Afren PLC Interim Management Statement -4-
May 29 2015 - 1:00AM
UK Regulatory
The US$200 million net cash proceeds from the issuance of the
PPN has been deposited in escrow, to be drawn down by the Group
over the coming months. Withdrawals from escrow are required to be
applied broadly in accordance with agreed financial forecasts, and
are subject to an agreed drawdown schedule and the Group's
continuing compliance with certain default conditions. The PPN
would be repayable by April 2016 if not refinanced through the
Recapitalisation.
In order for the Recapitalisation to be implemented there are
other conditions that need to be fulfilled, including obtaining (i)
the approval of requisite majorities of holders of the Existing
Notes in connection with a scheme of arrangement of such Existing
Notes; (ii) approval from the relevant courts in the UK and the US
as to such scheme of arrangement; and (iii) agreement from the
Group's remaining lenders. The Company will also seek the approval
of shareholders in general meeting to the terms of the
Recapitalisation, which is required in order to issue the new
ordinary shares in connection with the Recapitalisation. If
shareholder approval is not received, the Recapitalisation will
still proceed, but on amended terms for the New HY Notes (see
below).
As at 29 May 2015 Afren is in default under the terms of its
2016 Notes due to the non-payment of interest. The Company has
received assurances from the ad hoc committee of Noteholders (which
members hold in aggregate approximately 63% of the principal face
amount of the 2016 Notes and approximately 50% of the total
principal face amount of the Existing Notes) (Ad Hoc Committee)
that the Ad Hoc Committee has no current intention to take
enforcement action with respect to the 2016 Notes held by its
members as a result of the failure to make payment of interest due
under the 2016 Notes, on the basis that agreement has been reached
with the Company and its key stakeholders on the terms of a
consensual (but conditional) restructuring.
As at 29 May 2015 Afren is in default under the terms of its
2019 Notes due to the non-payment of interest. The Company has
received assurances from the Ad Hoc Committee (which members hold
in aggregate approximately 35% of the principal face amount of the
2019 Notes) that it has no current intention to take enforcement
action with respect to the 2019 Notes held by its members as a
result of the failure to make payment of interest due under the
2019 Notes.
There is a risk that one or more of these Recapitalisation steps
outlined above, may not be completed or satisfied and the
Recapitalisation may not occur. If additional funds are not
available to be drawn under the New HY Notes, and the
Recapitalisation does not proceed, the Directors are of the opinion
that the Group would become insolvent, absent an alternative
proposal being received by the Company that is capable of being
implemented.
If shareholder approval of the Recapitalisation is not received,
the Ad Hoc Committee and the lenders under the Group's existing
US$300 million Ebok credit facility have agreed to an alternative
restructuring plan, whereby the economic terms of the New HY Notes
will be amended, and the amendment and restatement of the Existing
Notes will be revised (so that no new shares are issued). In
addition, the New HY Notes will include a requirement for the
Company to initiate a sale of the Group's business by the end of
2016, which together will mean that existing shareholders would be
unlikely to see any return of their current investment.
On the basis that the Recapitalisation is successfully achieved
as outlined above, the Group's financial footing and ability to
continue in operation would be significantly strengthened. The
Group's financial forecasts and projections for the next twelve
months indicate that the Group would then be able to meet its
obligations as they fall due, however, this assessment is sensitive
to a number of downside risks such as any further significant
deterioration in the outlook for oil prices, any significant
disruption to the Group's production revenue stream due to
operational or other factors, and the crystallisation of other
risks such as those described in notes 10 and 13 to the financial
statements for the year ended 31 December 2014 (which are available
at www.afren.com), particularly if such downside risks were to
materialise in combination. Therefore, the Group expects that it
will still need to seek industry partnerships, strategic
divestments and other fundraising transactions as necessary to
build resilience against, or respond to, downside risks, capture
the opportunity in the Group's portfolio and secure the Group's
future.
The Directors recognise that the combination of the
circumstances described above represents a material uncertainty
that may cast significant doubt as to the Group's ability to
continue as a going concern and that it may be unable to realise
its assets in the normal course of business. Nevertheless, the
Directors expect that the Recapitalisation will obtain all of the
necessary approvals and consents as set out above and the Directors
therefore have a reasonable expectation that the Group will be able
to successfully navigate the present uncertainties and continue in
operation. Accordingly the condensed interim financial statements
have been prepared on a going concern basis and no break up
adjustments have been made.
2. Operating segments
The Group currently operates in three geographical markets which
form the basis of the information evaluated by the Group: Nigeria
and other West Africa, East Africa and Kurdistan region of Iraq.
Unallocated operating expenses, assets and liabilities relate to
the general management, financing and administration of the
Group.
Nigeria Kurdistan
and other region of
West Africa East Africa Iraq Unallocated Consolidated
US$m US$m US$m US$m US$m
================================== ============ =========== ========== =========== ============
Three months to 31 March 2015
Revenue by origin 130.3 - - - 130.3
Operating gain/(loss) before
derivative financial instruments 19.1 (5.5) (4.3) (24.7) (15.4)
Derivative financial instruments
losses - - - (1.8) (1.8)
================================== ============ =========== ========== =========== ============
Segment result 19.1 (5.5) (4.3) (26.5) (17.2)
Finance costs (34.2)
Other gains and losses - forex
and finance income 3.3
Loss before tax (48.1)
=========== ============
Income tax charge (5.0)
================================== ============ =========== ========== =========== ============
Loss after tax (53.1)
=========== ============
Loss for the period (53.1)
================================== ============ =========== ========== =========== ============
Segment assets - non-current 2,139.4 0.5 0.2 1.4 2,141.5
Segment assets - current 422.3 - - 63.1 485.4
Segment liabilities (1,370.7) (9.5) (36.0) (1,043.6) (2,459.8)
Capital additions - oil and
gas assets 290.7 - 3.1 - 293.8
Capital additions - exploration
and evaluation 19.7 4.9 4.1 0.1 28.8
Capital additions - other 0.2 - (0.6) 0.1 (0.3)
Depletion, depreciation and
amortisation (80.8) - (0.2) (0.8) (81.8)
Impairment of exploration
and evaluation assets (17.5) (4.9) (4.0) (0.1) (26.5)
================================== ============ =========== ========== =========== ============
2. Operating segments continued
Nigeria Kurdistan
and other region
West Africa East Africa of Iraq Unallocated Consolidated
US$m US$m US$m US$m US$m
=================================== ============= ============ ========== ============ =============
Year to 31 December 2014
Revenue by origin 945.8 - - - 945.8
Operating gain/(loss) before
derivative financial instruments (329.5) (327.0) (1,218.0) (14.7) (1,889.2)
Derivative financial instruments
gains/(losses) 1.9 - - (10.8) (8.9)
=================================== ============= ============ ========== ============ =============
Segment result (327.6) (327.0) (1,218.0) (25.5) (1,898.1)
Finance costs (66.9)
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