Afren share price in focus as group reaches funding agreement

on Mar 13, 2015
Updated: Oct 21, 2019

Afren Plc (LON:AFR) has this morning announced that it has reached a preliminary agreement on interim funding. The company also issued an operational and trading update.

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**Highlights from the company statement:**
**Update on capital structure review: Interim Funding and Recapitalisation**
In connection with a review of its capital structure and alternatives to address its immediate and longer term funding issues, Afren has considered a range of proposals and alternatives from both existing stakeholders and third parties. Following such review, the Company has concluded that a transaction with its current creditors offers the best alternative that is capable of being implemented.
**2014 summary**
· Afren faced several significant challenges during 2014, including the discovery of unauthorised payments to senior executives resulting in their dismissal, a significant reduction in reserves at Barda Rash in Kurdistan, the impact of a rapid decline in oil prices resulting in material impairments and a need to restructure the Group’s financing.
· 2014 full year net production slightly below guidance at 31.8 kbopd (gross production of 47.9 kbopd) (excluding Barda Rash), with net capex spend of approximately US$769 million.
· 2014 revenues were approximately US$0.9 billion (2013: US$1.644 billion) with gross debt of US$1.304 billion (2013: US$1.129 billion) and cash at bank of US$237 million (2013: US$390 million) which includes the realisation of US$80 million on oil price hedges sold in December 2014.
· Post tax impairment charges totalling approximately US$2 billion are expected. Impairment charges are expected in respect of production and development assets (including goodwill) due to the previously announced write-off of oil reserves at Barda Rash as well as the impact of lower oil prices on the reserves of producing assets in Nigeria. Impairment charges will also be recorded against the Group’s exploration and evaluation (E&E) assets as future capital expenditure is curtailed due to the materially lower oil price environment and Afren’s current financing constraints.
**2015 outlook and corporate update**
· In light of the significant volatility in the oil industry and related financing markets resulting from the rapid decline in oil prices, the Board initiated a review of the Group’s capital structure, liquidity and funding requirements. The Company was able to obtain a deferral of its obligation to pay a US$50 million amortisation payment under the Ebok Facility at the end of January 2015 and the Board decided (after utilising a 30 day grace period for payment) not to pay a US$15 million interest payment due under the 2016 Notes in order to preserve cash in the business while an agreement was being sought.
As of 07:29 GMT, Friday, 13 March, Afren Plc share price is 6.50p.


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