Great IMS from Afren which makes terrific reading. The company really is moving in the right direction and deserves a much higher sp.
The detail on Kurdistan will be of interest to GKP shareholders in particular as the Simrit-2 exploration well on the Ain Sifni licence is literally on the very edge of GKP’s massive Shaikan licence which has to date around 8.9bln oip on a p90.
Afren have discovered a massive oil column which is very similar to that described by GKP on their SH-4 drill. Afren/Hunt are also drilling deeper than their planned TD (like GKP are doing with SH-5 and 6). TD is expected to be end of May and testing cited for 2months. It’s uncanny that this may also tie in with GKP’s releases for SH-5 and 6 as they too are due to TD in the coming days if not already.
The below Afren IMS is a lengthy one but well worth the read.
……………………………………………………………………………….
15 May 2012, Afren plc (AFR LN)
Interim Management Statement
London, 15 May 2012 – Afren plc (“Afren” or the “Company”), announces its Interim Management Statement and financial results for the three months ended 31 March 2012 and an update on its operations to 15 May 2012, in accordance with the reporting requirements of the EU Transparency Directive. Information contained within this release is un-audited and is subject to further review.
Highlights
-- 2012 exploration campaign yielding significant success
- High value discoveries offshore south east Nigeria at Okoro East and Ebok North Fault Block
- Transformational Simrit-2 discovery in Kurdistan region of Iraq; exploration well being deepened ahead of extensive testing programme
- Ongoing prospect maturation in East Africa with significant data acquisition; 1,570 km total 2D seismic, 9,000 km gravity and magnetic data
- 2012 exploration targeting mean resources of 630 mmboe (net to Afren)
– Q1 net production of 41,308 boepd in line with expectations for the period (+327% year-on-year)
- Early production wells on Okoro East to be drilled shortly
- Further development of Ebok field ongoing (four production wells)
- On track for full year net production guidance (42,000 boepd to 46,000 boepd)
-- Development work underway at Barda Rash field
- On track for first oil in August 2012
-- Significantly cash generative portfolio
- Turnover US$386.7 million (Q1 2011: US$73.4 million); profit after tax US$53.2 million (Q1 2011: US$11.1 million loss)
- Net operating cash flow generated of US$300.2 million (Q1 2011: US$12.8 million net operating cash flow used); US$153.1 million net cash flow generated post capex (Q1 2011: US$147.2 million net cash flow used post capex)
- Cash at bank US$399.0 million (Q1 2011: US$333.0 million)
-- Diversified sources of funding; maturing capital structure
- Successfully completed US$300 million bond issue; majority of debt long dated (2016-2019)
- Net debt US$639.4 million (Q1 2011: US$291.6 million)
Commenting on today’s IMS, Osman Shahenshah, Chief Executive of Afren plc, said:
“We have made an excellent start to our 2012 exploration campaign with significant discoveries at Okoro East, Ebok North fault Block and Ain Sifni. Group production during the first quarter was in line with our expectations, generating US$300.2 million of net operating cash flow. We look forward to continuing our exploration programme, with wells in Nigeria, the Nigeria-Sao Tome & Principe JDZ , Congo, the Kurdistan region of Iraq and East Africa, targeting in excess of 630 million barrels of oil equivalent net to Afren.”
Operations update
Production to Q1 Working interest Average gross production Average net production
2012 boepd
Okoro 50.00% 16,345 8,884
Ebok 100.00% 28,557 28,557
CI-11 & LGP 47.96% / 100% 5,728 3,190
Total 50,630 40,631
Associate company
production (FHN /
OML 26) 45%* 3,341 677
Total including associate
company volumes 53,971 41,308
*Afren is a 45% shareholder in First Hydrocarbon Nigeria which owns a 45% interest in OML 26
Net working interest production during the first quarter was in line with expectations and reflects the management of ongoing development work, simultaneous operations and associated downtime at the Ebok field during exploration and development drilling. The Company remains firmly on track to achieve full year net production guidance.
