Don't Miss


Home   >   Business   >   Industries   >   Energy   >   Afren targets production boost and exploration drilling

Afren targets production boost and exploration drilling

By on July 20, 2011

Afren , the Africa-focused FTSE 250 oil and gas group, said today that it was on track to be producing 50,000 barrels of oil equivalent per day by the end of this year. In an update ahead of its half year results in August, the company said that while average full year daily production was set to be lower than originally thought because of unforeseen facilities downtime, it was nevertheless pleased with the reservoir performance at its main Ebok and Okoro fields in Nigeria. Afren said it was also aiming to grow its reserves by drilling up to nine exploration wells targeting over 600 million net barrels and pursuing further value accretive acquisitions.

During the first half of the year Afren’s group working interest production averaged 13,000 boepd, with an average full year daily production expected to be between 25,000 and 30,000 boepd. Whilst this has been revised down from expectations at the start of the year, the good news is that reservoir performance at the Okoro and Ebok fields has been at the upper end of expectations. With production set to ramp up during the second half, the company said it was on track to achieve its year-end production target of 50,000 boepd. Osman Shahenshah, Afren’s chief executive, said: “During the period, reservoir performance on the Ebok and Okoro fields has come in at the upper end of expectations. While we have revised the 2011 average production guidance, due to non reservoir related facilities downtime and simultaneous operations, we are expecting a 2011 exit rate of 50,000 boepd. Looking forward, we are targeting both organic and inorganic reserves growth, with up to nine exploration wells targeting over 600 million barrels net to Afren in H2 2011 and further value accretive acquisitions.”

Broking firm Evolution Securities said the trading update highlighted that 2011 was likely to be a tale of two halves for Afren, with the second-half likely to be a stark contrast to the first-half given the expected increase in production and a number of exploration wells being drilled in Nigeria, Ghana, Kenya and Tanzania. “Considering the ramp up in production, cash flow and exploration activity in H2 any weakness in Afren’s shares represents a buying opportunity,” Evolution said.

Afren’s production figures were affected by delayed start up of Ebok field production and greater than predicted facilities down time at the field. This was due in part to safety requirements as a result of managing simultaneous production and drilling operations and ongoing commissioning work associated with the power generation facilities and production processing equipment. Tie in of Ebok Phase 2 production is also likely to take longer than initially planned as a result of customs and logistical delays experienced in country during the election period. Meanwhile, lower than anticipated production at the Okoro field reflected the impact of de-bottlenecking work being undertaken in order to increase total liquids capacity from the current 27,000 bpd. During the period, Afren delivered revenues of US$161 million against US$214.8 million last year. It has a cash pile of US$320 million and net debt of US$344 million. Capital expenditure reached US$254 million, with full year expenditure expected to be US$450 million.

Stockopedia