TIDMAFR
RNS Number : 2367C
Afren PLC
10 November 2009
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10 November 2009
Afren plc (AFR LN)
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO
THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA OR JAPAN
Proposed fundraising to raise approximately US$200 million
through issue of
new shares and exercise of existing warrants
Details of the Placing
A placing (the "Placing") of new Ordinary Shares, with both new and existing
institutional shareholders (the "Placing Shares") is being conducted, subject to
the satisfaction of certain conditions, through an accelerated book-building
process to be carried out by Merrill Lynch International ("Merrill Lynch") and
Morgan Stanley Securities Limited ("Morgan Stanley"), acting as joint
bookrunners (the "Joint Bookrunners") and Jefferies International Limited
("Jefferies"), Nomura International Plc ("Nomura") and Evolution Securities
Limited ("Evolution"), acting as co-lead managers, in relation to the Placing.
Merrill Lynch is acting as sole global co-ordinator in relation to the Placing.
The identity of Placees and the basis of the allocations are at the discretion
of Afren and the Joint Bookrunners. The number of Placing Shares and the price
at which the Placing Shares are to be placed (the "Placing Price") will be
agreed by Afren with the Joint Bookrunners at the close of the book-building
process. Details of the number of Placing Shares and the Placing Price will be
announced as soon as practicable after the close of the book-building process.
The Placing Shares will be issued credited as fully paid and will rank pari
passu with existing Ordinary Shares, including the right to receive all
dividends and other distributions declared, made or paid on or in respect of
such shares after the date of issue of the Placing Shares. The Placing will be
made on a non-preemptive basis.
The Company will apply for admission of the Placing Shares to the Official List
of the UK Listing Authority (the "Official List") and to trading on the London
Stock Exchange's main market for listed securities ("Main Market"), together
(the "Admission"). It is expected that Admission will take place and that
trading will commence at the same time as cancellation of the Company's
admission on AIM, to take place on or around 3 December 2009, as announced by
the Company on 4 November 2009.
The Placing is conditional upon, inter alia, Admission becoming effective and
upon the passing of the resolutions (without amendment) at the Company's general
meeting scheduled for 30 November 2009. The Placing is also conditional on the
Placing Agreement made between the Company, Merrill Lynch, Morgan Stanley,
Jefferies, Nomura and Evolution not being terminated. It is anticipated that the
settlement date will be on or around 3 December 2009.
Appendix I to this announcement (which forms part of this announcement) sets out
the terms and conditions of the Placing.
Background to the Placing and Use of Proceeds
The Ebok appraisal drilling this year has significantly de-risked the project
and identified further upside, as announced to the market at the Afren Capital
Markets Day on 30 June 2009 and subsequently on 3 November 2009. In addition, in
August 2009, Afren announced its entry into a farm-out agreement for the
development of the Okwok field adjacent to its existing Ebok field. Together
with the appraisal success on Ebok, this has increased the resource potential of
the broader Ebok-Okwok complex and increased the scope of a potential joint
development.
In addition, on the Okoro field, continuing sub-surface and reservoir management
work has identified two attractive infill drilling locations that will add
significant incremental reserves and production. On Block CI-11 in Côte
d'Ivoire, subsurface evaluation work focused on applying the latest
understanding of the Cretaceous depositional model has identified infill
drilling opportunities targeting material upside potential.
The net proceeds of the Placing will be used to fund an accelerated appraisal
and development of the broader Ebok-Okwok complex, further appraisal and infill
drilling of Afren's Côte d'Ivoire assets and infill drilling on the Okoro
project in Nigeria. In addition, Afren shall apply a proportion of the proceeds
to potential future acquisitions and general corporate purposes.
Pending their use as described above, the Group intends to invest the net
proceeds from the Placing in short term investments with internationally
recognised financial institutions.
Exercise of Founder Warrants
Afren also announces the exercise, by certain shareholders including some of the
Directors (the "Founder Shareholders"), of 40,000,000 warrants over Ordinary
Shares (the "Founder Shares") issued pursuant to the Company's Founders'
Investment and Warrant Scheme, which are due to expire on 11 December 2009,
raising approximately GBP15 million (US$25 million) (before expenses) for the
Company. The proceeds from the exercise of the warrants do not form part of the
proceeds of the Placing but will be used in conjunction with the net proceeds of
the Placing as described above.
In order to finance the exercise of these warrants and to pay tax obligations
arising from the exercise, the Founder Shareholders have agreed to sell some of
the Founder Shares in the Placing at the Placing Price (the exact number of
which will be calculated following determination of the Placing Price).
Admission and CREST
Application has been made to the UK Listing Authority and to the London Stock
Exchange respectively for admission of all of the Ordinary Shares to: (i) the
Official List; and (ii) the London Stock Exchange's market for listed
securities. No application has been made or is currently intended to be made for
the Ordinary Shares to be admitted to listing or dealt with on any other
exchange. It is expected that Admission will become effective and that dealings
on the London Stock Exchange in the Ordinary Shares will commence on 3 December
2009 (International Security Identification Number: GB00B0672758, Stock
Exchange Daily Official List (SEDOL) number B067275GB).
Application has been made to the London Stock Exchange to cancel admission of
Afren's Ordinary Shares on AIM. It is expected that trading of Afren's Ordinary
Shares on AIM will cease at the close of business on 2 December 2009.
CREST is a paperless settlement procedure enabling securities to be evidenced
otherwise than by a certificate and transferred otherwise than by a written
instrument. The Articles permit the holding of Ordinary Shares under the CREST
system. The Ordinary Shares were admitted to CREST on 14 March 2005, the date
that the Ordinary Shares were admitted to trading on AIM. Settlement of
transactions in the Ordinary Shares following Admission may continue to take
place within CREST if any shareholder so wishes. However, CREST is a voluntary
system and the holders of Ordinary Shares who wish to receive and retain share
certificates will be able to do so.
Dividend policy
The Group has made losses since the date of its incorporation and is accordingly
currently unable to pay dividends. The Directors do not expect that Afren will
pay any dividends in the foreseeable future, and in any event until such time as
it is prudent to do so, having regard to the level of revenue generated by the
Group's operations and the retained earnings to fund its operations and
exploration and development programmes. For the foreseeable future, any earnings
will be reinvested in developing the businesses of the Group.
Current trading and prospects
Afren has continued to make significant progress across all aspects of its core
business, with both operational and strategic successes demonstrated. Afren
continues to exceed prior production guidance on Okoro and the Lion and Panthère
fields in Block CI-11 since acquisition, with a group working interest
production for 2009 forecast to average 22,300 bopd. The Company has also
delivered significant reserves growth, through the successful ongoing appraisal
of the Ebok field in Nigeria. In addition, in August 2009 Afren announced the
entry into a farm-out agreement for the development of the Okwok field adjacent
to its existing Ebok field. Together with significant appraisal success on Ebok,
this has significantly increased the resource potential of the broader
Ebok-Okwok complex and increased the scope of potential joint development
synergies. The Company will commence first phase drilling of the Ebok field post
the current appraisal drilling and the Company is on track for first production
from the Ebok field at the first half of 2010. Over the period to 2011, Afren
intends to drill 10 appraisal and exploration wells, targeting over 600 net
million barrels of oil equivalent (25 million recoverable barrels proved to date
on the Ebok V well) in Nigeria, Congo, Côte d'Ivoire and Ghana.
Afren's management case reserves and resources
The table below sets outs Afren's management case of its reserves and resources
at the date of its last interim results on 25 September 2009 and to date:
+-------------------------+--------------------+--------------------+
| mmboe | Interim results | Current |
| | (25 September | |
| | 2009) | |
+-------------------------+--------------------+--------------------+
| Developed 2P reserves | | |
+-------------------------+--------------------+--------------------+
| Okoro | 19 | 19 |
+-------------------------+--------------------+--------------------+
| CI-11 | 9 | 9 |
+-------------------------+--------------------+--------------------+
| | 28 | 28 |
+-------------------------+--------------------+--------------------+
| Undeveloped 2P reserves | | |
+-------------------------+--------------------+--------------------+
| CI-01 | 17 | 17 |
+-------------------------+--------------------+--------------------+
| Ebok FB1 & FB2 | 0 | 34 |
+-------------------------+--------------------+--------------------+
| Ebok West | 0 | 13 |
+-------------------------+--------------------+--------------------+
| Okwok Core | 0 | 10 |
+-------------------------+--------------------+--------------------+
| | 17 | 73 |
+-------------------------+--------------------+--------------------+
| Contingent 2C reserves | | |
+-------------------------+--------------------+--------------------+
| Ebok FB1 & FB2 | 34 | 0 |
+-------------------------+--------------------+--------------------+
| Ebok West | 0 | 0 |
+-------------------------+--------------------+--------------------+
| Ebok Upside | 50 | 37 |
+-------------------------+--------------------+--------------------+
| Okwok Core | 10 | 0 |
+-------------------------+--------------------+--------------------+
| Okwok Upside | 25 | 25 |
+-------------------------+--------------------+--------------------+
| | 119 | 62 |
+-------------------------+--------------------+--------------------+
| Prospective mean | | |
| resources | | |
+-------------------------+--------------------+--------------------+
| Keta | 340 | 340 |
+-------------------------+--------------------+--------------------+
| La Noumbi | 40 | 40 |
+-------------------------+--------------------+--------------------+
| CI-01 | 90 | 90 |
+-------------------------+--------------------+--------------------+
| Iris Marin | 10 | 10 |
+-------------------------+--------------------+--------------------+
| Ibekelia Licence | 10 | 10 |
+-------------------------+--------------------+--------------------+
| JDZ Block 1 | 15 | 15 |
+-------------------------+--------------------+--------------------+
| Okwok | 40 | 40 |
+-------------------------+--------------------+--------------------+
| OPL 907/OPL917 | 40 | 40 |
+-------------------------+--------------------+--------------------+
| OPL 310 | 0 | 230 |
+-------------------------+--------------------+--------------------+
| | 585 | 815 |
+-------------------------+--------------------+--------------------+
| | | |
+-------------------------+--------------------+--------------------+
| 2P Reserves and 2C | 163 | 163 |
| Contingent Resources | | |
+-------------------------+--------------------+--------------------+
| Total | 748 | 979 |
+-------------------------+--------------------+--------------------+
Production
Afren is currently producing oil from the Okoro field in Nigeria and oil and gas
from the Lion and Panthère fields in Block CI 11 in Côte d'Ivoire, as well as
processing gas at the Lion Gas Plant in Côte d'Ivoire. The Group achieved first
oil in Okoro in June 2008 at a rate of approximately 3,000 bopd, rising to
approximately 22,000 bopd by the end of 2008. The year to date production to 31
October 2009 at the Okoro field was 5,714,840 barrels of oil (gross), equivalent
to an average daily production rate of 18,800 bopd. Oil production at Block
CI-11 to 31 October 2009 was 389,542 barrels of oil (gross), equivalent to an
average daily production rate of 1,281 bopd. Natural gas production at CI-11 was
9.9 bcf (gross), equivalent to an average daily production rate of 32.7 mmcfd.
Also during the period to 31 October 2009, 362,543 barrels of oil equivalent of
natural gas liquids were stripped from the inlet gas stream at the Lion Gas
Plant, equivalent to 1,193 boepd.
Whilst on the Official List, the Group is targeting production of up to 100,000
bopd by the end of 2012 from Okoro, Ebok and Block CI-11 and other existing
appraisal or development assets which can be converted into production assets,
in addition to potential acquisitions in the longer term.
Contacts
+----------------------------+---------------------+------------------+
| Afren plc | | +44 20 7451 9700 |
+----------------------------+---------------------+------------------+
| Osman Shahenshah | Chief Executive | |
+----------------------------+---------------------+------------------+
| Galib Virani | Head of | |
| | Acquisitions and | |
| | Investor Relations | |
+----------------------------+---------------------+------------------+
| | | |
+----------------------------+---------------------+------------------+
| BofA Merrill Lynch | | +44 20 7996 1000 |
+----------------------------+---------------------+------------------+
| Andrew Osborne | | |
+----------------------------+---------------------+------------------+
| Rupert Hume-Kendall | | |
+----------------------------+---------------------+------------------+
| | | |
+----------------------------+---------------------+------------------+
| Morgan Stanley Securities | | +44 20 7425 8000 |
| Limited | | |
+----------------------------+---------------------+------------------+
| Edward Knight | | |
+----------------------------+---------------------+------------------+
| |
+---------------------------------------------------------------------+
| Jefferies International | | +44 20 7029 8000 |
| Limited | | |
+----------------------------+---------------------+------------------+
| Jack Pryde | | |
+----------------------------+---------------------+------------------+
| |
+---------------------------------------------------------------------+
| Nomura International Plc | | +44 20 7102 1000 |
+----------------------------+---------------------+------------------+
| Jan Laubjerg | | |
+----------------------------+---------------------+------------------+
| |
+---------------------------------------------------------------------+
| Evolution Securities | | +44 20 7071 4307 |
| Limited | | |
+----------------------------+---------------------+------------------+
| Tim Redfern | | |
+----------------------------+---------------------+------------------+
| |
+---------------------------------------------------------------------+
| Pelham Public Relations | | +44 20 7337 1500 |
+----------------------------+---------------------+------------------+
| James Henderson | | |
+----------------------------+---------------------+------------------+
| Mark Antelme | | |
+----------------------------+---------------------+------------------+
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO
THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA OR JAPAN.
This announcement contains (or may contain) certain forward-looking statements
with respect to certain of Afren's plans and its current goals and expectations
relating to its future financial condition and performance and which involve a
number of risks and uncertainties. Afren cautions readers that no
forward-looking statement is a guarantee of future performance and that actual
results could differ materially from those contained in the forward-looking
statements. These forward-looking statements can be identified by the fact that
they do not relate only to historical or current facts. Forward-looking
statements sometimes use words such as "aim", "anticipate", "target", "expect",
"estimate", "intend", "plan", "goal", "believe", or other words of similar
meaning. Examples of forward-looking statements include statements regarding or
which make assumptions in respect of the Company's production targets. By their
nature, forward-looking statements involve risk and uncertainty because they
relate to future events and circumstances, including, but not limited to,
economic and business conditions, the effects of continued volatility in credit
markets, market-related risks such as changes in the price of oil or changes in
interest rates and foreign exchange rates, the policies and actions of
governmental and regulatory authorities, changes in legislation, the further
development of standards and interpretations under International Financial
Reporting Standards ("IFRS") applicable to past, current and future periods,
evolving practices with regard to the interpretation and application of
standards under IFRS, the outcome of pending and future litigation or regulatory
investigations, the success of future explorations, acquisitions and other
strategic transactions and the impact of competition. A number of these factors
are beyond Afren's control. As a result, Afren's actual future results may
differ materially from the plans, goals, and expectations set forth in Afren's
forward-looking statements. Any forward-looking statements made in this
announcement by or on behalf of Afren speak only as of the date they are made.
Except as required by the FSA, the London Stock Exchange or applicable law,
Afren expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained in this
announcement to reflect any changes in Afren's expectations with regard thereto
or any changes in events, conditions or circumstances on which any such
statement is based.
This announcement is for information purposes only and shall not constitute an
offer to buy, sell, issue, or subscribe for, or the solicitation of an offer to
buy, sell, issue, or subscribe for any securities, nor shall there be any sale
of securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdiction. This announcement has been issued by and is the
sole responsibility of Afren.
No representation or warranty, express or implied, is or will be made as to, or
in relation to, and no responsibility or liability is or will be accepted by
Merrill Lynch, Morgan Stanley, Jefferies, Nomura or Evolution or by any of their
respective affiliates or agents as to, or in relation to, the accuracy or
completeness of this announcement, including the Appendices, or any other
written or oral information made available to or publicly available to any
interested party or its advisers, and any liability therefore is expressly
disclaimed.
Merrill Lynch International, which is authorised and regulated in the United
Kingdom by the FSA, is acting for Afren and for no-one else in connection with
the Placing, and will not be responsible to anyone other than Afren for
providing the protections afforded to customers of Merrill Lynch International
nor for providing advice to any other person in relation to the Placing or any
other matter referred to herein.
Morgan Stanley Securities Limited, which is authorised and regulated in the
United Kingdom by the FSA, is acting for Afren and for no-one else in connection
with the Placing, and will not be responsible to anyone other than Afren for
providing the protections afforded to customers of Morgan Stanley nor for
providing advice to any other person in relation to the Placing or any other
matter referred to herein.