Nigeria
Okoro and Okoro East
On 17 January 2012, Afren and its partner Amni International Petroleum Development Company Ltd. (“Amni”) announced that the Okoro East exploration well had successfully made a new oil discovery. Located approximately 2 km east of the Okoro main field, the well was targeting equivalent reservoirs to the main field in a fault sealed three-way dip closed structure in addition to further prospectivity in a deeper horst block structure – a play concept that had not previously been explored on the block.
The well encountered net pay of 549 ft across both the upper and deeper targets, and test data confirmed the oil to be light and of good quality (38[deg] to 40[deg] API) in excellent reservoir sands with multi-Darcy permeabilities and average porosity of between 30% to 35%. The pressure data also obtained has helped with the Company’s structural understanding of the field and supports the Company’s pre drill volumetric estimates (Pmean STOIIP of 157 mmbbls).
The year ahead will see ongoing management of existing production at the Okoro field with the objective of optimising the oil recovery factor from the already developed reservoir zones. Afren and its partner Amni will shortly commence the drilling of two new production wells at Okoro East, whilst also defining the most appropriate long-term development solution for the entire field.
Ebok and Ebok North Fault Block
Having commissioned all production wells associated with the initial phases of the Ebok field development in 2011, the Company and its partner Oriental Energy Resources (“Oriental”) are in the process of drilling and completing a further four horizontal production wells at the field. The wells are being drilled from the West Fault Block wellhead platform and are targeting proved oil bearing reservoir zones that were not captured by the initial phases of development work.
On 14 May 2012 the Company announced that the Ebok North Fault Block (“Ebok NFB”) exploration well has successfully made an oil discovery. The well was spudded on 12 April2012 by Afren and Oriental, and reached a total depth of 4,320 ft, with the Transocean Adriatic IX jack-up drilling rig. The well was targeting a separate fault block structure located to the north of the main Ebok field, and has successfully encountered 370 ft net pay (TVT) of good quality oil in the same Tertiary reservoir sands equivalent to those that have been developed and are in production at the main Ebok field development. The discovery of significant oil pay at this location underlines the high-grade prospectivity that exists across the wider Ebok/Okwok/OML 115 area, and represents an important step towards unlocking the full volume and value potential of what is a core hub of Afren’s portfolio.
Logging operations at the Ebok NFB well have been completed, with data obtained supporting a Pmean STOIIP in excess of 100 million barrels of oil, towards the upper end of Afren’s pre-drill expectations. The well will now be suspended whilst Afren and Oriental determine the optimal development solution for Ebok NFB. This will likely incorporate synergies using the existing production, storage and offtake infrastructure at the main Ebok field and could involve the early drilling of new production wells from the existing wellhead platform at Ebok West Fault Block, followed by a full field development of Ebok NFB. The Transocean Adriatic IX rig will shortly commence the drilling of early production wells at the recent Okoro East discovery.
Okwok
Processing of the 348 km(2) Ocean Bottom Cable 3D seismic survey that was acquired over the whole Ebok/Okwok/OML 115 area in late 2011 has been completed, and results are being integrated into the existing data set. The new data will assist in the optimal placement of one appraisal well at Okwok during the second half of the year to test upside potential, and development planning prior to formal submission of a Field Development Plan to the Nigerian authorities. The most likely development scenario for Okwok comprises the installation of a separate dedicated production processing platform tied back to and sharing the existing 1.2 mmbbls capacity Ebok Floating Storage Offloading vessel (FSO) located approximately 13 km to the west.
OML 115
The partners plan to drill an exploration well on the block during the second half of 2012, most likely targeting the Ufon prospect. The Ufon prospect is a three-way dip closed structure that is interpreted to have oil prospectivity in the same reservoirs that have proven to be oil bearing at the nearby Ebok and Okwok fields.
