Europe could be shelved as falling prices force international oil companies to tear up their investment plans.

Global energy consultancy Wood Mackenzie has said that 32 potential European oil field developments containing 4.9bn barrels of oil equivalent are waiting for approval on more than $87bn (£55bn) of funding. These could be at risk should oil prices fall below $60 per barrel.

“Major projects and investment in the UK and across Continental and Mediterranean Europe could be at risk if prices stay below $80 per barrel, as over 70pc of the pre-FID [final investment decision] reserves in each region have a break-even [price] in excess of $60 per barrel,” James Webb, lead analyst for Continental and Mediterranean Europe upstream research at Wood Mackenzie, told The Sunday Telegraph.

“Whereas in Norway almost 80pc of reserves require an oil price of less than $60 per barrel to break even,” he said.

Norway’s output is expected to increase by 50,000 barrels per day (bpd) to average almost 1.9m bpd in 2014, despite the recent slump in prices.
Related Articles

Major international oil companies such as BP, Chevron and ConocoPhillips are already reviewing capital expenditure levels in the wake of a rout in global crude markets, which has wiped 45pc off the price of a barrel of Brent since June.

The benchmark closed out the week at just above $62 per barrel, close to a new five-and-a-half-year low, after the International Energy Agency slashed its forecast for demand growth next year by 230,000 barrels to 93.3m bpd.

A sharp cutback in spending on new projects by oil majors could also threaten thousands of jobs in the UK’s oil and gas sector offshore and hit hubs such as Aberdeen and Montrose, which serve the North Sea, hard.

BP warned of thousands of potential redundancies last week, as it informed investors of $1bn of cuts it plans to make to adjust its business to the new lower price environment.

“The downward trend in oil prices is a growing source of concern for operators across Europe,” said Mr Webb.

A sharp pull-back in investment is a concern for the North Sea, where the challenging offshore operating environment, high levels of taxation and dwindling reserves have made Britain’s hydrocarbons heartland increasingly uncompetitive when compared with regions opening up elsewhere in the world.

A recent study by industry body Oil & Gas UK suggested that £1 trillion of investment may be required in order to extract all of the remaining 30bn of oil reserves left in the UK Continental Shelf. Oil & Gas UK has also said it was aware of 150 projects offshore in British waters that are seeking investment and final sanction by operators.

These schemes could now be seriously threatened if oil prices continue to trade at the current levels, or fall even further, which some analysts predict.

Pressure is also expected to build on George Osborne to provide more tax relief for drillers in addition to the measure introduced in the Autumn Statement, when it was announced that the charge on profits for oil companies working in the UK Continental Shelf would fall 2pc to 30pc.

North Sea output was expected to recover in the fourth quarter after the start-up of Nexen’s Golden Eagle Area Development, which will pump 70,000 bpd of crude. However, total full-year output for the entire North Sea is expected to decline to 840,000 bpd, its lowest since 1977.

However, some analysts argue that a slowdown in global supply and spending on developing new oil reserves is what is required to rebalance the market. Abdullah bin Hamad al-Attiyah, a former president of the Organisation of Petroleum Exporting Countries (Opec), told The Telegraph last week that 2m bpd of crude need to be removed from circulation in order to restore an equilibrium between supply and demand.

Mr al-Attiyah said the cartel, which controls about a third of world supply, should sit down with other producers outside the group such as Russia, Mexico and Norway to share the burden of trimming output.