Jefferies International Limited, which is authorised and regulated in the United
Kingdom by the FSA, is acting for Afren and for no-one else in connection with
the Placing, and will not be responsible to anyone other than Afren for
providing the protections afforded to customers of Jefferies nor for providing
advice to any other person in relation to the Placing or any other matter
referred to herein.
Nomura International Plc, which is authorised and regulated in the United
Kingdom by the FSA, is acting for Afren and for no-one else in connection with
the Placing, and will not be responsible to anyone other than Afren for
providing the protections afforded to customers of Nomura nor for providing
advice to any other person in relation to the Placing or any other matter
referred to herein.
Evolution Securities Limited, which is authorised and regulated in the United
Kingdom by the FSA, is acting for Afren and for no-one else in connection with
the Placing, and will not be responsible to anyone other than Afren for
providing the protections afforded to customers of Evolution nor for providing
advice to any other person in relation to the Placing or any other matter
referred to herein.
The distribution of this announcement and the offering of the Placing Shares in
certain jurisdictions may be restricted by law. No action has been taken by
Afren, Merrill Lynch, Morgan Stanley, Jefferies, Nomura or Evolution that would
permit an offering of such shares or possession or distribution of this
announcement or any other offering or publicity material relating to such shares
in any jurisdiction where action for that purpose is required. Persons into
whose possession this announcement comes are required by Afren, Merrill Lynch,
Morgan Stanley, Jefferies, Nomura and Evolution to inform themselves about, and
to observe such restrictions.
The price of shares and the income from them may go down as well as up and
investors may not get back the full amount invested on disposal of the shares.
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS
ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET OUT IN
THIS ANNOUNCEMENT ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT
PERSONS WHO ARE: (A) (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5)
OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005
(THE "ORDER"), OR (II) PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) ("HIGH NET
WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER, OR (III)
PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED; AND (B) (I) PERSONS
IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE QUALIFIED INVESTORS (AS
DEFINED IN ARTICLE 2(1)(E) OF EU DIRECTIVE 2003/71/EC (THE "PROSPECTUS
DIRECTIVE")), AND/OR (II) PERSONS IN THE UNITED KINGDOM WHO ARE QUALIFIED
INVESTORS (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").
THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET
OUT IN THIS ANNOUNCEMENT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE
NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS
ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET OUT IN
THIS ANNOUNCEMENT RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE
ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT (INCLUDING THE
APPENDICES) DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY
SECURITIES IN AFREN PLC.
Persons (including individuals, funds or otherwise) by whom or on whose behalf a
commitment to acquire Placing Shares has been given ("Placees") will be deemed
to have read and understood this announcement, including the Appendices, in its
entirety and to be making such offer on the terms and conditions, and to be
providing the representations, warranties, acknowledgements, and undertakings
contained in Appendix I. In particular, each such Placee represents, warrants
and acknowledges that it is: (i) a Relevant Person (as defined above) and
undertakes that it will acquire, hold, manage or dispose of any Placing Shares
that are allocated to it for the purposes of its business; (ii) it is not within
the United States; (iii) it is not within Australia, Canada, South Africa, Japan
or any other jurisdiction in which it is unlawful to make or accept an offer to
acquire the Placing Shares; (iv) it is not acquiring the Placing Shares for the
account of any person who is located in the United States, unless the
instruction to acquire was received from a person outside the United States and
the person giving such instruction has confirmed that it has the authority to
give such instruction, and that either (a) it has investment discretion over
such account or (b) it is an investment manager or investment company and, in
the case of each of (a) and (b), that it is acquiring the Placing Shares in an
"offshore transaction" (within the meaning of Regulation S under the Securities
Act; and (v) it is not acquiring the Placing Shares with a view to the offer,
sale, resale, transfer, delivery or distribution, directly or indirectly, of any
such Placing Shares into the United States or any other jurisdiction referred to
in (iii) above;
This announcement, including the Appendices, is not for distribution directly or
indirectly in or into the United States (including its territories and
possessions, any State of the United States and the District of Columbia),
Canada, Australia, South Africa or Japan or any jurisdiction into which the same
would be unlawful. This announcement is not an offer of securities for sale in
the United States. Securities may not be offered or sold in the United States
absent registration or an exemption from registration. No public offering of
securities will be made in the United States by Afren in connection with the
Placing.
This announcement does not constitute or form part of an offer or solicitation
to purchase or subscribe for shares in the capital of Afren in Canada,
Australia, South Africa or Japan or any jurisdiction in which such an offer or
solicitation is unlawful. No public offering of securities of Afren will be made
in connection with the Placing in the United Kingdom or elsewhere.
The relevant clearances have not been, and nor will they be, obtained from the
securities commission of any province or territory of Canada; no prospectus has
been lodged with, or registered by, the Australian Securities and Investments
Commission or the Japanese Ministry of Finance; and the Placing Shares have not
been, and nor will they be, registered under or offered in compliance with the
securities laws of any state, province or territory of Canada, Australia, South
Africa or Japan. Accordingly, the Placing Shares may not (unless an exemption
under the relevant securities laws is applicable) be offered, sold, resold or
delivered, directly or indirectly, in or into the United States, Canada,
Australia, South Africa or Japan or any other jurisdiction outside the United
Kingdom.
The Placing Shares have not been approved or disapproved by the US Securities
and Exchange Commission, any State securities commission or any other regulatory
authority in the United States, nor have any of the foregoing authorities passed
upon or endorsed the merits of the Placing or the accuracy or adequacy of this
announcement. Any representation to the contrary is unlawful.
This announcement relates to an Exempt Offer in accordance with the Offered
Securities Rules of the Dubai Financial Services Authority ("DFSA"). This
announcement is intended for distribution only to persons of a type specified in
the Offered Securities Rules of the DFSA. It must not be delivered to, or relied
on by, any other person. The DFSA has no responsibility for reviewing or
verifying any documents in connection with Exempt Offers. The DFSA has not
approved this announcement nor taken steps to verify the information set forth
herein and has no responsibility for this announcement. The Placing Shares to
which this announcement relates may be illiquid and/or subject to restrictions
on their resale. Prospective purchasers of the Placing Shares offered should
conduct their own due diligence on the Placing Shares. If you do not understand
the contents of this announcement you should consult an authorised financial
advisor.
Persons (including, without limitation, nominees and trustees) who have a
contractual or other legal obligation to forward a copy of the Appendices or
this announcement should seek appropriate advice before taking any action.
The Placing Shares to be issued pursuant to the Placing will not be admitted to
trading on any stock exchange other than the London Stock Exchange. Neither the
content of Afren's website nor any website accessible by hyperlinks on Afren's
website is incorporated in, or forms part of, this announcement.
APPENDIX I
TERMS AND CONDITIONS OF THE PLACING
IMPORTANT INFORMATION FOR PLACEES ONLY REGARDING THE PLACING
Details of the Placing
Each of Merrill Lynch, Morgan Stanley, Jefferies, Nomura and Evolution has
entered into an agreement with Afren (the "Placing Agreement") under which,
subject to the conditions set out in that agreement, Merrill Lynch and Morgan
Stanley (the "Joint Bookrunners"), Jefferies, Nomura and Evolution have agreed,
as agents for and on behalf of Afren, to use reasonable endeavours to procure
subscribers for Placing Shares at a price determined following completion of the
bookbuilding process in respect of the Placing (the "Bookbuild"), described in
this announcement and set out in the Placing Agreement.
The Placing Shares will, when issued, be credited as fully paid and will rank
pari passu in all respects with the existing ordinary shares of Afren including
the right to receive all dividends and other distributions declared in respect
of such ordinary shares after the date of issue of the Placing Shares.
As part of the Placing, Afren has agreed that it will not issue or sell any
ordinary shares, and it has agreed to procure that certain of its shareholders
will not sell any ordinary shares, in the capital of Afren for the Restricted
Period, without the prior consent of the Joint Bookrunners. This agreement does
not however prevent Afren from granting or satisfying exercises of options
granted pursuant to existing employee share schemes of Afren as disclosed in
publicly available information available as at today's date.
"Restricted Period" means from the date of this announcement until the date
falling 180 days after Admission.
Application for Admission
The Company will apply for admission of the Placing Shares to the Official List
of the UK Listing Authority and to trading on the main market for listed
securities of the London Stock Exchange. Admission is conditional upon the
approval of the Placing by shareholders of the Company at the general meeting
convened for on or around 30 November 2009. It is expected that Admission will
take place and that trading in the Placing Shares will commence on 3 December
2009.
Bookbuild
Merrill Lynch, Morgan Stanley, Jefferies, Nomura and Evolution will today
commence the Bookbuild to determine demand for participation in the Placing by
Placees. This Appendix gives details of the terms and conditions of, and the
mechanics of participation in, the Placing. No commissions will be paid to
Placees or by Placees in respect of any Placing Shares.
Merrill Lynch, Morgan Stanley and Afren shall be entitled to effect the Placing
by such alternative method to the Bookbuild as they may, in their sole
discretion, determine.
Participation in, and principal terms of, the Placing
1. Merrill Lynch, Morgan Stanley, Jefferies, Nomura and Evolution are
arranging the Placing as agents for the Company.
2. Participation in the Placing will only be available to persons who may
lawfully be, and are, invited to participate by Merrill Lynch, Morgan Stanley,
Jefferies, Nomura and Evolution. Merrill Lynch, Morgan Stanley, Jefferies,
Nomura, Evolution and their respective affiliates are each entitled to enter
bids in the Bookbuild as principal.
3. The Bookbuild will establish a single price payable by all Placees whose
bids are successful (the "Placing Price"). The Placing Price and the number of
Placing Shares to be issued will be agreed between the Joint Bookrunners and
Afren following completion of the Bookbuild. The Placing Price and the number of
Placing Shares will be announced on a Regulatory Information Service following
the completion of the Bookbuild.
4. To bid in the Bookbuild, Placees should communicate their bid by
telephone to their usual sales contact at Merrill Lynch, Morgan Stanley,
Jefferies, Nomura or Evolution (as the case may be). Each bid should state the
number of Placing Shares which the prospective Placee wishes to subscribe for at
either the Placing Price, which is ultimately established by Afren and the Joint
Bookrunners, or at prices up to a price limit specified in its bid. Bids may be
scaled down by the Joint Bookrunners on the basis referred to in paragraph 9
below.
5. The Bookbuild is expected to close no later than 4.30 p.m. (London time)
on 10 November 2009 but may be closed earlier or later at the discretion of the
Joint Bookrunners. The Joint Bookrunners may, in agreement with Afren, accept
bids that are received after the Bookbuild has closed. Afren reserves the right
(upon the agreement of the Joint Bookrunners) to reduce or seek to increase the
amount to be raised pursuant to the Placing, in its absolute discretion.
6. Each prospective Placee's allocation will be agreed between the Joint
Bookrunners and Afren and will be confirmed orally by Merrill Lynch, Morgan
Stanley, Jefferies, Nomura or Evolution (as the case may be) as agents of Afren
following the close of the Bookbuild. That oral confirmation will constitute an
irrevocable legally binding commitment upon that person (who will at that point
become a Placee) to subscribe for the number of Placing Shares allocated to it
at the Placing Price on the terms and conditions set out in this Appendix and in
accordance with Afren's articles of association.
7. Each prospective Placee's allocation and commitment will be evidenced by
a contract note issued to such Placee by Merrill Lynch, Morgan Stanley,
Jefferies, Nomura or Evolution (as the case may be). The terms of this Appendix
will be deemed incorporated in that contract note.
8. Each Placee will also have an immediate, separate, irrevocable and
binding obligation, owed to Merrill Lynch, Morgan Stanley, Jefferies, Nomura or
Evolution (as the case may be)as agents of Afren, to pay in cleared funds, an
amount equal to the product of the Placing Price and the number of Placing
Shares such Placee has agreed to subscribe and Afren has agreed to allot and
issue to that Placee.
9. The Joint Bookrunners may choose to accept bids, either in whole or in
part, on the basis of allocations determined in agreement with Afren and may
scale down any bids for this purpose on such basis as they may determine. The
Joint Bookrunners may also, notwithstanding paragraphs 4 and 5 above, subject to
the prior consent of Afren (i) allocate Placing Shares after the time of any
initial allocation to any person submitting a bid after that time and (ii)
allocate Placing Shares after the Bookbuild has closed to any person submitting
a bid after that time.
10. A bid in the Bookbuild will be made on the terms and subject to the
conditions in this announcement and will be legally binding on the Placee on
behalf of which it is made and except with the consent of the Joint Bookrunners
will not be capable of variation or revocation after the time at which it is
submitted.
11. Irrespective of the time at which a Placee's allocation pursuant to the
Placing is confirmed, settlement for all Placing Shares to be acquired pursuant
to the Placing will be required to be made at the same time, on the basis
explained below under "Registration and Settlement".
12. All obligations under the Bookbuild and Placing will be subject to
fulfilment of the conditions referred to below under "Conditions of the Placing"
and to the Placing not being terminated on the basis referred to below under
"Termination of the Placing Agreement".
13. By participating in the Bookbuild, each Placee will agree that its
rights and obligations in respect of the Placing will terminate only in the
circumstances described below and will not be capable of rescission or
termination by the Placee.
14. To the fullest extent permissible by law, none of Merrill Lynch, Morgan
Stanley, Jefferies, Nomura or Evolution or any of their respective affiliates
shall have any liability to Placees (or to any other person whether acting on
behalf of a Placee or otherwise). In particular, none of Merrill Lynch, Morgan
Stanley, Jefferies, Nomura or Evolution or any of their respective affiliates
shall have any liability (including to the fullest extent permissible by law,
any fiduciary duties) in respect of Merrill Lynch, Morgan Stanley, Jefferies,
Nomura and Evolution's ' conduct of the Bookbuild or of such alternative method
of effecting the Placing as the Joint Bookrunners and Afren may agree.
Conditions of the Placing
The obligations of Merrill Lynch, Morgan Stanley, Jefferies, Nomura and
Evolution under the Placing Agreement are conditional on, amongst other things:
(a) agreement being reached between Afren, Merrill Lynch, and Morgan Stanley
on the Placing Price and the number of Placing Shares;
(b) publication by Afren of an announcement of the Placing Price;
(c) the representations, warranties and agreements contained in the Placing
Agreement being true and accurate and not misleading on the date of the Placing
Agreement and on Admission;
(d) Afren complying with its obligations under the Placing Agreement to the
extent the same fall to be performed or satisfied prior to Admission, including
the delivery of a certificate from the Company to the Joint Bookrunners
confirming that none of the warranties, representations or undertakings in the
Placing Agreement have ceased to be true, accurate and not misleading;
(e) the passing of the resolutions relating to the Placing, without
amendment, at the GM of the Company to be convened on or around 30 November
2009;
(f) in the opinion of the Joint Bookrunners, there having been, prior to
Admission, no material adverse change in, or any development involving a
prospective material adverse change in or affecting the condition, financial,
operational, legal or otherwise, or in the earnings, management, business
affairs, business prospects of Afren or any member of the Afren group of
companies, whether or not arising in the ordinary course of business; and
(g) Admission taking place by 8.00 a.m. (London time) on 2 December 2009
(or such later date as the Joint Bookrunners may determine).
If any of the conditions contained in the Placing Agreement in relation to the
Placing Shares are not fulfilled or waived by the Joint Bookrunners, by the
respective time or date where specified (or such later time and/or date as Afren
and the Joint Bookrunners may agree), the Placing will not proceed and the
Placee's rights and obligations hereunder in relation to the Placing Shares
shall cease and terminate at such time and each Placee agrees that no claim can
be made by the Placee in respect thereof.
The Joint Bookrunners may, at their discretion and upon such terms as they think
fit, waive compliance by Afren with the whole or any part of any of Afren's
obligations in relation to the conditions in the Placing Agreement save that any
condition in the Placing Agreement relating to Admission or to Admission taking
place may not be waived. Any such extension or waiver will not affect Placees'
commitments as set out in this announcement.
None of Merrill Lynch, Morgan Stanley, Jefferies, Nomura or Afren or any other
person shall have any liability to any Placee (or to any other person whether
acting on behalf of a Placee or otherwise) in respect of any decision they may
make as to whether or not to waive or to extend the time and/or the date for the
satisfaction of any condition to the Placing nor for any decision they may make
as to the satisfaction of any condition or in respect of the Placing generally,
and by participating in the Placing each Placee agrees that any such decision is
within the absolute discretion of Merrill Lynch and Morgan Stanley.
