AFREN PLC sold for 55% profit from October 2011

Afren PLC is engaged an independent oil and gas exploration and production company. The Company produces from its assets offshore Nigeria and Cote d'Ivoire. The Company operates in four geographical markets: Nigeria, Cote d'Ivoire, Other West Africa and Eastern Africa. As of December 31, 2010, the Company had 29 assets in 11 countries, from Nigeria, Ghana, Cote d'Ivoire, Nigeria and Sao Tome & Principe JDZ, Congo Brazzaville,  Ethiopia, Kenya, Madagascar, the Seychelles, Tanzania, South Africa and Kurdistan (Iraq). The Cote d'Ivoire includes Lion Gas Plant and CI-01; Nigeria includes OPL 310, JDZ Block 1, OPL 907 and OPL 917; Congo Brazzaville includes La Noumbi; South Africa includes Block 2B; Kenya includes Block 10A, Block L17/L18; Seychelles includes Blocks A,B,C, and Tanzania includes Tanga Block. On October 7, 2010, the Company acquired Black Marlin Energy Holdings Limited.

Numbers
Market Cap $1.4B
Sales $266M (increase from 27M in 2008 or by 1000% and if you think about future potential in Africa/Kurdistan then another 1000% over years is possible)
Quarterly Sales Growth -25% (decline is attributed to lower Oil/Gas prices and decrease in production)
EBITDA $142M
Income $18M (first time positive income since inception in 2004)
Quarterly Earnings Growth -60% (Africa is a volatile same as Iraq, I value this stock only based on P/S ratio as I expect sales to reach few billions USD in 1 decade and then Afren PLC will be acquired by a big Oil companyfor a premium)
Cash $320M
LT Debt $343M
Employees 225
Assets $2.1B
Liabilities $1.2B
Shares Outstanding 1,070,000,000
Major Shareholders
Carmignac Gestion SA 19.06m 1.6%
Norges Bank Investment Management 18m 1.5%

Resume: This stock is cheap compared to Oil/Gas sector and it's bigger rivals like major global Oil&Gas companies, the assets are bigger than liabilities, no problem with debt and good cash level, high take over possibility for a bigger rival looking to enter Africa or increase market share there. Compared to P/S ratio stock is not cheap but on the other side this is how much Africa's energy resources are worth to investors, it's normal to value it over Western Oil/Gas companies whos production is declining. There is no balance sheet risk but only political risk because there is uncertainty in Africa and Kurdistan. I don't advise to buy this stock without hedging, there are few possibilities you may think about, one is long Afren/short (XOP) Oil Exploration&Production ETF. For every ex. $100,000 long in Afren sell short $100,000 XOP. This way you protect your investment in case Oil/Gas prices will fall, same if prices will rise Afren will rise more than XOP. If you are looking for Africa energy bet, then this stock is worth considering. It trades in London, U.S (as orinary shares in US$ and 1 ADS representing 5 shares), Frankfurt so you can decide in what currency you want to invest. The liquidity for small investors is good in U.S and Frankfurt but for bigger fund the LSE is O.K. same as ordinary shares traded on OTC Markets but you must get the quote from mm's for big order. Expect the gap between XOP and (AFRNF.PK) to narrow and Afren to outperform. But if you are bullish on Africa, Iraq and Oil/Gas prices, you don't have to do any hedging.




90 days performance.  

Significant Oil Discovery In The Kurdistan Region Of Iraq


London, 17 April 2012 – Afren plc ("Afren" or the “Company”) announces that the high impact Simrit-2 exploration well, located on the Ain Sifni PSC in the Kurdistan region of Iraq, has discovered a significant oil accumulation based on the results of drilling, wireline logs and sidewall core sampling.

The objective of the Simrit-2 exploration well is to test the western extent of the Simrit anticline.  The well has reached the prognosed total measured depth of 3,700 m (3,697 m true vertical depth). Preliminary analysis of data collected during and following drilling indicates that the well has encountered an estimated 409 m of net oil pay in Cretaceous, Jurassic and Triassic age reservoirs (an estimated 312 m of this pay is interpreted as containing light oil). No oil water contact has been established in the target reservoirs.

As there are continuing strong hydrocarbon shows to the current depth of 3700 m, Afren and operator Hunt Oil Middle East plan to run casing at the current depth and continue drilling to a new total depth of circa 3,800 m to test additional zones of prospectivity.

Once drilling operations have concluded a comprehensive well testing programme will be undertaken across multiple reservoir intervals, after which the drilling rig will be mobilised to the East Simrit prospect to drill the Simrit-3 exploration well.  Afren has a 20 per cent. interest in the Ain Sifni PSC and is partnered by Hunt Oil Middle East (60 per cent. and operator) and the Kurdistan Regional Government (20 per cent.).

Osman Shahenshah, Chief Executive of Afren, commented


“The successful result of the Simrit-2 exploration well represents a second major exploration success for Afren in 2012, following on from the Okoro East discovery offshore south east Nigeria.  The scale of the oil column that has been intersected suggests that the Simrit structure and surrounding prospects elsewhere on the Ain Sifni PSC have the potential to be transformational for Afren”.

For further information contact


Afren plc
+44 20 20 7864 3700
Andrew Dymond
Investor Relations

Pelham Bell Pottinger
+44 20 7861 3232
James Henderson
Mark Antelme 

 

http://www.afren.com/

 

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