OML 26
During the first quarter, output at OML 26 was restricted to 3,250 bopd owing to gaslift compressor outage and maintenance work that was undertaken on the SPDC operated Trans Forcados Trunkline which necessitated a 24 day period of downtime at the Ogini flowstation. Following a review of gaslift compression strategy at the field, the partners will in the near term seek to optimise production with the existing compression facilities and ultimately procure and install new compressor units in the third quarter. At the same time, the partners are evaluating reactivation and workover opportunities on existing wells prior to the planned commencement of drilling new horizontal wells in 2013, with the objective of ultimately increasing gross production to 50,000 bopd.
Kurdistan region of Iraq
Barda Rash
Having received all necessary approvals of the Field Development Plan (FDP) for Barda Rash during November 2011, the Company has commenced the development programme that will initially target approximately 500 million barrels of light recoverable oil out of the independently assessed 1.43 billion barrels total recoverable volume.
Phase I development work is focused on the existing BR-1, BR-2 and BR-3 wells that have been drilled at the field to date. The three wells will be sequentially re-entered, worked over, tested, completed and bought onstream. The wells will be tied back to a modular Early Production Facility that is being installed at the central BR-1 well location. Assembly of the Romfor 23 rig has been completed at the BR-1 well location, and final preparations are being made to re-enter the well. The Company is on track to commence production at Barda Rash by August, and expects all three wells to be onstream and producing at a rate of between 10,000 bopd to 15,000 bopd by year end. Acquisition of a comprehensive block wide 3D seismic survey has also commenced and is progressing well. The objective of the survey is to provide additional data that will assist in future development planning and well placement combined with enhancement of the Company’s understanding of fracture zone distribution.
Post completion of this initial phase, the Company will commence the drilling and completion of multiple new development wells with the intention of increasing production to a planned trucking capacity of 35,000 bopd and ultimately to a targeted 125,000 bopd by 2017. Following this, the Company will focus on the development and production of the heavier oil resources, which will offer further large scale production growth.
Ain Sifni
On 17 April 2012, the Company announced that the Simrit-2 exploration well had 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 was to test the western extent of the Simrit anticline. The well was initially drilled to its prognosed total measured depth of 12,139 ft (12,129 ft true vertical depth) and successfully encountered an estimated 1,342 ft of net oil pay in Cretaceous, Jurassic and Triassic age reservoirs, an estimated 1,024 ft of which is interpreted as containing light oil. No oil water contact has been established in the target reservoirs.
As there were continuing strong hydrocarbon shows to the planned depth of 12,139 ft, Afren and operator Hunt Oil Middle East ran casing at that depth and continued drilling to a new total depth of circa 12,467 ft to test additional zones of prospectivity. Drilling operations are expected to be completed by the end of May, after which a comprehensive well testing programme will be undertaken across multiple reservoir intervals. Testing operations are expected to take up to two months to complete. Following this, the drilling rig will be mobilised to the East Simrit prospect to drill the Simrit-3 exploration well. Given the scale of the oil column that has been intersected with the Simrit-2 well, the initial volumetric estimates for the Ain Sifni PSC are being updated to incorporate the new data.
Cote d’Ivoire
CI-11 and Lion gas Plant
Production operations continued uninterrupted at the Company’s assets in Cote d’Ivoire during the period and remain in line with expectations.
CI-01
The partners on Block CI-01 plan to acquire additional 3D seismic to augment the existing well and seismic dataset. It is believed that the Cretaceous accumulations may be significantly larger than originally mapped.
West Africa exploration
Keta Block (Ghana)
The objective of the Nunya-1x exploration well was to explore a large four-way dip closed Upper Cretaceous prospect in the Keta block, located offshore Ghana. On 25 April 2012, the Company announced that the well had intersected 502 ft of very good quality sandstone reservoirs, however they were interpreted as water bearing. The well was drilled with the Marianas semi-submersible drilling rig to a total depth of 14,928 ft in a water depth of 5,535 ft. Afren has a 35 per cent. carried interest in the block. The well has provided important information with which to calibrate and further enhance the Company’s understanding of this under-explored block in what still remains a high potential basin.