Termination of the Placing Agreement
The Joint Bookrunners are entitled, at any time before Admission, to terminate
the Placing Agreement in relation to its obligations in respect of the Placing
Shares by giving notice to Afren if, amongst other things:
(a) there has been a breach of any of the warranties and representations
contained in the Placing Agreement or any failure to perform any of the
undertakings or agreements in the Placing Agreement; or
(b) it shall come to the notice of the Joint Bookrunners that any statement
contained in this announcement, or any other document or announcement issued or
published by or on behalf of Afren in connection with the Placing (together the
"Placing Documents"), is or has become untrue, incorrect or misleading in any
respect, or any matter has arisen, which would, if the Placing were made at that
time, constitute a material omission from the Placing Documents, or any of them,
and which the Joint Bookrunners consider to be material in the context of the
Placing or the underwriting of the Placing Shares, Admission or any of the
transactions contemplated by the Placing Agreement; or
(c) in the opinion of the Joint Bookrunners, there having been, prior to
Admission, no material adverse change in, or any development involving a
prospective material adverse change in or affecting the condition, financial,
operational, legal or otherwise, or in the earnings, management, business
affairs, business prospects of Afren or any member of the Afren group of
companies, whether or not arising in the ordinary course of business; or
(d) there has occurred (i) any material adverse change in the financial
markets in the United States, the United Kingdom, member states of the European
Union or in the international financial markets, (ii) any outbreak or escalation
of hostilities, act of terrorism or war or other calamity or crisis or (iii) any
change or development involving a prospective change in national or
international political, financial or economic conditions, or exchange rates or
exchange controls, in each case the effect of which is such as to make it, in
the judgment of the Joint Bookrunners, impracticable or inadvisable to market
the Placing Shares or to enforce contracts for the sale of the Placing Shares;
or
(e) trading in any shares of the Company has been suspended or limited by the
London Stock Exchange, on any exchange or over the counter market, or if trading
generally on the American Stock Exchange, the New York Stock Exchange, the
NASDAQ National Market, the London Stock Exchange or AIM has been suspended or
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of such exchanges or by such system
or by order of the regulatory authorities of the United Kingdom, the United
States, or any other governmental or self-regulatory authority, or a material
disruption has occurred in commercial banking or shares settlement or clearance
services in the United Kingdom, the United States or in Europe; or
(f) a banking moratorium has been declared by the authorities of any of the
United Kingdom, the United States, the State of New York or any other member
state of the EEA; or
(g) there is the occurrence of an adverse change (or a prospective adverse
change) in UK taxation affecting Ordinary Shares or the transfer of such shares
or exchange controls are imposed by the United Kingdom, the United States or any
other member state of the EEA;
Upon such termination, the parties to the Placing Agreement shall be released
and discharged (except for any liability arising before or in relation to such
termination) from their respective obligations under or pursuant to the Placing
Agreement subject to certain exceptions.
By participating in the Placing, Placees agree that the exercise by the Joint
Bookrunners of any right of termination or other discretion under the Placing
Agreement shall be within the absolute discretion of the Joint Bookrunners and
that they need not make any reference to Placees and that they shall have no
liability to Placees whatsoever in connection with any such exercise or failure
so to exercise.
No prospectus
No prospectus is required to be or has been published in order to effect the
sale of shares in the Placing. Notwithstanding that a prospectus is anticipated
to be approved as soon as practicable following the GM by the FSA (in accordance
with the UK Financial Services and Markets Act 2000) in relation to the
Company's application for admission of its ordinary shares to the Official List
and to trading on the Main Market (including in order to bring the Placing
Shares to Admission), Placees' commitments will be made solely on the basis of
the information contained in the announcements (including the Appendices and any
Agreed Offering Documents as defined below) released by Afren today.
Each Placee, by accepting a participation in the Placing, agrees that the
content of this announcement (including the Appendices) is exclusively the
responsibility of Afren and confirms that it has neither received nor relied on
any other information, representation, warranty, or statement made by or on
behalf of Afren, Morgan Stanley,Merrill Lynch, Jefferies, Nomura or Evolution or
any other person (save for any other offering document it may receive from
Afren, which shall also be exclusively the responsibility of Afren ("Agreed
Offering Documents")) and none of Merrill Lynch, Morgan Stanley, Jefferies,
Nomura, Evolution or Afren, nor any other person will be liable for any Placee's
decision to participate in the Placing based on any other information,
representation, warranty or statement which the Placees may have obtained or
received. Each Placee acknowledges and agrees that it has relied on its own
investigation of the business, financial or other position of Afren in accepting
a participation in the Placing. Nothing in this paragraph shall exclude the
liability of any person for fraudulent misrepresentation.
Registration and settlement
Settlement of transactions in the Placing Shares following Admission will take
place within CREST, subject to certain exceptions. Afren reserves the right to
require settlement for and delivery of the Placing Shares (or a portion thereof)
to Placees in certificated form if, in the opinion of the Joint Bookrunners,
delivery or settlement is not possible or practicable within the CREST system or
would not be consistent with the regulatory requirements in the Placee's
jurisdiction.
Following the close of the Bookbuild for the Placing, each Placee allocated
Placing Shares in the Placing will be sent a contract note stating the number of
Placing Shares to be allocated to it at the Placing Price and settlement
instructions.
Each Placee agrees that it will do all things necessary to ensure that delivery
and payment is completed in accordance with the standing CREST or certificated
settlement instructions that it has in place with Merrill Lynch, Morgan Stanley
Jefferies, Nomura, Evolution (as the case may be).
Afren will deliver the Placing Shares to a CREST account operated by Merrill
Lynch as agent for Afren and Merrill Lynch will enter its delivery (DEL)
instruction into the CREST system. The input to CREST by a Placee of a matching
or acceptance instruction will then allow delivery of the relevant Placing
Shares to that Placee against payment.
It is expected that settlement will take place on or around 3 December 2009 on a
delivery versus payment basis.
Interest is chargeable daily on payments not received from Placees on the due
date in accordance with the arrangements set out above at the rate of two
percentage points above LIBOR as determined by Merrill Lynch.
Each Placee is deemed to agree that, if it does not comply with these
obligations, Afren may sell any or all of the Placing Shares allocated to that
Placee on such Placee's behalf and retain from the proceeds, for Afren's account
and benefit, an amount equal to the aggregate amount owed by the Placee plus any
interest due. The relevant Placee will, however, remain liable for any shortfall
below the aggregate amount owed by it and may be required to bear any stamp duty
or stamp duty reserve tax (together with any interest or penalties) which may
arise upon the sale of such Placing Shares on such Placee's behalf.
If Placing Shares are to be delivered to a custodian or settlement agent,
Placees should ensure that the trade confirmation is copied and delivered
immediately to the relevant person within that organisation. Insofar as Placing
Shares are registered in a Placee's name or that of its nominee or in the name
of any person for whom a Placee is contracting as agent or that of a nominee for
such person, such Placing Shares should, subject as provided below, be so
registered free from any liability to UK stamp duty or stamp duty reserve tax.
Placees will not be entitled to receive any fee or commission in connection with
the Placing.
Representations and warranties
By participating in the Placing each Placee (and any person acting on such
Placee's behalf) acknowledges, undertakes, represents, warrants and agrees (as
the case may be) the following. It:
1. represents and warrants that it has read this announcement, including the
Appendices and any Agreed Offering Documents, in its entirety;
2. acknowledges and agrees that no listing particulars or prospectus has
been or will be prepared in connection with the Placing;
3. acknowledges that the ordinary shares in the capital of Afren are listed
on the AIM market of the London Stock Exchange, and Afren is therefore required
to publish certain business and financial information in accordance with the AIM
Rules for Companies, and that it is able to obtain or access such information
without undue difficulty, and is able to obtain access to such information or
comparable information concerning any other publicly traded company, without
undue difficulty;
4. acknowledges that none of Merrill Lynch, Morgan Stanley, Jefferies,
Nomura, Evolution or Afren nor any of their respective affiliates or any person
acting on behalf of any of them has provided, nor will they provide, it with any
material regarding the Placing Shares or Afren or any other person other than
this announcement and any Agreed Offering Document; nor has it requested any of
Merrill Lynch, Morgan Stanley, Jefferies, Nomura, Evolution, Afren, or any of
their respective affiliates or any person acting on behalf of any of them to
provide it with any such information;
5. acknowledges that the Placing Shares have not been and will not be
registered under the securities legislation of the United States, Australia,
Canada, South Africa or Japan and, subject to certain exceptions, may not be
offered, sold, transferred, delivered or distributed, directly or indirectly, in
or into those jurisdictions;
6. represents and warrants that (i) it is not within the United States; (ii)
it is not within Australia, Canada, South Africa, Japan or any other
jurisdiction in which it is unlawful to make or accept an offer to acquire the
Placing Shares; (iii) it is not acquiring the Placing Shares for the account of
any person who is located in the United States, unless the instruction to
acquire was received from a person outside the United States and the person
giving such instruction has confirmed that it has the authority to give such
instruction, and that either (a) it has investment discretion over such account
or (b) it is an investment manager or investment company and, in the case of
each of (a) and (b), that it is acquiring the Placing Shares in an "offshore
transaction" (within the meaning of Regulation S under the Securities Act); and
(iv) it is not acquiring the Placing Shares with a view to the offer, sale,
resale, transfer, delivery or distribution, directly or indirectly, of any such
Placing Shares into the United States or any other jurisdiction referred to in
(ii) above;
7. acknowledges that the content of this announcement is exclusively the
responsibility of Afren and that none of Merrill Lynch, Morgan Stanley,
Jefferies, Nomura, Evolution or any person acting on their behalf has or shall
have any liability for any information, representation or statement contained in
this announcement, any Agreed Offering Document or any information previously
published by or on behalf of Afren and will not be liable for any Placee's
decision to participate in the Placing based on any information, representation
or statement contained in this announcement, any Agreed Offering Document or
otherwise. Each Placee further represents, warrants and agrees that the only
information on which it is entitled to rely and on which such Placee has relied
in committing itself to subscribe for the Placing Shares is contained in this
announcement, any Agreed Offering Document and any information previously
published by Afren by notification to a Regulatory Information Service, such
information being all that it deems necessary to make an investment decision in
respect of the Placing Shares and that it has neither received nor relied on any
other information given or representations, warranties or statements made by
Merrill Lynch, Morgan Stanley, Jefferies, Nomura, Evolution or Afren and none of
Merrill Lynch, Morgan Stanley, Jefferies, Nomura, Evolution or Afren will be
liable for any Placee's decision to accept an invitation to participate in the
Placing based on any other information, representation, warranty or statement.
Each Placee further acknowledges and agrees that it has relied on its own
investigation of the business, financial or other position of Afren in deciding
to participate in the Placing;
8. acknowledges that none of Merrill Lynch, Morgan Stanley, Jefferies,
Nomura, Evolution or any person acting on behalf of them or any of their
respective affiliates has or shall have any liability for any publicly available
or filed information, or any representation relating to Afren, provided that
nothing in this paragraph excludes the liability of any person for fraudulent
misrepresentation made by that person;
9. represents and warrants that neither it, nor the person specified by it
for registration as a holder of Placing Shares is, or is acting as nominee or
agent for, and that the Placing Shares will not be allotted to, a person who is
or may be liable to stamp duty or stamp duty reserve tax under any of sections
67, 70, 93 and 96 of the Finance Act 1986 (depositary receipts and clearance
services);
10. represents and warrants that it has complied with its obligations in
connection with money laundering and terrorist financing under the Proceeds of
Crime Act 2002, the Terrorism Act 2000, the Terrorism Act 2006 and the Money
Laundering Regulations 2007 (the "Regulations") and, if making payment on behalf
of a third party, that satisfactory evidence has been obtained and recorded by
it to verify the identity of the third party as required by the Regulations;
11. if a financial intermediary, as that term is used in Article 3(2) of EU
Directive 2003/71/EC (the "Prospectus Directive") (including any relevant
implementing measure in any member state), represents and warrants that the
Placing Shares purchased by it in the Placing will not be acquired on a
non-discretionary basis on behalf of, nor will they be acquired with a view to
their offer or resale to, persons in a member state of the European Economic
Area which has implemented the Prospectus Directive other than to qualified
investors, or in circumstances in which the prior consent of Merrill Lynch,
Morgan Stanley, Jefferies, Nomura or Evolution has been given to the proposed
offer or resale;
12. represents and warrants that it has not offered or sold and, prior to
the expiry of a period of six months from Admission, will not offer or sell any
Placing Shares to persons in the United Kingdom, except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted and which will not result in
an offer to the public in the United Kingdom within the meaning of section 85(1)
of the Financial Services and Markets Act 2000 ("FSMA");
13. represents and warrants that it has not offered or sold and will not
offer or sell any Placing Shares to persons in the European Economic Area prior
to Admission except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their business or otherwise in circumstances which have not
resulted in and which will not result in an offer to the public in any member
state of the European Economic Area within the meaning of the Prospectus
Directive (including any relevant implementing measure in any member state);
14. represents and warrants that it has only communicated or caused to be
communicated and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity (within the meaning of
section 21 of FSMA) relating to the Placing Shares in circumstances in which
section 21(1) of FSMA does not require approval of the communication by an
authorised person;
15. represents and warrants that it has complied and will comply with all
applicable provisions of FSMA with respect to anything done by it in relation to
the Placing Shares in, from or otherwise involving, the United Kingdom;
16. (A) represents and warrants that it is a person falling within Article
19(5) and / or Article 49(2)(a) to (d) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 or is a person to whom this announcement
may otherwise be lawfully communicated; and
(B) acknowledges that any offer of Placing Shares may only be directed at
persons to the extent in member states of the European Economic Area who are
"qualified investors" within the meaning of Article 2(1)(e) of the Prospectus
Directive and represents and agrees that it is such a qualified investor;
17. represents and warrants that it is entitled to purchase the Placing
Shares under the laws of all relevant jurisdictions which apply to it, and that
its subscription/purchase of the Placing Shares will be in compliance with
applicable laws and regulations in the jurisdiction of its residence, the
residence of the Company, or otherwise;
18. undertakes that it (and any person acting on its behalf) will make
payment for the Placing Shares allocated to it in accordance with this
announcement on the due time and date set out herein, failing which the relevant
Placing Shares may be placed with other subscribers or sold as Merrill Lynch and
Morgan Stanley may in their discretion determine and without liability to such
Placee;
19. acknowledges that its allocation (if any) of Placing Shares will
represent a maximum number of Placing Shares which it will be entitled, and
required, to subscribe for, and that Afren may call upon it to subscribe for a
lower number of Placing Shares (if any), but in no event in aggregate more than
the aforementioned maximum;
20. acknowledges that none of Merrill Lynch, Morgan Stanley, Jefferies,
Nomura or Evolution or any of their respective affiliates, or any person acting
on their behalf, is making any recommendations to it, advising it regarding the
suitability of any transactions it may enter into in connection with the Placing
and that participation in the Placing is on the basis that it is not and will
not be a client of Merrill Lynch, Morgan Stanley, Jefferies, Nomura or Evolution
and that Merrill Lynch, Morgan Stanley, Jefferies, Nomura and Evolution do not
have any duties or responsibilities to it for providing the protections afforded
to Merrill clients or customers of Merrill Lynch, Morgan Stanley, Jefferies,
Nomura or Evolution or for providing advice in relation to the Placing nor in
respect of any representations, warranties, undertakings or indemnities
contained in the Placing Agreement nor for the exercise or performance of any of
its rights and obligations thereunder including any rights to waive or vary any
conditions or exercise any termination right;
21. undertakes that the person whom it specifies for registration as holder
of the Placing Shares will be (i) itself or (ii) its nominee, as the case may
be. None of Merrill Lynch, Morgan Stanley, Jefferies, Nomura, Evolution or Afren
will be responsible for any liability to stamp duty or stamp duty reserve tax
resulting from a failure to observe this requirement. Each Placee and any person
acting on behalf of such Placee agrees to participate in the Placing and it
agrees to indemnify Afren, Morgan Stanley, Merrill Lynch. Jefferies, Nomura and
Evolution in respect of the same on the basis that the Placing Shares will be
allotted to the CREST stock account of Merrill Lynch who will hold them as
nominee on behalf of such Placee until settlement in accordance with its
standing settlement instructions;
22. acknowledges that these terms and conditions and any agreements entered
into by it pursuant to these terms and conditions and any non-contractual
obligations arising out of or in connection with such agreements shall be
governed by and construed in accordance with the laws of England and Wales and
it submits (on behalf of itself and on behalf of any person on whose behalf it
is acting) to the exclusive jurisdiction of the English courts as regards any
claim, dispute or matter arising out of any such contract, except that
enforcement proceedings in respect of the obligation to make payment for the
Placing Shares (together with any interest chargeable thereon) may be taken by
Afren, Morgan Stanley, Merrill Lynch, Jefferies, Nomura or Evolution in any
jurisdiction in which the relevant Placee is incorporated or in which any of its
securities have a quotation on a recognised stock exchange;
23. acknowledges that Merrill Lynch, Morgan Stanley, Jefferies, Nomura and
Evolution will rely upon the truth and accuracy of the representations,
warranties and acknowledgements set forth herein and which are irrevocable and
it irrevocably authorises Merrill Lynch, Morgan Stanley, Jefferies, Nomura and
Evolution to produce this announcement, pursuant to, in connection with, or as
may be required by any applicable law or regulation, administrative or legal
proceeding or official inquiry with respect to the matters set forth herein;
24. agrees to indemnify and hold Afren, Merrill Lynch, Morgan Stanley,
Jefferies, Nomura and Evolution and their respective affiliates harmless from
any and all costs, claims, liabilities and expenses (including legal fees and
expenses) arising out of or in connection with any breach of the
representations, warranties, acknowledgements, agreements and undertakings in
this Appendix and further agrees that the provisions of this Appendix shall
survive after completion of the Placing;
25. represents and warrants that it will acquire any Placing Shares
purchased by it for its account or for one or more accounts as to each of which
it exercises sole investment discretion and it has full power to make the
acknowledgements, representations and agreements herein on behalf of each such
account;
26. acknowledges that its commitment to subscribe for Placing Shares on the
terms set out herein and in the contract note will continue notwithstanding any
amendment that may in future be made to the terms of the Placing and that
Placees will have no right to be consulted or require that their consent be
obtained with respect to Afren's conduct of the Placing. The foregoing
representations, warranties and confirmations are given for the benefit of Afren
as well as Merrill Lynch, Morgan Stanley, Jefferies, Nomura and Evolution. The
agreement to settle a Placee's subscription (and/or the subscription of a person
for whom such Placee is contracting as agent) free of stamp duty and stamp duty
reserve tax depends on the settlement relating only to the subscription by it
and/or such person direct from Afren for the Placing Shares in question. Such
agreement assumes, and is based on a warranty from each Placee, that neither it,
nor the person specified by it for registration as holder, of Placing Shares is,
or is acting as nominee or agent for, and that the Placing Shares will not be
allotted to, a person who is or may be liable to stamp duty or stamp duty
reserve tax under any of sections 67, 70, 93 and 96 of the Finance Act 1986
(depositary receipts and clearance services). If there are any such
arrangements, or the settlement relates to any other dealing in the Placing
Shares, stamp duty or stamp duty reserve tax may be payable. In that event the
Placee agrees that it shall be responsible for such stamp duty or stamp duty
reserve tax, and none of Afren, Morgan Stanley, Merrill Lynch, Jefferies, Nomura
or Evolution shall be responsible for such stamp duty or stamp duty reserve tax.
