Afren

Afren (AIM market)

Listed on 14 March 2005 on London Stock Exchange (AIM)

Afren is an independent oil and gas exploration and production company, founded in 2004 by Dr Rilwanu Lukman, the former Secretary General and President of OPEC, Nigerian minister of petroleum resources and honorary advisor to President Umaru Yar'Adua.

Afren has rapidly expanded its portfolio and the management team has delivered 11 assets in the Joint Development Zone of Nigeria, São Tomé and Príncipe, Nigeria, Gabon, Angola and Congo Brazzaville

Current portfolio ( keys assets)

1) Okoro Setu Fields (50% Afren)

Undeveloped fields (offshore Nigeria). The fields have combined 2P reserves of 42 million barrels (management case) and 2P Independent Certified reserves of 32 million barrels. Afren will commence development drilling in Q4 2007.
The Field Development Plan was approved in April 2007 and Afren subsequently secured a contract for the FPSO Armada Perkasa. Target of first oil in early 2008 and production of 15,000 to 20,000 b/d by mid 2008

2) Ogedeh (50% Afren)

Undeveloped field (offshore), Nigéria. The field was discovered by Chevron in 1993.
5 - 15 million barrels of prospective recoverable oil resources

3 ) Ofa field (onshore Nigéria)

Agreement with IEL to farm into and jointly develop Ofa field.
The field was initially discovered by Shell. Stock Tank Oil Initially in Place of up to 150 million barrels.
4,000 to 5,000 b/d are expected from two wells within 8 to 9 months

4) Eremor Field (50% Afren)

Undeveloped field (onshore, Nigéria). The field was initially discovered by Shell in 1978. The field is estimated to contain in place volumes of up to 30 million barrels, with a similar potential upside in a shallower reservoir.
The Eremor-1 well was re-entered in 2005. Test data indicates that flow rates of up to 2,000 b/d are achievable from the vertical well.

5) JDZ

Afren has 4.41 % interest in the JDZ Block 1
The Obo-1 well was drilled in Q1 2006 by Chevron. The well encountered a total of 150ft net oil and gas pay and was declared a Discovery.
World class exploration acreage, Billion barrel reserves potential.

6) La Noumbi

Afren holds a 14 per cent interest in the La Noumbi permit (adjacent world class M'Boundi field, which is currently producing over 50,000 b/d and has reserves in excess of 250 mmbbl).

First well Q2 2007 (August 2007) targeting the Doungou prospect which could contain between 50 to 75 mmbbl oil reserves. The operator of the field is Maurel et Prom.



I expect production near 12/15 000 barrels/day by 2008e (AFREN 100%).

Current Market cap: US $, 300 M.
Netback per barrel (projection, 2008e): 12$
PER 2008 (Q4): 5
Current share price: 0.64 GBP
Target price (2008e): 1.1 GBP

+“high impact exploration upside » with La Noumbi and JDZ prospects.
-Fully underwritten US$ 200 million credit facility secured for the Okoro-Setu project
-Cash: 112 M. US$
-Preferential access, leveraging of key relationships
-Management team one of the most respected in the sector and in Nigeria
-Local expertise to develop partnerships on proven undeveloped fields formerly held by the Majors and awarded to indigenous operators. Under the programme, which was introduced by the Nigerian Government in 1996, a total of 116 proven but undeveloped fields were designated as marginal, which have significant quantities of hydrocarbons, but were considered too small to be commercially exploitable by the Majors under historical fiscal regimes.
-Exclusive joint venture agreement including Afren, Gasol, Afgas and Sonagas to monetize gas supplies from Nigeria, Cameroon and Equatorial Guinea through infrastructure and facilities in Equatorial Guinea.


Risks:
-the constant threat of kidnappings
-political instability
-terrorist attacks

But... less risk of kidnappings and hijackings because they are seen as being a more indigenous company