OPL 310 (Nigeria)
Afren has identified several prospects that lie in the same Senonian, Turonian and Albian sandstone intervals that have yielded significant discoveries along with the West African Transform Margin in Ghana and Cote d’Ivoire. The Company intends to drill an exploration well in 2012 and has plans in place to acquire additional seismic data.
Block 1 (Nigeria Sao Tome & Principe JDZ)
The operator on Block 1, Total, has commenced a two well drilling campaign on the block with the West Polaris drill ship.
La Noumbi (Congo Brazzaville)
Following interpretation of depth processed 2D data on the block, two prospects have been identified and the operator has proposed drilling these in 2012.
Block 2B (South Africa)
The partners near-term work programme involves the acquisition of 600 km(2) of new 3D seismic data, with reprocessing of existing 2D seismic and ongoing seismic inversion and regional biostratigraphy studies ahead of expected exploration drilling in 2014.
OPL 907/917 (Nigeria)
The Company is continuing to evaluate the potential of the blocks in order to identify areas for future seismic acquisition that could ultimately lead to future exploration drilling.
East Africa exploration
Block 1 (Kenya)
Acquisition of the planned 1,800 km of 2D seismic data is well underway, and the Partners are targeting completion during 2012.
Block 10A (Kenya)
Having satisfied all seismic work commitments with the acquisition of 750 km of 2D seismic over the block in 2011, the operator (Tullow Oil) will commence the drilling of one exploration well on the Paipai prospect. The well is expected to spud in H2 2012.
Blocks L17/L18 (Kenya)
The Company has completed the acquisition of 1,207 km of additional 2D seismic data targeting the deepwater portion of the block. The preliminary interpretation of the deep water 2D seismic identifies four new highly encouraging prospects, in addition to the previously mapped prospects in the shallow water. Importantly, the leads mapped on the new seismic represent a major new play with lower risk and greater materiality than the shallow water play. Afren proposes to acquire 1,000 km(2) 3D seismic in H2 2012, in order to better understand the deep water prospectivity and identify a well location. The primary objectives of the 3D deep water seismic survey is to optimally image the deep water structures, define the reservoir distribution, potentially define fluid – or lithology – related amplitude anomalies and reduce risk.
Tanga Block (Tanzania)
During Q4 2011, the partners acquired over 900 km of deepwater 2D seismic, the results of which have now been interpreted and integrated with existing data. In 2012, the partners intend to acquire 3D seismic data over the deepwater areas of the block ahead of exploration drilling on the Orpheus prospect from a shallow water location. The Company is in the process of securing a suitable jack up rig.
Areas A,B,C (Seychelles)
Seismic data previously acquired by the partners revealed the presence of several large scale structures in all three licence areas. A major new survey in Q4 2011 (3,733 km) included new basins that could also contain significant Jurassic and Cretaceous sedimentary sections, and is currently being processed.
Block 1101 (Madagascar)
The expanded work programme on Block 1101 consists of the drilling of one exploration well to a minimum depth of 5,249 ft and the acquisition of additional 150 km of new 2D seismic and airborne gravity and magnetics. The gravity and magnetic acquisition was completed in January 2012, seismic acquisition is planned for H2 2012 and drilling is expected in 2013.
Blocks 7,8 (Ethiopia)
Work is ongoing to further interpret the prospectivity of Blocks 7 and 8 ahead of expected drilling in H2 2012.