If this is the case, each Placee should seek its own advice and notify Merrill
Lynch accordingly;
27. understands that no action has been or will be taken by any of the
Company, Merrill Lynch, Morgan Stanley, Jefferies, Nomura or Evolution or any
person acting on behalf of Afren, Merrill Lynch, Morgan Stanley, Jefferies,
Nomura or Evolution that would, or is intended to, permit a public offer of the
Placing Shares in any country or jurisdiction where any such action for that
purpose is required;
28. in making any decision to subscribe for Placing Shares, confirms that it
has knowledge and experience in financial, business and international investment
matters as is required to evaluate the merits and risks of subscribing for
Placing Shares. It further confirms that it is experienced in investing in
securities of this nature in this sector and is aware that it may be required to
bear, and is able to bear, the economic risk of, and is able to sustain a
complete loss in connection with the Placing. It further confirms that it relied
on its own examination and due diligence of the Company and its associates taken
as a whole, and the terms of the Placing, including the merits and risks
involved;
29. warrants and represents that it has (a) made its own assessment and
satisfied itself concerning legal, regulatory, tax, business and financial
considerations in connection herewith to the extent it deems necessary; (b) had
access to review publicly available information concerning the Afren group that
it considers necessary or appropriate and sufficient in making an investment
decision; (c) reviewed such information as it believes is necessary or
appropriate in connection with its subscription or purchase of the Placing
Shares; and (d) made its investment decision based upon its own judgement, due
diligence and analysis and not upon any view expressed or information provided
by or on behalf of Merrill Lynch, Morgan Stanley, Jefferies, Nomura or
Evolution;
30. understands and agrees that it may not rely on any investigation that
Merrill Lynch, Morgan Stanley, Jefferies, Nomura or Evolution or any person
acting on their behalf may or may not have conducted with respect to the
Company, its group, or the Placing and Merrill Lynch, Morgan Stanley, Jefferies,
Nomura and Evolution have not made any representation to it, express or implied,
with respect to the merits of the Placing, the subscription or purchase of the
Placing Shares, or as to the condition, financial or otherwise, of the Company,
its group, or as to any other matter relating thereto, and nothing herein shall
be construed as a recommendation to it to purchase the Placing Shares. It
acknowledges and agrees that no information has been prepared by Merrill Lynch,
Morgan Stanley, Jefferies, Nomura, Evolution, or the Company for the purposes of
this Placing;
31. accordingly it acknowledges and agrees that it will not hold Merrill
Lynch, Morgan Stanley, Jefferies, Nomura or Evolution or any of their respective
associates or any person acting on their behalf responsible or liable for any
misstatements in or omission from any publicly available information relating to
the Company's group or information made available (whether in written or oral
form) in presentations or as part of roadshow discussions with investors
relating to the Company's group (the "Information") and that none of Merrill
Lynch, Morgan Stanley, Jefferies, Nomura or Evolution or any person acting on
their behalf, makes any representation or warranty, express or implied, as to
the truth, accuracy or completeness of such Information or accepts any
responsibility for any of such Information; and
32. acknowledges and agrees that in connection with the Placing, each of
Merrill Lynch, Morgan Stanley, Nomura, Evolution, Jefferies and any of their
respective affiliates acting as an investor for its own account may take up
shares in the Company and in that capacity may retain, purchase or sell for its
own account such shares in the Company and any securities of the Company or
related investments and may offer or sell such securities or other investments
otherwise than in connection with the Placing. Accordingly, references in this
announcement or the Agreed Offering Documents to shares being issued, offered or
placed should be read as including any issue, offering or placement of such
shares in the Company to any of Merrill Lynch, Morgan Stanley, Nomura, Evolution
and Jefferies and any relevant affiliate acting in such capacity. None of
Merrill Lynch, Morgan Stanley, Nomura, Evolution and Jefferies intends to
disclose the extent of any such investment or transactions otherwise than in
accordance with any legal or regulatory obligations to do so.
By participating in the Placing, each Placee (and any person acting on Placee's
behalf) subscribing for Placing Shares acknowledges and agrees that: (i) the
Placing Shares are being offered and sold only pursuant to Regulation S under
the Securities Act in a transaction not involving a public offering of
securities in the United States and the Placing Shares have not been and will
not be registered under the Securities Act; (ii) it is not within the United
States; (iii) it is not acquiring the Placing Shares for the account of any
person who is located in the United States, unless the instruction to acquire
was received from a person outside the United States and the person giving such
instruction has confirmed that it has the authority to give such instruction,
and that either (a) it has investment discretion over such account or (b) it is
an investment manager or investment company and, in the case of each of (a) and
(b), that it is acquiring the Placing Shares in an "offshore transaction"
(within the meaning of Regulation S under the Securities Act); and (iv) it is
not acquiring the Placing Shares with a view to the offer, sale, resale,
transfer, delivery or distribution, directly or indirectly, of any such Placing
Shares into the United States.
Placees acknowledge that their acceptance is not by way of acceptance of any
public offer but is by way of a collateral contract and as such section 87Q of
the UK Financial Services and Markets Act 2000 does not entitle any Placee to
withdraw in the event that the Company publishes a supplementary prospectus in
connection with the Company's application for admission of its ordinary shares
to the Official List and to trading on the Main Market. If, however, any Placee
is entitled to withdraw, by accepting an obligation to subscribe for Placing
Shares, such Placee agrees to confirm its acceptance of the offer on the terms
contained in this announcement on the same terms immediately after such right of
withdrawal arises.
In addition, Placees should note that they will be liable for any stamp duty and
all other stamp, issue, securities, transfer, registration, documentary or other
duties or taxes (including any interest, fines or penalties relating thereto)
payable outside the United Kingdom by them or any other person on the
subscription by them of any Placing Shares or the agreement by them to subscribe
for any Placing Shares.
Each Placee and any person acting on behalf of each Placee acknowledges and
agrees that Merrill Lynch, Morgan Stanley, Jefferies, Nomura and Evolution or
any of their affiliates may, at their absolute discretion, agree to become a
Placee in respect of some or all of the Placing Shares.
When a Placee or person acting on behalf of the Placee is dealing with Merrill
Lynch, Morgan Stanley, Jefferies, Nomura, Evolution, any money held in an
account with Merrill Lynch, Morgan Stanley, Jefferies, Nomura, Evolution on
behalf of the Placee and/or any person acting on behalf of the Placee will not
be treated as client money within the meaning of the rules and regulations of
the FSA made under FSMA. The Placee acknowledges that the money will not be
subject to the protections conferred by the client money rules; as a
consequence, this money will not be segregated from Merrill Lynch's, Morgan
Stanley's, Jefferies', Nomura's or Evolution's money in accordance with the
client money rules and will be used by Merrill Lynch, Morgan Stanley, Jefferies,
Nomura and Evolution in the course of its own business; and the Placee will rank
only as a general creditor of Merrill Lynch, Morgan Stanley, Jefferies, Nomura
or Evolution (as the case may be).
All times and dates in this announcement may be subject to amendment. Merrill
Lynch and Morgan Stanley shall notify the Placees and any person acting on
behalf of the Placees of any changes.
Past performance is no guide to future performance and persons needing advice
should consult an independent financial adviser.
APPENDIX II
FURTHER INFORMATION ON AFREN
Overview
Afren is an independent oil and gas exploration and production company that was
founded in 2004 and admitted to AIM on 14 March 2005. With a focus purely on
Africa, the founding vision to become the leading pure-play African independent
exploration and production company was based on a clear and differentiated
strategy of utilising relationships of the Board and management to partner with
indigenous companies, national oil companies and host governments, in growing an
upstream portfolio of significant scale.
Adhering to the founding strategy Afren has today assembled a diversified
portfolio of 16 assets across six African countries: Nigeria, Côte d'Ivoire,
Ghana, Congo Brazzaville, Gabon and offshore Nigeria and São Tomé & Príncipe
JDZ. This includes a farm-out agreement entered into with Addax in relation to
Okwok, which is subject to completion. Afren's portfolio today encompasses
producing, development, appraisal and exploration opportunities that provide a
balanced platform and opportunity set from which to deliver further significant
organic growth into the foreseeable future.
Afren is currently producing oil from the Okoro field in Nigeria and oil and gas
from the Lion and Panthère fields in Block CI-11 in Côte d'Ivoire, as well as
processing gas at the Lion Gas Plant in Côte d'Ivoire. The Group's drilling
programme will be targeting a gross un-risked resource base of 686 mmboe in
2011.
Summary of Strengths, Strategy and Prospects
Afren's vision is to strengthen its position as the leading African independent
oil and gas exploration and production company. The Directors believe that
Afren's key strengths and strategic advantages are:
An exclusive focus on Africa
Over the past two decades, Africa's proven oil reserves have grown by over 100
per cent. (Source: BP Statistical Review of World Energy (June 2009)).
Sub-Saharan Africa has witnessed a 165 per cent. reserves growth over the same
period (Source: BP Statistical Review of World Energy (June 2009)). No other
region has matched this growth statistic, with many established producing
regions showing a contraction in reserves base over the same period. According
to the BP Statistical Review of World Energy (June 2009), in this region there
is:
? an estimated 52 billion barrels of proved oil reserves, of which 70 per
cent. is in Nigeria; and
? an estimated 227 tcf of gas reserves, of which 81 per cent. is in Nigeria.
Management considers that in this region there is:
? a fiscally stable environment and high margin barrels;
? an established oil exploration and production industry, at an earlier stage
of maturity than other major hydrocarbon provinces;
? significant exploration prospectivity with positive early indications of a
secondary market emerging in the Gulf of Guinea; and
? significant opportunities to commercialise gas.
Currently, approximately 15 per cent. of oil and gas supplied to the US
originates from West Africa, and this is projected by industry sources to
increase to 30 per cent. over the next decade highlighting the future dependence
on the West African hydrocarbon resource base, a region in which Afren is
competitively advantaged through its indigenous identity and strong access to
opportunities through the Board and management (Source: US Department of Energy,
Energy Information Administration).
Strong African representation on the Board and management
Afren benefits from an experienced Board and senior management with extensive
African experience and relationships, including:
? Afren's Chairman Egbert Imomoh, a Nigerian national, who has over 30 years
working experience including as deputy managing director of Shell Nigeria with
responsibility for more than one million bopd of operated production. Mr.
Imomoh has a long history of managing oil and gas operations in Africa, allowing
him to develop strong relationships with partner companies, government and
authorities, indigenous companies and community relations.
? The Group's Chief Executive, Osman Shahenshah, with more than 20 years
experience in oil, gas and energy corporate finance. His track record in oil
and gas financing, acquisitions and strategic advisory includes advising on the
financing of Mobil's Oso asset (Nigeria), the Escravos gas flaring reduction
project (Nigeria), a US$1.6 billion financing at N'Kossa (Congo Brazzaville) and
the financing of Block CI-11 (while at IFC).
? Afren's Chief Operating Officer, Shahid Ullah, who has spent over 15 years
working in Nigeria and other west African countries. Mr. Ullah was responsible
for and co-ordinated the development of Etame (Gabon) and the Abana field (Moni
Pulo, Nigeria).
? Constantine Ogunbiyi, a Nigerian national and an Executive Director, who
has extensive experience of African acquisitions and structured and project
financings, both with Afren and in his previous career as a lawyer with major
international law firms.
The extensive experience and relationships of the Board are complemented by
members of Afren's senior management team who are based in Nigeria and Côte
d'Ivoire, including operational managers and financial controllers. Afren
benefits from fully staffed offices in all operational locations, covering the
Company's operational requirements. These offices are staffed primarily by
locally-based employees, further evidencing Afren's commitment to Africa. This
'on the ground' presence provides the Group with direct insight into local
issues, as well as allowing the Group to react to operational matters promptly.
An established operational track record
Afren is operator on all of its core development assets and of its producing
assets in Côte d'Ivoire. Afren is also technical advisor to Amni International
Petroleum Development Company Limited ("Amni") at the producing Okoro field and
to Oriental at the Ebok field. During 2008, Afren successfully operated and
drilled a total of nine wells in Nigeria and Ghana and maintained an excellent
environmental health and safety record. In September 2009, Afren commenced a
multi-well appraisal and development drilling campaign at the Ebok field in
Nigeria.
The Okoro field in Nigeria marked Afren's maiden operated full field
development, in a period of under two years from signing the agreement to first
oil. The first half of 2009 saw production from the field ahead of pre drill
expectations of 19,327 bopd and a process uptime in excess of 95 per cent.
Proved reserves and production growth
At the time of its initial public offering in March 2005, Afren's sole oil and
gas interest was a 4.41 per cent. interest in the JDZ Block 1, with no reserves.
Afren has since established a probable contingent reserves base of 42.5 mmboe
and prospective resources base of 350 mmboe.
Afren is actively engaged in exploration activities in all six African countries
in which it has a presence. Through a selective exploration strategy, Afren is
exposed to the high impact Cretaceous fairway along the West African transform
margin, where it has secured the Keta Block in Ghana and Block CI-01 in Côte
d'Ivoire (attractive prospectivity has been identified in both the primary
Cretaceous intervals and younger Tertiary intervals), and selected
under-explored basins elsewhere in West Africa where working hydrocarbon systems
have been established and the potential for material discoveries exists (for
example, the Vandji play in Congo Brazzaville).
