A Review of the Nigerian Energy Industry

Afren says no proven or probable reserves at Iraqi Kurdistan oilfield


12 January 2015, London – Afren Plc said there were no proven or probable reserves at its Barda Rash oilfield in Iraqi Kurdistan, denting its chances of fetching a good price for the asset to refinance its debt.

Afren shares slumped 28 percent as Monday’s announcement further shook investor confidence in the company hit by high-level corruption, falling oil prices and suspended operations in Iraqi Kurdistan.

“It makes us wonder if there is anything else we don’t know about,” Canaccord Genuity analyst Thomas Martin said. Afren, which has most of its producing assets in Nigeria, said it would evaluate options for the oilfield and would divert capital to other projects.

“It’s not like it is going to kill the company or anything, but they really need now to figure out how they will deal with the debt, especially if the oil price remains like this for several years,” Oriel Securities analyst Dragan Trajkov said.

The company on Monday wiped 190 million barrels of oil (mmbbls) of gross proven plus probable (2P) reserves from Barda Rash and drastically cut the oilfield’s contingent resources to around 250 mmbbls from 1,243 mmbbls.

Afren said wells at the field had produced more water cuts than expected and that it had suffered from operational problems with drilling the complex fractured reservoirs.

The news from Afren, whose debt is estimated at about $1.1 billion as of 2014, comes a week before Seplat Petroleum Development Co Plc’s deadline to make a firm takeover offer for the company.

The company is still reeling from the effects of a payments scandal last year that resulted in the dismissal of its founder and CEO and three other top executives.

Afren shares were down 20.6 percent at 31.18 pence at 1202 GMT, placing them among the top losers on the London Stock Exchange. They have collapsed 74 percent since the payment scandal broke at the end of July last year.
*Abhiram Nandakumar; Gopakumar Warrier & Savio D’Souza – Reuters

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