Despite a dip in realised oil prices, Afren (AFR) managed to increase revenues last year on the back of an 8 per cent rise in daily production to 47,112 barrels of oil equivalent (boe). Reported profits for the oil and gas group came in lower, due to a combination of impairment charges and money it owes to some well partners for residual profit. Yet post-tax earnings were buoyed by a $157m (£95m) credit linked to a tax holiday on the Ebok field in Nigeria that will run until May 2016.
Afren's impairments were partly associated with write-off costs on Kenya Block 10A and the group's share of the cost of the Kola-1 and Kola-2 wells at La Noumbi in Congo, which were assessed as commercially unviable. There was much better news in Nigeria: the discovery at the Ogo-1 well was the third-largest oil and gas find in the world last year. The result was significantly in advance of pre-drill estimates, giving Ogo-1 an even-money chance of delivering a recoverable resource of 774m boe. The partners at Ogo-1 plan to run a 3D seismic programme ahead of appraisal drilling later in 2014.
Afren's exploration success, together with the impact of acquisitions in 2013, resulted in the group's reserves replacement ratio soaring to 201 per cent, while overall reserves rose by 6 per cent to 286m boe. Of course, all this had to be paid for - so it's unsurprising that net debt was up by a third to $739m.
This year Afren is likely to press ahead with further phases of the Ebok development, as it's anticipated that existing costs will be fully recovered at some point during the year. The field's average daily production rate stood at 34,910 boe in 2013, and the group intends to drill another five production wells this year. Given the tax break now in place, it's reasonable to assume that Ebok's contribution to group cash flow will rise significantly over the next five years.
| AFREN (AFR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 152p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 151-152p | 12-MONTH HIGH: | 171p | LOW: 118p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 164¢* | NET DEBT: | 41% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 0.3 | 1 | -2.6 | nil |
| 2010 | 0.3 | 79 | 5.1 | nil |
| 2011 | 0.6 | 221 | 12.3 | nil |
| 2012 (restated) | 1.5 | 569 | 18.6 | nil |
| 2013 | 1.6 | 318 | 43.8 | nil |
| % change | +10 | -44 | +135 | - |
Ex-div:- Payment:- *Includes intangible assets of $1.2bn, or 110¢ a share £1=$1.65 | ||||