Over the period to 2011 Afren aims to drill up to eight appraisal and
exploration wells across its portfolio, targeting gross volumes of 686 mmboe.
The Group is currently producing approximately 27,686 boe per day of oil,
natural gas and natural gas liquids from the Okoro field in Nigeria, Block CI-11
and the Lion Gas Plant in Côte d'Ivoire respectively. At the Okoro field, the
year to date production to 31 October 2009 was 5,714,840 barrels of oil (gross),
equivalent to an average daily production rate of 18,800 bopd. The Ebok
development is expected to deliver 15,000 bopd in the first half of 2010,
increasing to 35,000 bopd at the end of first phase drilling.
The Group is targeting production of up to 100,000 bopd by the end of 2012 from
Okoro, Ebok and Block CI-11 and other existing appraisal or development assets
which can be converted into production assets and potential acquisitions.
Continued growth through partnerships and acquisitions
Afren's significant reserves growth to date has been achieved through a
combination of accessing and developing discovered but undeveloped assets
through partnerships with indigenous companies (in relation to Okoro and Ebok)
across the Gulf of Guinea (Nigeria in particular) and selective acquisitions
where Afren is strategically advantaged (for example, the acquisition of Devon
Energy's assets in Côte d'Ivoire and Ghana).
The discovered but undeveloped oil and gas fields across Sub-Saharan Africa,
more specifically in Nigeria, offer a rich opportunity set. With the vast
majority of these fields residing as "fallow" assets in the major oil companies'
portfolios, they typically fall below the materiality threshold of the major oil
companies, given a growing focus on exploring the deeper water regions for very
large discoveries.
There are encouraging signs that indicate a secondary asset market is emerging
in the Gulf of Guinea, as certain governments' emphasis turns to realising the
full benefit of the Gulf's natural resources and encouraging greater local and
indigenous participation in order to achieve this. Attractive acreage is
increasingly being awarded to indigenous companies who, in turn, are looking to
partner with independent oil companies that can bring both technical expertise
and financial resources. Afren intends to continue its partnership based
approach in growing the reserves base.
In addition, to complement its fallow field strategy and in direct response to
the Nigerian government's objective to increase the level of local participation
in the oil and gas sector, Afren has established an indigenous company, First
Hydrocarbon Nigeria Limited ("FHN") with the support of two leading Nigerian
financial institutions First City Monument Bank ("FCMB") and Guaranty Trust Bank
Plc. FHN will acquire substantial oil and gas assets in Nigeria from the major
international oil companies' portfolios. Over time, FHN will be owned by a wider
Nigerian stakeholder base, ensuring diversity of ownership and a reflection of
Afren's Nigerian focus.
History of the Group
Afren was incorporated in December 2004 and its share capital was admitted to
trading on AIM in March 2005. Afren has since developed a diversified portfolio
of 16 assets comprising production, near term development and high impact
exploration assets across Côte d'Ivoire, Nigeria, offshore Nigeria and São Tomé
& Príncipe JDZ, Ghana, Congo and Gabon.
The Group's first asset, acquired on 8 March 2005, was an indirect 4.41 per
cent. interest in JDZ Block 1 in offshore Nigeria and São Tomé & Príncipe JDZ
through a 49 per cent. equity interest in Dangote Energy Equity Resources Ltd
("DEER"). This acquisition gave Afren its foothold in offshore Nigeria and São
Tomé & Príncipe JDZ and its proven deep water reserves.
On 18 July 2005, Afren acquired from Ascent Resources plc a 12.86 per cent.
interest in the Iris Marin licence in Gabon. This acquisition provided Afren
with access to the Gamba sandstone reservoir which is productive in the nearby
Etame field. In April 2007 Afren increased its equity interest in the Iris Marin
licence area from 12.86 per cent. to 16.67 per cent. following the withdrawal of
Petroleum Oil & Gas Corporation Pty Limited of South Africa.
On 24 March 2006, Afren, Afren Energy Resources Limited ("AERL") and Amni signed
a production sharing and technical services agreement for the development of the
Okoro and Setu fields in offshore Nigeria.
On 3 January 2007, Afren acquired a 20 per cent. interest in the Ibekelia TEA
licence area. The Ibekelia licence is located adjacent to the Gamba, Ivinga and
Olowi oilfields.
On 3 April 2007, AERL on behalf of itself and Amni signed a contract with Bumi
Armada Berhad (which was later amended and novated) for the use of the Armada
Perkasa FPSO for an initial five-year term with an option to extend. The Armada
Perkasa FPSO has a storage capacity of 380,000 barrels and a processing capacity
of 27,000 bopd.
On 12 November 2007, Afren entered into a share purchase agreement with Devon
Energy to acquire Devon Energy Ghana Holdings Limited, which indirectly held
(together with Encana International (Ghana) Limited) a 90 per cent. working
interest and operatorship of the Keta Block, located offshore eastern Ghana in
the Volta Basin.
On 20 February 2008, AGER through a joint venture agreement with GEC, signed
production sharing contracts for OPL 907 and OPL 917 located in onshore Nigeria
within the Anambra Basin. Under the terms of the production sharing contracts,
AGER took a 41 per cent. interest in OPL 907 and a 42 per cent. interest in OPL
917, and AGER acts as operator of both assets. The joint venture agreement
between Afren and GEC defines the commercial terms under which Afren
participates with GEC in the exploration and development of the two licences.
Afren's interests are held through AGER in which Afren holds an 80 per cent.
economic interest.
On 5 March 2008, Devon Energy, Devon International Holdings Ltd, Afren C1 (II)
Limited and Afren entered into a share purchase agreement pursuant to which on
24 September 2008, Afren CI (II) Limited acquired Devon Energy and Devon
International Holdings Ltd's interests in Côte d'Ivoire comprising (i) a 47.9592
per cent. working interest and operatorship of the producing Block CI-11, (ii) a
65 per cent. direct interest and operatorship with rights over an additional 15
per cent. interest in the undeveloped Block CI-01, and (iii) a 100 per cent.
interest in the onshore Lion Gas Plant. The consideration for the acquisition
was US$184 million (after working capital adjustments). The transaction yielded
immediate production, complementing production start-up at the Okoro field in
Nigeria, increased probable reserves by 67 per cent. to 70 million boe and
represented a strategic new entry into Côte d'Ivoire.
On 31 March 2008, Afren Resources signed a farm-in agreement with Oriental
jointly to develop the Ebok field located offshore South-East Nigeria. Oriental
had been awarded a 100 per cent. interest and operatorship of Ebok by the
Mobil/NNPC Joint Venture in May 2007.
On 3 April 2008, Afren announced that it had raised GBP118.75 million pursuant
to a placing with institutional investors of 95 million new ordinary shares of
one penny each in the capital of the Company at 125 pence per share.
On 10 June 2008, Afren announced first oil from the Okoro field in Nigeria.
On 8 October 2008, Afren entered into a strategic alliance agreement with Sojitz
Corporation ("Sojitz") jointly to pursue significant oil and gas acquisition
opportunities in Africa. Under the terms of the agreement, the alliance will
terminate on the earlier of 8 October 2011 or the date upon which Sojitz has
invested a total of US$500 million in joint acquisitions. Sojitz is to provide
financial support to the alliance for the purpose of funding material joint
acquisitions, among other things, including by securing funding and credit
support from the Japanese Government.
On 24 October 2008, Afren, through its subsidiary Afren Energy Ghana Limited,
signed a farm-out agreement with Mitsui Ghana in respect of the Keta Block,
pursuant to which on 28 November 2008 Mitsui Ghana acquired a 20 per cent.
participating interest in the petroleum agreement governing the Keta Block
together with a 22.2 per cent. interest in a joint operating agreement with Gulf
in return for a significant contribution to the Cuda-1x exploration well.
On 26 March 2009, Afren announced the successful outcome of the Ebok field
appraisal. An independent assessment of the in-place oil and recoverable oil
reserves from the Ebok field preliminarily confirmed a P50 STOIIP of 148 mmbls
oil for the FB-1 and FB-2 areas of the field. Recoverable reserves were
calculated at 41.2 mmbls. The independent assessor further assigned a 14 mmbls
oil of resources to the FB-1 and FB- field area. An additional 21 mmbls oil of
contingent reserves and 33 mmbls prospective resources were assigned to other
areas of the field including the Ebok West and Ebok North Fault Blocks.
On 15 April 2009, Afren announced that it had raised GBP84.8 million (US$126.3
million) pursuant to a placing with institutional investors of 265 million new
ordinary shares of one penny each in the capital of the Company at 32 pence per
share.
On 3 July 2009, Afren announced that it had established FHN with the support of
two leading Nigerian financial institutions, FCMB and Guaranty Trust Bank Plc.
FHN was established to fulfil the Nigerian Government's criteria for indigenous
operators and is to be used as vehicle to acquire substantial oil and gas assets
in Nigeria, including stakes in assets currently under negotiation, assets that
may become available that are held by international independents and by the
joint ventures between the Nigerian Government and international oil companies,
and assets that may be divested in connection with indigenous licensing rounds.
On 25 August 2009, Afren announced that it had entered into a farm-out agreement
with Addax for the development of the Okwok field, located in OML 67 offshore
Nigeria, in consideration for Afren agreeing to drill one appraisal well in the
farm-out area and paying all costs associated therewith. Under the terms of the
farm-out agreement, Afren as technical adviser, will acquire a 28 per cent.
legal interest and a 70 per cent. effective working interest (before cost
recovery), reverting to 56 per cent. (after cost recovery) pre hurdle point and
35 per cent. (after cost recovery) post hurdle point, subject to gross volumes
lifted. The hurdle point is the period following the cost recovery period when
available petroleum lifted equals US$1.2 billion in value. The assignment of
Addax's interests is not effective until Afren completes the drilling of the
well. Afren is required to have completed the drilling of the well by 31 March
2011. Afren was also granted an option, exercisable within six months after the
drilling of the appraisal well is complete (and, if Afren elects, the production
testing of one or more of the crude oil bearing sections of that well), to
purchase Addax's residual interest in the project.
On 3 November 2009, Afren announced a drilling update on the Ebok-5 appraisal
well and approval by the Department of Petroleum Resources of Phase 1a of the
field development plan for Ebok.
On 4 November 2009, Afren announced an operational update and confirmed its
intention to move to the Official List.
Summary of Reserves and Resources
NSAI has produced a report, dated as of 3 November 2009, on Afren's reserves and
resources. NSAI has prepared its assessment of Afren's asset base as at 30 June
2009 (and 15 October 2009 in respect of the Ebok Field), and has reviewed and
incorporated only field studies and data that were available up to that date.
Afren has provided updated data, including updated performance data for the
Okoro and Setu fields, the Lion and Panthère fields in Block CI-11, the Kudu,
Eland and Ibex fields in CI-01, JDZ Block 1, certain reservoirs in the Ebok
field, the La Noumbi permit, the Iris Marin and Ibekelia licences, the Keta
Block and OPL 310, made available after 30 June 2009 but not in time to
incorporate into NSAI's 15 October 2009 estimates. NSAI has reviewed this data
and has confirmed its estimate of reserves and resources for all of the fields
as at 15 October 2009 has not changed materially from 30 June 2009 and are
therefore still valid as at 15 October 2009. In its internal reserve and
resource estimates, Afren management includes the most current and comprehensive
suite of available data, work and studies.
Reserves
NSAI has estimated the proved, probable and possible reserves to the Afren
interest in the Okoro field located in OML 112, offshore Nigeria, and in the
Lion and Panthère fields located in Block CI-11, offshore Côte d'Ivoire as of 30
June 2009 and to the Afren interest in the Ebok field located in OML 67,
offshore Nigeria and as of 15 October 2009.
The table below sets out NSAI's estimated net oil and gas reserves to Afren's
interest in the following assets as of 30 June 2009 (and 15 October 2009 in
respect of the Ebok field). This information has been extracted without material
adjustment from the NSAI Report.
+-----------------------------------+---------+--------+---------+--------+
| | Afren Effective | Net Entitlement |
| | Working | Reserves(1) |
| | Interest | |
| | Reserves After | |
| | Royalty | |
+-----------------------------------+------------------+------------------+
| Country / Category | Oil | Gas | Oil | Gas |
| |(mmbbl) | (bcf) |(mmbbl) | (bcf) |
+-----------------------------------+---------+--------+---------+--------+
| Offshore Nigeria(4) | | | | |
+-----------------------------------+---------+--------+---------+--------+
| Okoro Field(2) | | | | |
+-----------------------------------+---------+--------+---------+--------+
| Proved (1P) | 8.4 | -(3) | 8.4 | -(3) |
+-----------------------------------+---------+--------+---------+--------+
| Proved + Probable (2P) | 10.4 | -(3) | 10.4 | -(3) |
+-----------------------------------+---------+--------+---------+--------+
| Proved + Probable + Possible (3P) | 13.5 | -(3) | 13.5 | -(3) |
+-----------------------------------+---------+--------+---------+--------+
| Ebok Field(2) | | | | |
+-----------------------------------+---------+--------+---------+--------+
| Proved (1P) | 13.1 | -(3) | 9.7 | -(3) |
+-----------------------------------+---------+--------+---------+--------+
| Proved + Probable (2P) | 19.1 | -(3) | 13.0 | -(3) |
+-----------------------------------+---------+--------+---------+--------+
| Proved + Probable + Possible (3P) | 26.2 | -(3) | 15.9 | -(3) |
+-----------------------------------+---------+--------+---------+--------+
| Offshore Côte d'Ivoire(5) | | | | |
+-----------------------------------+---------+--------+---------+--------+
| Lion and Panthère Fields(2) | | | | |
+-----------------------------------+---------+--------+---------+--------+
| Proved (1P) | 0.7 | 16.2 | 0.4 | 8.9 |
+-----------------------------------+---------+--------+---------+--------+
| Proved + Probable (2P) | 0.9 | 22.0 | 0.5 | 12.3 |
+-----------------------------------+---------+--------+---------+--------+
| Proved + Probable + Possible (3P) | 1.3 | 31.0 | 0.7 | 18.0 |
+-----------------------------------+---------+--------+---------+--------+
____________
(1) Net reserves are after deductions for royalty burdens
(2) Estimates for Okoro, Lion and Panthère Fields are as of 30 June 2009.
Estimates for Ebok Field are as of 15 October 2009 and reflect the Nigerian
Government approval of the Ebok Phase 1 development plan which was received on 2
October 2009
(3) Gas reserves are not included because there is currently no viable market
for produced gas
(4) Oil reserves for offshore Nigeria include crude oil only
(5) Oil reserves for offshore Côte d'Ivoire include crude oil and condensate
Contingent Resources
NSAI has estimated the contingent resources for the Kudu, Eland and Ibex fields
in Block CI-01, offshore Côte d'Ivoire, JDZ Block 1, offshore Nigeria and São
Tomé & Príncipe JDZ, three reservoirs in the Ebok field located in OML 67,
offshore Nigeria and the Setu field located in OML 112, offshore Nigeria as of
30 June 2009.
The development plan approved on 2 October 2009 for the Ebok field does not
address all of the discovered hydrocarbons, therefore, oil volumes in those
discovered reservoirs at the Ebok field not covered by the development plan are
considered contingent resources.
Oil
The table below sets out NSAI's estimated gross OOIP and contingent oil
resources for the following assets as of 30 June 2009. This information has been
extracted without material adjustment from the NSAI Report.
+----------------------+----------+----------+----------+----------+----------+----------+
| | Gross (100%) Oil Volumes (mmbl) |
+----------------------+-----------------------------------------------------------------+
| | OOIP | Contingent Oil Resources |
+----------------------+--------------------------------+--------------------------------+
| Area | Low | Best | High | Low | Best | High |
| |Estimate |Estimate |Estimate |Estimate |Estimate |Estimate |
| | (1C) | (2C) | (3C) | (1C) | (2C) | (3C) |
+----------------------+----------+----------+----------+----------+----------+----------+
| Offshore Côte | 59.2 | 81.1 | 104.8 | 13.5 | 19.8 | 27.9 |
| d'Ivoire | | | | | | |
+----------------------+----------+----------+----------+----------+----------+----------+
| JDZ Block 1 | 80.8 | 123.4 | 173.8 | 24.4 | 42.5 | 67.0 |
+----------------------+----------+----------+----------+----------+----------+----------+
| Offshore Nigeria | 82.5 | 129.6 | 171.7 | 18.1 | 31.8 | 45.9 |
+----------------------+----------+----------+----------+----------+----------+----------+
Gas
The table below sets out NSAI's estimated gross OGIP and contingent gas
resources for the following assets as of 30 June 2009. This information has been
extracted without material adjustment from the NSAI Report.
