TIDMAFR
RNS Number : 1982R
Afren PLC
25 June 2015
Statement at 2015 Annual General Meeting
London, 25 June 2015
Afren plc ("Afren", the "Company" or the "Group"), (LSE: AFR)
announces that at today's annual general meeting the Chairman,
Egbert Imomoh, opened the meeting with the following statement:
"Just over a year ago when I spoke at the last AGM, little was I
aware that of what the year held in stock for us. The events that
have radically changed our Company commenced when the Board
discovered that our former CEO, Osman Shahenshah, and our former
COO Shahid Ullah had received payments undisclosed and unknown to
the Board. They were immediately suspended and following a very
thorough investigation of the situation their contracts with the
Company were terminated. This necessitated Toby Hayward stepping in
as the interim CEO and me as executive chairman whilst we commenced
the search for a new CEO.
Events following their dismissal, including the Company's
inability to complete the planned refinancing of its debt
obligations in the second half of 2014, and the sharp decline in
oil prices from over US$100/bbl in August 2014 to under US$50 per
barrel in January 2015, placed significant pressure on the Group's
liquidity position, resulting in the Group having net current
liabilities of US$459 million as at 31 December 2014. Early this
year, we reviewed our strategic options in respect of the Barda
Rash field in the Kurdistan region of Iraq after disappointing
operational results (early water breakthrough and production of
hydrogen sulphide) at the field and a significant reserves and
resources downgrade. This eliminated gross 2P reserves whilst gross
2C resources fell from 1,243 mmbbls to around 250 mmbbls. This
movement in reserves in the field led to a material impairment
charge in the year ended 31 December 2014 of US$933 million, which
contributed to the unprecedented pre-tax loss of US$1,955 million
last year.
Average net production for year ended 31 December 2014 was
31,819 bopd (excluding Barda Rash), a decrease of 32% from 47,112
bopd for the year ended 31 December 2013, this was due to achieving
cost recovery on Ebok in the first quarter of 2014, and delays in
achieving production ramp-up across Afren's producing asset base in
Nigeria. There was also a 42% decrease in revenue from US$1,644
million for the year ended 31 December 2013 to US$946 million in
the year ended 31 December 2014 reflecting lower production volumes
and share of production, and the impact of lower realised oil
prices during the second half of 2014.
The Company recorded a loss after tax of US$1,651 million in the
year ended 31 December 2014, mainly due to a reduction in revenue
given the fall in oil prices, a material impairment charge of
US$1,112 million in respect of the carrying value of the Company's
production and development assets and the impact of the curtailment
of future capital expenditure on our exploration.
In response to the very adverse situation that developed, the
interim management took decisive action in reviewing our capital
structure and operating/capital expenditure. We took the strategic
decision to concentrate on the lower cost production capacity in
our Nigerian portfolio. We are focused on delivering on this
strategy, and have therefore lowered our full 2015 capital
expenditure to US$0.4 billion. We are confident that, in
conjunction with our proven operational capabilities, the strategy
will create value for all our stakeholders in the near future.
In March, we announced the terms of a financial restructuring
which had been agreed with our creditors, and which provided
essential additional funding to the Group - without this funding, I
can genuinely say that we would not be here today. Last week, we
published the full prospectus explaining the terms of the
restructuring and how shareholders can participate in this for the
benefit of your Company. I strongly encourage you all to read the
document that has been sent to you, which explains why your Board
believes that this is the only viable option to secure Afren's
future and to provide an opportunity for shareholders to realise
value in their investment in the Company. Your Board also
unanimously recommends that you vote in favour of the restructuring
at the extraordinary general meeting to be held on 24 July, because
a "No Vote" will mean shareholders will receive no return at
all.
In the first quarter of this year Afren achieved an average net
production of 36,035 bopd, which is above our guidance range of
23,000 - 32,000 bopd for 2015. The Company delivered revenue of
US$130 million and operating cash flows before movements in working
capital of US$59 million, down from US$269 million and US$169
million respectively in Q1 2014. The fall in revenue was due to
lower realised oil prices and production liftings from Ebok
utilised to settle a net profit interest (NPI) liability which is
part of the agreement.
As we have moved forward, a key requisite has been renewing the
management team. I am therefore delighted to welcome Alan Linn as
the new Chief Executive Officer. His proven turnaround experience
and excellent grasp of operational matters will be invaluable. He
has a firm vision of where he wishes to take the Company. We have
also recently appointed Dave Thomas as our COO and proposed new
executive director, who has significant executive and operational
experience in the international oil and gas industry. I would also
like to thank Toby Hayward for his steady leadership in adverse
circumstances.
On behalf of the Board, I would like to re-iterate my thanks to
Darra Comyn, Peter Bingham, John St John and Ennio Sganzerla, who
have all stepped down as Executive and Non-Executive Directors
since the last AGM. They all have made considerable contributions
to Afren and its development. Additionally, as announced this
morning, I shall be stepping down as Chairman with effect from the
close of this Annual General Meeting, together with Iain McLaren,
Toby Hayward, Patrick Obath and Sheree Bryant as Non-Executive
Directors. My thanks also go out to each of Iain, Toby, Patrick and
Sheree. David Frauman, an experienced restructuring lawyer and
director, will become non-executive chairman with immediate effect
from the close of this meeting. As previously announced, the
Company has commenced the search for a Chief Financial Officer and
is also seeking to appoint additional non-executive directors to
the Board.
The internal changes go beyond the Board movements. All of our
internal processes have been reviewed and amended where necessary
to ensure compliance with corporate governance best practice. We
have run comprehensive training for our employees and contractors
in anti-bribery and corruption laws, and are confident that we now
have a robust infrastructure in place to avoid the failures of the
past.
I would also like to say a few words about our corporate
responsibility activities. In 2014 the Board identified CSR as one
of the five key strategic priorities needed to fulfil our vision,
and the Board of Directors adopted a new CSR strategy. Our approach
was generated by taking as the framework industry guidance on
sustainability produced by IPIECA and identifying where current
performance did not meet stakeholder expectations. The strategy
design process identified a series of high priority issues and
recommendations to address these gaps. These are reflected in our
targets and aims for 2014 and 2015. More detail can be found in our
annual report.
In summary, the last 12 months have been far from what we
planned and results have been disappointing and have led to a very
sharp drop in our share price and a loss of confidence by
stakeholders. However I believe the Company can face the future
with confidence given the quality of our assets, the good
relationship with our partners, the injection of capital and the
attraction of very competent people into the Company. I want to
thank our shareholders, bondholders, partners, staff and all other
stakeholders for their patience and forbearance in what has been a
very difficult period for the Company. I would like to end by
re-iterating the new Board's commitment and determination to regain
the confidence of all our stakeholders, and set Afren back on the
course to value growth once more and where it truly belongs."
- Ends -
Contacts:
Afren plc
Tel.: +44 20 7864 3700
Anne Vallely, Acting General Counsel
Natalia Erikssen, Investor Relations
Bell Pottinger (public relations adviser to Afren plc)
Tel.: +44 20 3772 2500
Gavin Davis
Henry Lerwill
This information is provided by RNS
The company news service from the London Stock Exchange
END
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