Forward 2012 exploration and appraisal drilling schedule
Country Asset Effective Gross Mean E&A wells
Working Interest prospect size / Seismic
mmbbls
Kurdistan region of
Iraq Ain Sifni** 20% 917 3 wells
Nigeria - Sao Tome
& Principe JDZ Block 1 JDZ** 4.41% 193 2 wells
Nigeria Ebok North Fault 100%/50%* 35 1 well
Block**
Kenya Block 10A 20% 100 1 well
1 well
Tanzania Tanga Block 74% 200 & 3D seismic
Nigeria OPL 310 70% 250 1 well
Nigeria OML 115 100%/50%* 60 1 well
Nigeria Okwok 70%/56%* 70 1 well
Ethiopia Blocks 7 & 8 30% TBC 1 well
Congo La Noumbi 14% TBC 2 wells
Kenya Blocks L17/L18 100% - 1,000
km(2)
3D seismic
Madagascar Block 1101 90% - 150 km
2D seismic
South Africa Block 2B 25% - 600 km(2)
3D seismic
Kenya Block 1 50% - 1,800
km 2D
seismic
===================== ================== ================== =============== ==============
* Working interest pre/post cost recovery;
** Well operating; Simrit-2 (Kurdistan region of Iraq) discovery announced 17 April 2012, Ebok NFB (offshore Nigeria) discovery announced 14 May 2012
Financial position
Revenue in the period was US$386.7 million (Q1 2011: US$73.4 million), reflecting increased production from the Ebok field. The company realised an average oil price of US$115.5/bbl (Q1 2011: US$104.1/bbl) and an average gas price of US$6.0/mcf (Q1 2011: US$7.6/mcf).
Oil and gas inventory at Q1 2012 was US$36.3 million (Q1 2011: US$13.4 million), representing approximately 460,000 barrels at Ebok and 270,000 barrels at Okoro net to Afren.
Hedges covering approximately 2.7 million barrels are in place for the period 1 April 2012 to 31 December 2012, following the purchase of additional deferred put options and spreads post year end, providing minimum floor prices on these volumes of between approximately US$79-US$90/bbl.
Profit from continuing activities before tax was US$143.2 million (Q1 2011: US$2.0 million). This reflects an increase in gross profit of US$171.6 million compared with the prior period, but also includes the effect of losses on derivative financial instruments of US$30.2 million on the valuation of mark to market oil price hedges (Q1 2011: US$9.6 million loss), finance costs of US$23.6 million largely arising from interest charges on the Company’s banking facilities and secured loan notes, and a share of FHN’s unrealised losses on oil price hedges (US$9.3 million net to Afren) arising from Afren’s shareholding in FHN offset by gains on the recognition of deferred tax assets relating to FHN’s historical losses.
Normalised profit in the period was US$78.3 million (Q1 2011: US$9.9 million). Normalised profit excludes the effect of unrealised hedge movements on Afren and on its share of the derivative financial instrument losses in FHN, share related costs, and the cost of early debt repayment.
On 8 March 2012, the Company completed a second bond issue raising approximately US$300 million before issue costs. The coupon on the bonds is 10.25% and they are listed on the Luxembourg Stock Exchange. The proceeds from the issue of the new bond have been used in part to repay and cancel the up to US$200 million VTB/BNPP facility and for general corporate purposes.
Capital expenditure on appraisal and exploration in the period was US$41.3 million (Q1 2011: US$27.4 million), which included US$15.7 million in respect of the successful Okoro East exploration well. Development expenditure was US$105.2 million (Q1 2011: US$105.0 million). Deferred consideration of US$200 million in respect of the acquisition of Afren’s interests in the Barda Rash PSC was paid in the period.
Net debt, excluding finance leases, as at Q1 2012 was US$639.4 million (31 December 2011: US$548.3 million) with cash at bank of US$399.0 million (Q1 2011: US$333.0 million).
Afren Net debt Q1 2012 Coupon Repayment due
US$mm
2016 senior secured notes 500 11.5% 2016
2019 senior secured notes 300 10.25% 2019
Ebok RBL 218 LIBOR +4.0% Up to US$450 million
to 5.25% facility. Repayments
commence 2012 through
2015
Unsecured corporate facility 50 LIBOR +4.5% 23 month facility.
Repayment in July
2013
Borrowing costs net capitalised
interest (30)
Total debt at end period 1,038
Cash at bank 399
Net debt at end period 639
Ends.