+---------------------+----------+----------+----------+----------+----------+----------+
| | Gross (100%) Gas Volumes (bcf) |
+---------------------+-----------------------------------------------------------------+
| | OGIP | Contingent Gas Resources |
+---------------------+--------------------------------+--------------------------------+
| Area | Low | Best | High | Low | Best | High |
| |Estimate |Estimate |Estimate |Estimate |Estimate |Estimate |
| | (1C) | (2C) | (3C) | (1C) | (2C) | (3C) |
+---------------------+----------+----------+----------+----------+----------+----------+
| Offshore Côte | 105.7 | 160.1 | 237.0 | 66.2 | 101.5 | 152.4 |
| d'Ivoire | | | | | | |
+---------------------+----------+----------+----------+----------+----------+----------+
| JDZ Block 1(1) | - | - | - | - | - | - |
+---------------------+----------+----------+----------+----------+----------+----------+
| Offshore Nigeria(1) | - | - | - | - | - | - |
+---------------------+----------+----------+----------+----------+----------+----------+
____________
(1) Gas resources are not included because there is currently no viable
market for produced gas
Prospective Resources
NSAI has estimated the prospective resources for the La Noumbi permit, onshore
Congo, the Kudu and Ibex Fields in Block CI-01, offshore Côte d'Ivoire, the Iris
Marin and Ibekelia licences, offshore Gabon, the Keta Block, offshore Ghana, JDZ
Block 1, offshore Nigeria and São Tomé & Príncipe JDZ, seven reservoirs in the
Ebok field, offshore Nigeria and OPL 310, offshore Nigeria as of 30 June 2009.
Oil
The table below sets out NSAI's estimated gross OOIP and unrisked prospective
oil resources for the following assets as of 30 June 2009. This information has
been extracted without material adjustment from the NSAI Report.
+---------------------+----------+----------+----------+----------+----------+----------+
| | Gross (100%) Oil Volumes (mmbl) |
+---------------------+-----------------------------------------------------------------+
| | OOIP | Unrisked Prospective Oil |
| | | Resources |
+---------------------+--------------------------------+--------------------------------+
| Area | Low | Best | High | Low | Best | High |
| |Estimate |Estimate |Estimate |Estimate |Estimate |Estimate |
+---------------------+----------+----------+----------+----------+----------+----------+
| Onshore Congo | 662.3 | 1,282.6 | 2,153.3 | 145.0 | 315.0 | 595.5 |
+---------------------+----------+----------+----------+----------+----------+----------+
| Offshore Côte | 17.4 | 48.6 | 93.3 | 4.2 | 12.0 | 24.2 |
| d'Ivoire | | | | | | |
+---------------------+----------+----------+----------+----------+----------+----------+
| Offshore Gabon | 282.0 | 390.3 | 513.2 | 52.5 | 97.3 | 159.4 |
+---------------------+----------+----------+----------+----------+----------+----------+
| Offshore Ghana | 722.4 | 2,416.7 | 8,061.2 | 153.9 | 604.2 | 2,299.5 |
+---------------------+----------+----------+----------+----------+----------+----------+
| JDZ Block 1 | 734.1 | 1,003.0 | 1,348.5 | 229.4 | 350.1 | 518.4 |
+---------------------+----------+----------+----------+----------+----------+----------+
| Offshore Nigeria | 169.5 | 411.3 | 712.8 | 90.9(1) | 186.9(1) | 327.9(1) |
+---------------------+----------+----------+----------+----------+----------+----------+
____________
(1) These prospective volumes include condensate associated with the OPL 310
prospective gas resources
Gas
The table below sets out NSAI's estimated gross OGIP and unrisked prospective
gas resources for the following assets as of 30 June 2009. This information has
been extracted without material adjustment from the NSAI Report.
+---------------------+----------+----------+----------+----------+----------+----------+
| | Gross (100%) Gas Volumes (bcf) |
+---------------------+-----------------------------------------------------------------+
| | OGIP | Unrisked Prospective Gas |
| | | Resources |
+---------------------+--------------------------------+--------------------------------+
| Area | Low | Best | High | Low | Best | High |
| |Estimate |Estimate |Estimate |Estimate |Estimate |Estimate |
+---------------------+----------+----------+----------+----------+----------+----------+
| Offshore Côte | 197.4 | 544.9 | 949.6 | 157.5 | 436.1 | 736.6 |
| d'Ivoire | | | | | | |
+---------------------+----------+----------+----------+----------+----------+----------+
| Offshore Nigeria | 1,169.5 | 1,625.1 | 2,265.6 | 833.5 | 1,201.9 | 1,711.4 |
+---------------------+----------+----------+----------+----------+----------+----------+
Summary of future net revenue
NSAI has estimated the future net revenue to the Afren interest in the Okoro
field located in OML 112, offshore Nigeria and in the Lion and Panthère fields
located in Block CI-11, offshore Côte d'Ivoire, as of 30 June 2009 and to the
Afren interest in the Ebok field located in OML 67, offshore Nigeria as of 15
October 2009.
The table below sets out NSAI's estimated future net revenue to the Afren
interest in the following assets as of 30 June 2009 (and 15 October 2009 in
respect of the Ebok field), under the assumptions set out in the NSAI Report.
This information has been extracted without material adjustment from the NSAI
Report.
+-------------------------------------------------+--------+---------+
| | Future Net |
| | Revenue(2) |
| | (US$mm) |
+-------------------------------------------------+------------------+
| Country / Category | Total |Present |
| | | Worth |
| | | at 10% |
+-------------------------------------------------+--------+---------+
| Offshore Nigeria | | |
+-------------------------------------------------+--------+---------+
| Okoro Field(1) | | |
+-------------------------------------------------+--------+---------+
| Proved (1P) | 305.2 | 281.0 |
+-------------------------------------------------+--------+---------+
| Proved + Probable (2P) | 390.6 | 349.3 |
+-------------------------------------------------+--------+---------+
| Proved + Probable + Possible (3P) | 481.2 | 418.8 |
+-------------------------------------------------+--------+---------+
| Ebok Field(1) | | |
+-------------------------------------------------+--------+---------+
| Proved (1P) | 68.0 | 42.6 |
+-------------------------------------------------+--------+---------+
| Proved + Probable (2P) | 118.2 | 81.5 |
+-------------------------------------------------+--------+---------+
| Proved + Probable + Possible (3P) | 172.1 | 122.0 |
+-------------------------------------------------+--------+---------+
| Offshore Côte d'Ivoire | | |
+-------------------------------------------------+--------+---------+
| Lion and Panthère fields(1) | | |
+-------------------------------------------------+--------+---------+
| Proved (1P) | 31.9 | 30.9 |
+-------------------------------------------------+--------+---------+
| Proved + Probable (2P) | 44.2 | 40.0 |
+-------------------------------------------------+--------+---------+
| Proved + Probable + Possible (3P) | 62.5 | 53.1 |
+-------------------------------------------------+--------+---------+
____________
(1) Estimates for Okoro, Lion and Panthère Fields are as of 30 June 2009.
Estimates for Ebok Field are as of 15 October 2009 and reflect the Nigerian
Government approval of the Ebok Phase 1 development plan which was received on 2
October 2009
(2) Future net revenue is the revenue attributable to the interests of Afren
after deducting from the future gross revenue direct operating expenses, taxes
and all interests, including royalties, attributable to others.
Overview of Assets
Afren currently has the following assets in its portfolio:
+----------------------+----------+----------+----------+------------+--------------+
| | Legal | Effective | Fiscal | Expiry |
| |Interest | Working Interest | system | |
+----------------------+----------+---------------------+------------+--------------+
| | |Pre-Cost | Post | | |
| | |Recovery | Cost | | |
| | | |Recovery | | |
+----------------------+----------+----------+----------+------------+--------------+
| Nigeria | | | | | |
+----------------------+----------+----------+----------+------------+--------------+
| Okoro (OML 112) | 0% | 95% | 50% | Royalty | 12 |
| | | | | Tax | February |
| | | | |Concession | 2018 |
+----------------------+----------+----------+----------+------------+--------------+
| Setu (OML 112) | 0% | 95% | 50% | Royalty | 12 |
| | | | | Tax | February |
| | | | |Concession | 2018 |
+----------------------+----------+----------+----------+------------+--------------+
| Ebok (OML 67) | 40% | 100% | 50% | Royalty | Initial |
| | | | | Tax | term - |
| | | | |Concession | May 2011 |
+----------------------+----------+----------+----------+------------+--------------+
| OPL 310 | 40% | 91% |321%/70% | Royalty | 10 |
| | | | | Tax | February |
| | | | |Concession | 2019 |
+----------------------+----------+----------+----------+------------+--------------+
| OPL 9077 | 241% | 251.25% | 241% | PSC | 20 |
| | | | | | February |
| | | | | | 2018 |
+----------------------+----------+----------+----------+------------+--------------+
| OPL 9177 | 242% | 270% | 242% | PSC | 20 |
| | | | | | February |
| | | | | | 2018 |
+----------------------+----------+----------+----------+------------+--------------+
| Ofa (OML 30)7 | 32.5% | See Table 1 | Royalty | Initial |
| | | | Tax | term - |
| | | |Concession | November |
| | | | | 2009 |
| | | | | (subject |
| | | | | to |
| | | | | regulatory |
| | | | | review, |
| | | | | renewal |
| | | | | may be |
| | | | | granted |
| | | | | for a |
| | | | | further |
| | | | | period of |
| | | | | 20 years) |
+----------------------+----------+---------------------+------------+--------------+
| Offshore Nigeria and | | | | |
| São Tomé & Príncipe | | | | |
+----------------------+----------+---------------------+------------+--------------+
| JDZ Block 1 | 64.41% | 64.41% | 64.41% | PSC | 28 April |
| | | | | | 2014 |
+----------------------+----------+----------+----------+------------+--------------+
| Côte d'Ivoire | | | | | |
+----------------------+----------+----------+----------+------------+--------------+
| Block CI-11 (Lion |47.9592% |47.9592% |47.9592% | PSC | Typically |
| and Panthère fields) | | | | | 25 years |
| | | | | | from |
| | | | | | development |
| | | | | | approval |
+----------------------+----------+----------+----------+------------+--------------+
| Block CI-01 (Kudu, | 465% | 465% | 465% | PSC | Typically |
| Eland and Ibex) | | | | | 25 years |
| fields | | | | | from |
| | | | | | development |
| | | | | | approval |
+----------------------+----------+----------+----------+------------+--------------+
| Lion Gas Plant | 100% | 100% | 100% | N/A | N/A |
+----------------------+----------+----------+----------+------------+--------------+
| Ghana | | | | | |
+----------------------+----------+----------+----------+------------+--------------+
| Keta Block | 68% | 568% | 68% | Royalty | 31 |
| | | | | Tax | December |
| | | | |Concession | 2009 |
| | | | | | (extension |
| | | | | | subject to |
| | | | | | the |
| | | | | |ratification |
| | | | | | of a new |
| | | | | | petroleum |
| | | | | | agreement |
| | | | | | before |
| | | | | | Ghanaian |
| | | | | | Parliament) |
+----------------------+----------+----------+----------+------------+--------------+
| Gabon | | | | | |
+----------------------+----------+----------+----------+------------+--------------+
| Iris Marin Licence | 16.67% | 16.67% | 16.67% | PSC | 11 May |
| | | | | | 2010 |
+----------------------+----------+----------+----------+------------+--------------+
| Ibekelia Licence | 20% | 20% | 20% | TEA | Until |
| | | | | | conclusion |
| | | | | | of PSC |
| | | | | |negotiations |
+----------------------+----------+----------+----------+------------+--------------+
| Congo (Brazzaville) | | | | | |
+----------------------+----------+----------+----------+------------+--------------+
| La Noumbi Permit | 14% | 14% | 14% | PSC | 18 June |
| | | | | | 2010 |
+----------------------+----------+----------+----------+------------+--------------+
___________
(1) Afren's interest is 56% pre-hurdle point and post hurdle point Afren's
interest is 35%. The hurdle point is the point following the Cost Recovery
Period when available petroleum lifted equals US$1.2 billion in value.
(2) Afren's interests are held through AGER in which Afren holds an 80%
economic interest in relation to current assets.
(3) Afren's interest is 21% during short period of Optimum (local partner)
cost recovery period.
(4) 65% direct interest and 15% additional rights
(5) 75.55% if GNPC is carried
(6) Indirect interest via 49% ownership of DEER
(7) The NSAI Report does not include an analysis of Afren's Nigerian
appraisal assets in the Anambra Basin (OPL 907 and 917) or Ofa (OML 30)
Table 1 - for Ofa, Afren's effective working interest depends upon its
cumulative production as follows:
+------------------------------+------------------------------+
| Cumulative Production | Effective Working Interest |
| (mmbbls) | |
+------------------------------+------------------------------+
| 0 | 50% |
+------------------------------+------------------------------+
| 5 | 32.50% |
+------------------------------+------------------------------+
| 10 | 26.50% |
+------------------------------+------------------------------+
| 15 | 22.50% |
+------------------------------+------------------------------+
| 20 | 20% |
+------------------------------+------------------------------+
| 30 | 15% |
+------------------------------+------------------------------+
In addition, in August 2009, Afren announced its entry into a farm-out agreement
for the development of the Okwok field adjacent to its existing Ebok field.
Under the terms of the farm-out agreement, Afren as technical adviser, will
acquire a 28 per cent. legal interest and a 70 per cent. effective working
interest (before cost recovery), reverting to 56 per cent. (after cost recovery)
pre hurdle point and 35 per cent. (after cost recovery) post hurdle point,
subject to gross volumes lifted. The hurdle point is the period following the
cost recovery period when available petroleum lifted equals US$1.2 billion in
value. The assignment of Addax's interests is not effective until Afren
completes the drilling of the first approved well. Afren is required to have
completed the drilling of the well by 31 March 2011.
Production
Afren is currently producing oil from the Okoro field located in OML 112,
offshore Nigeria and oil and gas from the Lion and Panthère fields in Block
CI-11, offshore Côte d'Ivoire, as well as processing gas at the Lion Gas Plant
in Côte d'Ivoire.
Oil Production
The Group achieved first oil in the Okoro field in June 2008 at a rate of 3,000
bopd, rising to approximately 22,000 bopd by the end of 2008. At the Okoro
field, the year to date production to 31 October 2009 was 5,714,840 barrels of
oil (gross), equivalent to an average daily production rate of 18,800 bopd. Oil
production at Block CI-11 to 31 October 2009 was 389,542 barrels of oil (gross),
equivalent to an average daily production rate of 1,281 bopd.
The Group is targeting production of up to 100,000 bopd by the end of 2012 from
Okoro, Ebok and Block CI-11 and other existing appraisal or development assets
which can be converted into production assets and potential acquisitions.
The following table sets out the number of production wells drilled since 2008,
together with the average crude oil production and total production management
anticipates will be achieved through 2010:
+--------------------------------+-----------+-----------+-----------+
| Year ended | 2008 | 2009(1) | 2010(1) |
+--------------------------------+-----------+-----------+-----------+
| Production wells | 16 | 16 | 16 |
+--------------------------------+-----------+-----------+-----------+
| Average crude oil production | 4350 | 20,600 | 16,960 |
| (bopd) | | | |
+--------------------------------+-----------+-----------+-----------+
| Total production (mmboe) | 3.42 | 9.4 | 8.28 |
| (crude oil/ condensate, gas, | | | |
| LPG) | | | |
+--------------------------------+-----------+-----------+-----------+
____________
(1) Estimated
The following table sets out the actual number of wells drilled since 2007,
together with the number of wells management anticipates will be drilled through
2010:
+--------------------------------+--------+--------+---------+---------+
| | 2007 | 2008 |2009(1) |2010(1) |
+--------------------------------+--------+--------+---------+---------+
| Number of exploration wells | 2 | 2 | 4 | 0 |
| drilled | | | | |
+--------------------------------+--------+--------+---------+---------+
| Number of production wells | 0 | 7 | 0 | 6 |
| drilled | | | | |
+--------------------------------+--------+--------+---------+---------+
| Total wells | 2 | 9 | 4 | 6 |
+--------------------------------+--------+--------+---------+---------+
____________
(1) Estimated
Gas Production
Natural gas production at the Lion and Panthère fields in Block CI-11 was 9.9
bcf (gross), equivalent to an average daily production rate of 32.7 mmcfd.
