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Afren reports 42 percent drop in profit

By on August 30, 2011

Plans for increasing production at Africa-focused oil and gas firm Afren are on track, it said on Tuesday, after reporting a 42 percent drop in profits in the first half of the year after a delay in the start-up of its flagship Ebok field in Nigeria.

The London-listed company said it is now ramping up production towards its targeted 50,000 barrels of oil equivalent per day (boepd) by the end of the year, although it dropped the upper end of the range of its average output forecast for the year.

In July it said it expected full-year production to average between 25,000 and 30,000 boepd, down from the 40,000 boepd it forecast in May.

The FTSE-250 company also said on Tuesday that reservoir performance at Ebok and Okoro in Nigeria was at the upper end or ahead of its expectations.

Pretax profit fell to $43.7 million from $75.4 million in the first half of last year as production fell 36 percent to 13,000 boepd.

The shares, which have fallen 35 percent this year, were up 4.5 percent at 0810 GMT, outperforming a 2.0 percent gain in a European index of oil and gas companies .

Bank of America Merrill Lynch said the results should bring comfort to investors.

“The 30 percent drop in the shares month-to-date (one of the weakest in our coverage) does not reflect the improving outlook for the company,” it said. “The Ebok field ramp-up remains key to the story near term and management appears to be making good progress.”

Production at Ebok is around 15,000-17,000 bopd, compared with 3,300 barrels a day in the first half.

Afren said in July it had agreed to buy stakes in two Kurdistan operations for $588 million, extending the group’s reach into the Middle East.

The company will focus on developing those stakes and on drilling work elsewhere.

Reuters