A Review of the Nigerian Energy Industry

Costs hit Afren’s profits

Afren-drill-workers25 August 2013, London – listed company Afren saw profits slide during the first half of the year as increased costs and expenses offset higher revenues.
For the six months to 30 June Afren posted a profit of $78.5 million, down from a profit of $101.9 million booked during the same period last year.

The fall in profits came despite a rise in revenue to $796.8 million, up 2% from the $778.4 million generated in the first half of 2012.

Eating away at the increased revenue however was a rise in the cost of sales, from $367.7 million to $419.5 million, which resulted in gross profits sliding 8% to $377.3 million.

Afren also blamed the slide in net profits on impairment charges, non-recurring administrative expenses and losses on derivative financial instruments arising from the inclusion of First Hydrocarbon Nigeria’s (FHN) results for the period.

The company booked a $5 million impairment charge related to the write-off costs of drilling the Kola-1 and Kola-2 wells at La Noumbi, Congo-Brazzaville.

Afren also booked a loss of $25 million in its half year financial statement related to the expected relinquishment of its interest in the Nigeria and Sao Tome & Príncipe joint development zone.

Afren said on Friday that it intended to relinquish its interest in the licence during the second half of the year and decided to impair the associated costs in its first half results.

Helping boost revenue during the first half of 2013 was a 13% rise in production to 47,653 barrels of oil equivalent per day, mainly driven by the company’s greenfield developments off Nigeria.

This helped offset a 5% dip in the realised oil price from $109 per barrel in the first half of 2012 to $104 per barrel this year.

Afren said it was on track to meet its full year production guidance of between 40,000 and 47,000 boepd and revised its full year capital expenditure down from $650 million to $620 million.
*Josh Lewis, Upstreamonline

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