The Lion Gas Plant in Côte d'Ivoire was built to improve margins by extracting
and selling high value natural gas liquids from gas produced at Block CI-11. Gas
production from adjacent Blocks CI-26 and CI-40, operated by Canadian Natural
Resources Limited, was added to the process stream, providing third party tariff
revenue from the use of the Block CI-11 pipeline infrastructure, and additional
gasoline and butane sales revenue at the Lion Gas Plant.
During the period to 31 October 2009, 362,543 barrels of oil equivalent of NGL
were stripped from the inlet gas stream at the Lion Gas Plant, equivalent to
1,193 boepd from a process stream of rich gas produced at Blocks CI-11, CI-26
and CI-40. With a total inlet capacity of 75 mmcfd, the produced butane is sold
into the local market at a price of US$21.09/boe with the gasoline spiked into
the Block CI-11 crude stream and sold onto the open market.
APPENDIX III
OPERATING AND FINANCIAL REVIEW OF THE AFREN GROUP
Contractual obligations and contingent liabilities
At 30 June 2009, 31 December 2008, 2007 and 2006, the Group had outstanding
commitments for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
+--------------------------+----------+----------+----------+------------------+---------+
| | At 30 | At 31 December |
| | June | |
+--------------------------+----------+--------------------------------------------------+
| | 2009 | 2008 | 2007 | 2006 |
+--------------------------+----------+----------+-----------------------------+---------+
| | US$000's | US$000's | US$000's | US$000's |
+--------------------------+----------+----------+----------+----------------------------+
| Within one year | 44,535 | 40,998 | 26,520 | 684 |
+--------------------------+----------+----------+----------+----------------------------+
| In the second to fifth | 133,541 | 103,109 | 125,339 | 1,124 |
| years | | | | |
+--------------------------+----------+----------+----------+----------------------------+
| | 178,076 | 144,107 | 151,859 | 1,808 |
+--------------------------+----------+----------+----------+------------------+---------+
Operating lease commitments included rentals of US$27.7 million at 30 June 2009,
US$28.6 million at 31 December 2008 and US$25.2 million at 31 December 2007
within one year and US$85.8 million at 30 June 2009, US$100.0 million at 31
December 2008 and US$120.8 million at 31 December 2007 between two and five
years for the FPSO that is used on the Okoro field. Other operating lease
commitments represents rentals payable by the Group for certain of its office
properties and long term logistics contracts. Property leases are negotiated for
an average term of three years and rentals are fixed for an average term of
three years.
At 30 June 2009, 31 December 2008, 31 December 2007 and 31 December 2006, the
Group had future capital commitments for oil and gas asset development and oil
and gas asset exploration and evaluation as follows:
+---------------------------+----------+----------+----------+----------+
| | At 30 | At 31 December |
| | June | |
+---------------------------+----------+--------------------------------+
| | 2009 | 2008 | 2007 | 2006 |
+---------------------------+----------+----------+----------+----------+
| | US$000's | US$000's | US$000's | US$000's |
+---------------------------+----------+----------+----------+----------+
| Capital commitments | | | | |
+---------------------------+----------+----------+----------+----------+
| Oil and gas assets - | - | - | 183,278 | 56,618 |
| Development | | | | |
+---------------------------+----------+----------+----------+----------+
| Oil and gas assets - | 6,406 | 11,154 | 3,951 | 5,100 |
| Exploration & Evaluation | | | | |
+---------------------------+----------+----------+----------+----------+
| | 6,406 | 11,154 | 187,229 | 61,718 |
+---------------------------+----------+----------+----------+----------+
The significant decrease in development commitments from US$183.3 million at 31
December 2007 to nil at 31 December 2008 relates to the Group's satisfaction of
commitments in relation to the Okoro field.
As at 31 December 2008, the Group had a US$6.0 million stand-by letter of credit
issued by a bank in respect of contractual arrangements of the FPSO. There were
no such stand-by letters of credit as at 31 December 2007 or 2006.
As at 31 December 2007, the Group had a US$17.6 million outstanding letter of
credit issued by a bank relating to a drilling contract on the Okoro
development. There were no such letters of credit outstanding as at 31 December
2008 or 2006.
As part of the contractual arrangements on the Ofa field in Nigeria, Afren may
be liable to contribute up to a maximum of US$0.5 million in respect of the
abandonment should certain events specified in the contract occur.
Capitalisation and capital resources
The capitalisation and indebtedness of the Group is set out below. The Group
does not have any contingent or indirect indebtedness.
The following table sets out the Group's capitalisation and indebtedness as at
30 September 2009 and 30 June 2009.
+----------------------------------------------+------------+------------+
| | As at 30 | As at 30 |
| | September | June 2009 |
| | 2009 | |
+----------------------------------------------+------------+------------+
| | US$000s | US$000's |
+----------------------------------------------+------------+------------+
| Total current debt | (159,771) | (148,771) |
+----------------------------------------------+------------+------------+
| Guaranteed | - | - |
+----------------------------------------------+------------+------------+
| Secured | (143,105) | (140,438) |
+----------------------------------------------+------------+------------+
| Unguaranteed / unsecured | (16,667) | (8,333) |
+----------------------------------------------+------------+------------+
| Total non-current debt (excluding current | (203,796) | (218,797) |
| portion of long-term debt) | | |
+----------------------------------------------+------------+------------+
| Guaranteed | - | - |
+----------------------------------------------+------------+------------+
| Secured | (125,463) | (132,130) |
+----------------------------------------------+------------+------------+
| Unguaranteed / unsecured | (78,333) | (86,667) |
+----------------------------------------------+------------+------------+
| Shareholders' equity | | |
+----------------------------------------------+------------+------------+
| Share capital | (12,830) | (12,785) |
+----------------------------------------------+------------+------------+
| Share premium | (563,365) | (561,182) |
+----------------------------------------------+------------+------------+
| Other reserves | 118,199 | 136,619 |
+----------------------------------------------+------------+------------+
| Total | (821,564) | (804,916) |
+----------------------------------------------+------------+------------+
The following table sets out the Group's net indebtedness in the short and
medium-long term as at 30 September 2009 and 30 June 2009:
+-----------------------------------------------+------------+------------+
| | As at | As at 30 |
| | 30 | June 2009 |
| | September | |
| | 2009 | |
+-----------------------------------------------+------------+------------+
| | US$000's | US$000's |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Cash | 201,642 | 153,276 |
+-----------------------------------------------+------------+------------+
| Cash equivalent | - | - |
+-----------------------------------------------+------------+------------+
| Trading securities | - | - |
+-----------------------------------------------+------------+------------+
| Liquidity | 201,642 | 153,276 |
+-----------------------------------------------+------------+------------+
| Current financial receivable | - | - |
+-----------------------------------------------+------------+------------+
| Current bank debt | (159,771) | (148,771) |
+-----------------------------------------------+------------+------------+
| Current portion of non current debt | - | - |
+-----------------------------------------------+------------+------------+
| Other current financial debt | - | - |
+-----------------------------------------------+------------+------------+
| Current financial indebtedness | (159,771) | (148,771) |
+-----------------------------------------------+------------+------------+
| Non current bank loans | (158,796) | (173,797) |
+-----------------------------------------------+------------+------------+
| Bonds issued | - | - |
+-----------------------------------------------+------------+------------+
| Other non current loans | (45,000) | (45,000) |
+-----------------------------------------------+------------+------------+
| Non-current financial indebtedness | (203,796) | (218,797) |
+-----------------------------------------------+------------+------------+
| Net financial indebtedness | (161,926) | (214,292) |
+-----------------------------------------------+------------+------------+
Liquidity
The Group's liquidity requirements arise principally from its capital
expenditure and working capital requirements. For the periods presented, the
Group met its working capital requirements primarily from the proceeds of equity
and debt financings.
The Group held cash and cash equivalents of US$153.3 million at 30 June 2009,
US$117.7 million at 31 December 2008, US$91.8 million at 31 December 2007 and
US$35.7 million at 31 December 2006.
The Group cash and cash equivalents balance at 30 June 2009 included US$28.7
million to which the Group had restricted access as a result of short-term
restrictions on project cash, pending completion of certain milestones on the
Okoro field operations. In addition certain cash was held on behalf of the joint
venture for the Ghana Keta block. This compares with US$58.9 million and US$25.0
million to which the Group had restricted access at 31 December 2008 and 31
December 2007 respectively.
Following confirmation of project completion, the majority of the cash relating
to the Okoro project is no longer restricted as at 30 September 2009.
Financing
Equity financing
In April 2009, Afren raised approximately US$126.3 million (before expenses) via
a placement of 265 million shares with institutional investors.
In July 2008, an agreement was reached for early conversion of the GBP41.25
million senior unsecured convertible bonds originally issued in July 2006. Afren
issued 71.1 million shares upon conversion of the bonds.
In April 2008 Afren raised approximately US$235.0 million (before expenses) via
a placement of 95 million shares with institutional investors.
In June 2007, Afren raised approximately US$65.0 million (before expenses) via a
private placement of 55.3 million shares.
In April 2007, US$15.0 million of equity funds were raised via a private
placement with Standard Bank (US$10.0 million) and BNP Paribas.
Debt financing
Total debt at the end of 2008 amounted to US$405.2 million and this had fallen
to US$348.2 million by 30 June 2009.
The following table presents information on the Group's borrowings as at 30 June
2009 and 31 December 2008, 2007 and 2006:
+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+
| | As at 30 June | As at 31 December |
+-------------+-----------------------------------------------+-----------------------------------------------------------------------+
| | 2009 | 2008 | 2008 | 2007 | 2006 |
| | | unaudited | | | |
+-------------+-----------------------+-----------------------+-----------------------+-----------------------+-----------------------+
| | | | | | |
+-------------+-----------------------+-----------------------+-----------------------+-----------------------+-----------------------+
| |Current |Non-current |Current |Non-current |Current |Non-current |Current |Non-current |Current |Non-current |
+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+
| | $000's | $000's | $000's | $000's | $000's | $000's | $000's | $000's | $000's | $000's |
+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+
| | | | | | | | | | | |
+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+
| Convertible | - | - | - | 70,906 | - | - | - | 69,206 | - | 64,540 |
| bond | | | | | | | | | | |
+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+
| Loan | - | 35,191 | - | - | - | 33,205 | - | - | - | - |
| notes | | | | | | | | | | |
+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+
| Bank | 148,771 | 164,166 | 29,165 | 181,099 | 111,218 | 260,741 | - | 77,485 | - | - |
| borrowings | | | | | | | | | | |
+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+
| | 148,771 | 199,357 | 29,165 | 252,005 | 111,218 | 293,946 | - | 146,691 | - | 64,540 |
+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+---------+-------------+
Bank borrowings relating to the US$230 million Okoro Development facility from
BNP Paribas, were US$191.6 million at 31 December 2008, US$32.4 million at 31
December 2007 and nil at 31 December 2006. Interest on the loan is based on
LIBOR plus a margin of between 4.5 per cent. and 5.75 per cent. as at 31
December 2008. The facility is repayable in semi-annual instalments of
approximately US$30.0 million ending in 2011. The loan is secured by the assets
of the Okoro field. The repayment profile is impacted by borrowing base
calculations linked to the certified reserves of the Okoro field.
The acquisition of operations in Côte d'Ivoire was financed by a financing
package arranged through BNP Paribas. The outstanding balance on the financing
package was US$132.6 million as at 30 June 2009 and US$139.6 million at 31
December 2008 (US$128.1 million and US$133.9 million at 30 June 2009 and 31
December 2008 respectively net of financing arrangement costs). Repayment
instalments for US$72.9 million (senior debt) of the facility amount are
determined by borrowing base calculations linked to the certified reserves of
the Côte d'Ivoire operations whilst US$66.7 million (subordinate debt) of the
facility is repayable in semi-annual instalments of US$6.7 million commencing
January 2010. Interest on the senior debt is based on LIBOR plus a margin of
between 3.25 per cent. and 3.5 per cent. as at 31 December 2008. Interest on the
subordinate debt is based on LIBOR plus a margin of 4.25 per cent. The senior
debt includes certain financial covenants which are assessed on a quarterly
basis.
Borrowings also include a balance of US$46.5 million at 31 December 2008,
US$45.1 million at 31 December 2007 and US$nil at 31 December 2006, relating to
an unsecured loan facility from First City Monument Bank plc. Interest on the
loan is based on LIBOR plus a margin of 4.45 per cent. The loan is repayable in
six equal semi-annual instalments commencing 2010 and ending in 2012.
In October 2008 Afren entered into a strategic alliance with Sojitz, a Japanese
investment and industrial conglomerate, to jointly pursue acquisition
opportunities of scale in Africa. Sojitz invested US$45.0 million in the form of
loan notes in Afren which become convertible bonds at the time of entering into
or announcing joint acquisitions. The net proceeds from the issue of the loan
notes were split between a liability component and an equity component at the
date of issue. The liability component of the loan notes was US$32.6 million as
at 31 December 2008 and US$33.2 million at 30 June 2009.
The July 2008 conversion of the GBP41.25 million senior unsecured convertible
bonds reduced the Group's debt by approximately US$70.9 million.
The following table presents information on the Group's debt maturity profile as
at 30 June 2009 and 31 December 2008, 2007 and 2006:
+---------------------+----------+-----------+----------+----------+----------+
| | As at 30 June | As at 31 December |
+---------------------+----------------------+--------------------------------+
| | 2009 | 2008 | 2008 | 2007 | 2006 |
| | |unaudited | | | |
+---------------------+----------+-----------+----------+----------+----------+
| |US$000's | US$000's |US$000's |US$000's |US$000's |
+---------------------+----------+-----------+----------+----------+----------+
| | | | | | |
+---------------------+----------+-----------+----------+----------+----------+
| Due within one year | 148,771 | 29,165 | 111,218 | 11,030 | 7,317 |
+---------------------+----------+-----------+----------+----------+----------+
| Due within two to | 218,797 | 272,157 | 318,421 | 157,410 | 73,755 |
| five years | | | | | |
+---------------------+----------+-----------+----------+----------+----------+
| Due after five | - | - | - | - | - |
| years | | | | | |
+---------------------+----------+-----------+----------+----------+----------+
| | 367,568 | 301,322 | 429,639 | 168,440 | 81,072 |
+---------------------+----------+-----------+----------+----------+----------+
During the remainder of 2009 and the first half of 2010 the Group estimates that
it will be required to repay US$148.8 million of debt principal repayments. The
Group intends that it will be able to repay its borrowings through cash flow
from operations.
The Group has also recently commenced the appraisal and development of the Ebok
field in Nigeria. The anticipated capital expenditure has subsequently increased
as a result of two factors: i) during 2009 the base case reserves and upside
resources of Ebok have increased and ii) as a result of the Company's
development obligations in respect of Okwok, the potential appraisal and
development costs in relation to the broader Ebok - Okwok complex. The Company
has recently received an indicative signed term sheet for a loan facility of up
to US$300 million, which is subject to confirmation of reserves, for purposes of
a reserves based facility to assist in the funding of the broader Ebok-Okwok
complex. Although the Group's current committed facilities are sufficient to
meet its current committed expenditures, this facility will provide the Group
with additional financial flexibility with respect to the broader Ebok-Okwok
complex development programme.
Recent developments
In July 2009 Afren announced it had allotted conditional to admission 2,701,138
ordinary shares of 1p each with a market value approximately GBP1.35 million to
Energy Investment Holdings Limited, representing a milestone payment in relation
to the Ebok project.
In August 2009 Afren announced that it had signed a drilling contract for the
development of Ebok field, offshore Nigeria. In September 2009, Afren announced
that the initial development phase of the Ebok field, offshore south east
Nigeria had commenced and that the Ebok-5 well was spudded.
In August 2009 Afren announced that it had signed a farm-out agreement with
Addax Petroleum for the acquisition of a 28 per cent. legal interest in the
Okwok field, offshore Nigeria.
