March 25, 2013 4:48 pm

Afren figures lifted by Nigeria growth

Strong production growth from fields off Nigeria’s coast helped Africa-focused oil and gas producer Afren more than double annual revenues and pre-tax profits.

The FTSE 250 constituent, which also holds exploration assets in the Kurdistan region of northern Iraq, confirmed on Monday that it was paying $37m to increase its interest in First Hydrocarbon Nigeria from 45 per cent to 55 per cent.

The deal extends Afren’s interest in the OML 26 licence in Nigeria close to the town of Warri in the politically volatile Niger Delta. This follows completion of the sale to Nigeria-based FHN of a 45 per cent stake in the onshore block by Royal Dutch Shell, Total of France and Eni of Italy in November 2011.

The move by Afren to extend its interests in onshore Nigeria mirrors a similar deal made by FTSE peer Heritage Oil, which has also taken on stakes in once-prolific Nigerian fields from oil majors alongside local partners under a policy of indigenisation of the oil industry encouraged by the government.

But the main boost to Afren’s fortunes was delivered by strong growth at its Ebok and Okoro fields off Nigeria’s coast that led to group annual production advancing from 19,000 to 43,000 barrels of oil equivalent a day.

Osman Shahenshah, chief executive, said the year had also been marked by further exploration success off Nigeria’s coast and at its Ain Sifni field in Kurdistan.

Afren is yet to secure an export outlet for its Barda Rash block in Kurdistan but Mr Shahenshah said he hoped that small levels of production could begin reaching market in the coming weeks.

The group reiterated production guidance for the current year ranging from 40,000 to 47,000 boe/d excluding Kurdistan, although Mr Shahenshah predicted Afren would lift its output of cheaply acquired oil reserves to significantly higher levels as new projects came on stream.

The company was also on track to drill exploration wells in Kenya, Tanzania, Ethiopia and Madagascar during the year. “We have an extensive exploration programme in both west and east Africa,” Mr Shahenshah said.

Revenue rose from $597m to $1.5bn as pre-tax profits jumped from $221m to $594m. The company finished the year to December with net debt of $488m, down from $548m at the beginning of the period. Afren expects capital expenditure this year to edge ahead from $523m to $620m.

Shares in Afren, up by a fifth over the year, rose 1p to 148.6p on Monday.

In notes on Monday broker Jefferies maintained a “buy” stance, highlighting further exploration potential while noting that “Afren’s Nigeria portfolio continues to hum along nicely”. Bank of America Merrill Lynch also held its “buy” recommendation, predicting a jump in post-tax income from $203m to $350m in the coming year.

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