The Okwok field was discovered by the Mobil/NNPC Joint Venture in 1967 (Okwok
1), and two subsequent appraisal wells were drilled in 1968 (Okwok 2 and Okwok
3) but were not production tested. The wells encountered oil in the LD1 and D2
series of reservoirs with over 100 ft of oil pay logged in the Okwok 2 well at
the D2 level plus multiple 50 ft oil bearing sections in the LD1 in Okwok 1 and
Okwok 2.
Oriental and Addax drilled a further three wells in 2006 which found over 100 ft
of oil pay in the D2 of Okwok 4st and an approximate equivalent amount of pay in
the LD1 series in Okwok 8. The Okwok 4ST1 well sampled 32 API quality crude,
while Okwok 8 tested 27 API quality crude oil at a rate of 1,200 bopd per day
from the LD1 reservoir interval.
Through Afren's technical understanding of the area based on detailed work and
appraisal drilling at Ebok, Afren estimates that:
- the Okwok field has STOIIP of 225 mmbbls in the D2 and LD1c, LD1d and
LD1e reservoirs;
- assuming a 32 per cent. recovery factor, 70 mmbbls of oil in place could
potentially be produced; and
- upside exploration potential at the deeper Qua Iboe level could add
significantly to the reserves base. Two prospects have been identified and are
estimated to each contain circa 200 mmbbls STOIIP.
In October 2009 the Group finalised an insurance claim in respect of partial
redrill cost and equipment lost down hole in 2008 and 2009. The amount of the
claim for the joint venture was US$12.8 million net of deductibles. This is
expected to impact the Group's financial results for the second half of 2009.
On 3 November 2009, Afren announced that:
- The Ebok-5 appraisal well had encountered 182ft of gross oil pay in the D1
reservoir and 84 ft of gross oil pay in the LD-1E reservoir;
- Extensive log and pressure data had been acquired over these intervals,
which were being analysed;
- Results confirm pre drill estimates of Ebok West Fault Block volumetrics
with de-risks of 92 mmbbls STOIIP and 25 mmbbls 2P recoverable;
- The Ebok-5 appraisal well was currently drilling below 3,350 ft and would
continue to test deeper objectives in the D2 and Qua Iboe sands;
- The results increased the total Ebok project to 78 mmbbls 2P recoverable
reserves, with upside resources potential of 74 mmbbls
Following completion of the initial Ebok development phases, management plans
that the second phase development will be launched, incorporating the full
development of the D1 reservoir (Fault Block 1 & 2 areas) and the now de-risked
Fault Block West, whilst appraising the potential within the West Flank Qua Iboe
structure (150 mmbbls STOIIP, estimated 45 mmbbls recoverable resources) and
Fault Block North (30 mmbbls STOIIP, estimated 9 mmbbls recoverable resources).
Afren currently plans to drill one appraisal well at Okwok in mid 2010, and is
engaged in studies to determine the optimal well location and development
concept, maximising on development synergies with Ebok.
A full summary of the Ebok - Okwok complex 18 month planned drilling schedule
and associated volumes as estimated by management are shown below:
+----------+----------+----------+----------+----------+----------+----------+----------+
| Target | Well type | Gross Best Estimate | Indicative Timing / |
| | | Resources - | Result |
| | | Appraisal Upside | |
| | | MMbbl | |
+---------------------+---------------------+---------------------+---------------------+
| | | | |
+---------------------+---------------------+---------------------+---------------------+
| Ebok West Fault | Appraisal | 25 | Oil |
| Block | | | |
+---------------------+---------------------+---------------------+---------------------+
| Ebok D2 Southern | Appraisal | 8 | Q4 09 |
| Lobe | | | |
+---------------------+---------------------+---------------------+---------------------+
| D2 base case | Production | n/a | Q1 10 |
+---------------------+---------------------+---------------------+---------------------+
| D2 base case | Production | n/a | Q1 10 |
+---------------------+---------------------+---------------------+---------------------+
| D2 base case | Production | n/a | Q1 10 |
+---------------------+---------------------+---------------------+---------------------+
| D2 base case | Production | n/a | Q1 10 |
+---------------------+---------------------+---------------------+---------------------+
| D2 base case | Production | n/a | Q2 10 |
+---------------------+---------------------+---------------------+---------------------+
| D1 base case | Production | n/a | Q2 10 |
+---------------------+---------------------+---------------------+---------------------+
| Ebok D2 Upside | Appraisal | 12 | Q2 10 |
| Extension | | | |
+---------------------+---------------------+---------------------+---------------------+
| Ebok West Flank Qua | Exploration | 45 | Q2 10 |
| Iboe | | | |
+---------------------+---------------------+---------------------+---------------------+
| Okwok | Appraisal | 70 | Q3 10 |
+---------------------+---------------------+---------------------+---------------------+
| Ebok North Fault | Appraisal | 9 | Q1 11 |
| Block | | | |
+---------------------+---------------------+---------------------+---------------------+
| | | | |
+---------------------+---------------------+---------------------+---------------------+
| Total | 12 | 169 | |
+----------+----------+----------+----------+----------+----------+----------+----------+
On 4 November 2009, the Company announced an operational update and confirmed
its intention to move up to the Official List.
APPENDIX IV
ADDITIONAL INFORMATION
Risk Factors
Investors and prospective investors should consider carefully whether an
investment in Afren is suitable for them in light of the information set out in
this announcement.
The risks and uncertainties summarised below may not be the only ones facing the
Group. Additional risks and uncertainties not currently known to the Company or
that the Company deems immaterial may also impair the Company's business
operations. The Group's business, prospects, financial condition and results of
operations could be materially and adversely affected by any of these risks.
Risk factors relating to the countries in which Afren operates
? Risks associated with emerging and developing markets generally
? The countries in which the Group operates face political, economic, fiscal,
legal, regulatory and social uncertainties which could have a material adverse
effect on Afren's business, financial condition and results of operations
? The countries in which the Group operates suffer from crime and
governmental or business corruption which could have an adverse effect on
Afren's business, financial condition and results of operations
? The countries in which the Group operates suffer from terrorism and
militant activity which could have a material adverse effect on Afren's
business, financial condition and results of operations
? Underdeveloped infrastructure in the countries in which the Group operates
could have an adverse effect on Afren's business, financial condition and
results of operations
? Uncertainties in the interpretation and application of laws and regulations
in the jurisdictions in which Afren operates may affect the Group's ability to
comply with such laws and regulations which may increase the risks with respect
to the Group's operations
? Licensing and other regulatory requirements in the countries in which the
Group operates may be subject to amendment or reform which could make compliance
more challenging
? The Group is exposed to the risk of adverse sovereign action by governments
in the countries in which it operates
Risk factors relating to the Oil and Gas Industry
? Any volatility and future decreases in crude oil prices could materially
and adversely affect the Group's business, prospects, financial condition and
results of operations
? The level of the Group's crude oil and gas reserves, their quality and
production volumes may be lower than estimated or expected
? The Group faces drilling, exploration and production risks and hazards that
may affect the Group's ability to produce crude oil and natural gas at expected
levels, quality and costs
? Afren faces significant uncertainties in connection with its appraisal,
exploration and development activities
? The Group operates in a highly competitive industry
Risk factors relating to Afren's Business
? The Group's exploration and production operations are dependent on the
Group's compliance with the obligations under its licences, contracts and field
development plans
? There are risks inherent in Afren's strategy of geographic diversification
and acquisition of new exploration and development properties
? The Group faces costs and risks in developing its near term development
plans
? The Group's business strategy of significantly increasing reserves and
production may require additional funding in the longer term
? Typical risks associated with debt financing may, in the longer term,
affect the Group's business, prospects, financial position and operating results
? The Group depends on key members of management and service providers and on
its ability to retain and hire new qualified personnel and consultants
? If the Group fails to consummate or integrate acquisitions successfully,
the Group's financial condition and future performance could be adversely
affected
? Failure to manage Afren's future growth and performance may adversely
affect its operations
? The Group is obliged to comply with health and safety and environmental
regulations and cannot guarantee that it will be able to comply with these
regulations
? Afren operates a number of joint ventures which may result in delays or
additional costs if the joint venture parties disagree
? Afren's operations are subject to the risk of litigation
? The Group does not insure against certain risks and its insurance coverage
may not be adequate for covering losses arising from potential operational
hazards and unforeseen interruptions
? Failure to obtain necessary equipment and transportation systems could
materially and adversely affect production
? The Group may face unanticipated increased or incremental costs
? The Group is subject to foreign exchange and inflation risks, which might
adversely affect its financial condition and results of operations
? Members of the Group may engage in hedging activities from time to time
that would expose the Group to losses should markets move against the Group's
hedged position
? The Group may be exposed to certain tax risks in Nigeria which might
adversely affect its financial condition and results of operations
Risk factors relating to an investment in Afren's Ordinary Shares
? The price of the Ordinary Shares may fluctuate
? Further share issues could have an adverse effect on the market price of
the Ordinary Shares as a whole or a dilutive effect on shareholders
? Ordinary Shares may be unsuitable as an investment
? Pre-emptive rights may not be available to US holders of the Company's
Ordinary Shares
Material contracts
The following contracts are all the material contracts (not being contracts
entered into in the ordinary course of business) which have been entered into
within the two years prior to the date of this document by members of the Group
and the contracts (not being contracts entered into in the ordinary course of
business) entered into at any time by members of the Group which contain
provisions under which any member of the Group has an obligation or entitlement
which is or may be material to the Group as at the date of this document:
* A placing agreement was entered into between Afren, Merrill Lynch International
and Jefferies International Limited on 3 April 2008 relating to the placing of
95 million new Ordinary Shares at 125 pence per Ordinary Share to institutional
investors. Afren paid commission of 1.75 per cent. of the aggregate value at the
placing price of the placing shares to Merrill Lynch International and Jefferies
International Limited. Afren gave representations and warranties customary for
an agreement of this nature in favour of Merrill Lynch International and
Jefferies International Limited, unlimited in time and amount.
* On 8 October 2008, Sojitz, Afren Energy International plc and Afren entered into
a bond subscription agreement under which Sojitz agreed to make a direct
investment into Afren in the form of floating rate guaranteed bonds issued by
Afren Energy International plc, with a nominal value of US$45million; with Afren
guaranteeing Afren Energy International plc's payment obligations. The terms and
conditions of the bonds are set out in an individual bond certificate issued by
Afren Energy International plc on 29 October 2008. No convertible bonds have
been issued to date. The bonds are exchangeable for convertible bonds at the
time of entering into, or announcing, a joint acquisition between Afren and
Sojitz, and the convertible bonds are convertible into fully-paid ordinary
shares in Afren. Afren Energy International plc is to pay to Sojitz an annual
fee of 0.5 per cent. of the available bond commitment less the drawdown amount.
Bonds are exchangeable for convertible bonds for each joint acquisition in a
proportion pro rata to the aggregate joint acquisition investment by Sojitz
available to Afren, assuming a notional US$500million of available aggregate
joint acquisition investment, including funds committed and/or advanced directly
or indirectly by or on behalf of Sojitz in respect of joint acquisitions. If
US$300million or more is committed, all of the bonds will be exchanged for
convertible bonds. Interest on the bonds and the convertible bonds is six month
US$ LIBOR plus two per cent. per annum. The bonds and convertible bonds are
redeemable at the option of Afren Energy International plc from six months
following the first utilisation date, upon payment of a 2.5 per cent. early
redemption fee, and mature on 8 October 2011. If Afren declares a cash dividend,
each bondholder is entitled to receive an amount per bond to be calculated with
reference to several factors, including the cash dividend amount, the 30-day
volume weighted average price of an ordinary share in Afren and the principal
amount of the bonds. The conversion price of the bonds is calculated by
reference to the 30-day volume weighted average price of Afren ordinary shares
ending on the earlier of the time of entering into, or announcing, a joint
acquisition. The bonds and convertible bonds are redeemable in whole (but not in
part only) at the option of Sojitz upon notification within the first 20 days
following each of the first and second anniversaries of the agreement if, during
the 365 days prior to the anniversary, the parties have not entered into a joint
acquisition and, in addition, Afren has not submitted to Sojitz at least five
proposals for joint acquisitions (excluding exploration opportunities).
* A strategic alliance agreement was entered into between Afren and Sojitz on 8
October 2008 under which the parties agreed to act jointly with the aim of
acquiring rights or property interests in Africa relating to the exploration or
extraction of oil or gas and/or the production of oil and gas related or derived
products, including assets already in development and/or production. Under the
terms of the agreement, the alliance will terminate on the earlier of 8 October
2011 or the date upon which Sojitz has invested a total of US$500 million in
joint acquisitions. Sojitz is to provide financial support to the alliance for
the purpose of funding material joint acquisitions, among other things,
including by securing funding and credit support from the Japanese Government.
Afren is to be appointed as operator in respect of any joint acquisitions. Afren
is required to attempt to locate assets which are materially and strategically
appropriate for a direct or indirect joint acquisition and provide information
in relation to such assets to Sojitz. Subject to such assets fulfilling certain
criteria, Afren is required to submit a proposal to Sojitz offering
participation in acquisitions of such new assets. Afren and its affiliated
companies cannot transfer or sell any interest in any asset of the type referred
to above already held by Afren without offering Sojitz the opportunity to
purchase the interest on the same terms that Afren has offered such interest to
a third party.
* A placing agreement was entered into between Afren and Merrill Lynch
International, Jefferies International Limited and Morgan Stanley Securities
Limited on 15 April 2009 relating to the cash placing of 265 million new
Ordinary Shares at 32 pence per Ordinary Share to institutional investors. Afren
paid commission of two per cent. of the aggregate value at the placing price of
the placing shares to Merrill Lynch International, Jefferies International
Limited and Morgan Stanley Securities Limited. Afren gave representations and
warranties customary for an agreement of this nature in favour of Merrill Lynch
International, Jefferies International Limited and Morgan Stanley Securities
Limited, unlimited in time and amount.
* The Company and the Directors entered into the Placing and Sponsor's Agreement
on 10 November 2009 with Merrill Lynch International, Morgan Stanley, Evolution,
Nomura and Jefferies relating to the issue of approximately US$175 million of
new Ordinary Shares (the "New Shares") and the sale of Ordinary Shares by
certain shareholders, including certain Directors in connection with the
exercise of 40,000,000 warrants over Ordinary Shares (the "Founder Shares" and
together with the New Shares, the "Placing Shares") and the admission of the
Ordinary Shares (issued and to be issued) to the Official List and to trading on
the London Stock Exchange. The Company appointed Merrill Lynch International as
sponsor, global coordinator and joint bookrunner, Morgan Stanley as joint
bookrunner and Evolution, Nomura and Jefferies as co-managers in respect of
Admission and the Placing. Merrill Lynch International, Morgan Stanley,
Jefferies, Nomura and Evolution have agreed to procure subscribers for the
Placing Shares and the Underwriters have agreed to underwrite settlement of the
Placing Shares at the Placing Price. In consideration of the services being
provided under the Placing and Sponsor's Agreement the Company agreed to pay to
Merrill Lynch International a fee of US$750,000 in connection with its role as
sponsor and the Underwriters a commission at a rate of 1.25 per cent. of the
amount equal to the product of the Placing Price and the aggregate number of
Placing Shares. An additional commission of up to one per cent. of the amount
equal to the product of the Placing Price and the aggregate number of Placing
Shares is payable to the Underwriters at the absolute discretion of the Company.
The Company also agreed to pay all reasonable costs and expenses of, or in
connection with, the Placing, Admission, the Placing and Sponsor's Agreement and
the allotment and issue of the New Shares (including, without limitation, any
stamp duty or stamp duty reserve tax) and all stock exchange listing fees,
admission fees, registrar's fees, legal fees and expenses of the Company and the
Underwriters, the Company's accountancy fees and expenses, costs of printing,
advertising and circulating documentation and the out-of-pocket expenses of the
Underwriters. The Company and the Directors gave certain customary
representations, warranties and indemnities to the Underwriters under the
Placing and Sponsor's Agreement. The liabilities of the Company are unlimited as
to time and amount. Prior to Admission, the Placing and Sponsor's Agreement may
be terminated by Merrill Lynch International and Morgan Stanley upon the
occurrence of certain specified events, including, but not limited to, material
adverse change and force majeure. Neither Merrill Lynch International nor Morgan
Stanley is entitled to terminate the Placing and Sponsor's Agreement after
Admission.
Financing arrangements
Afren has entered into financing arrangements which are summarised below.
US$200,000,000 Facility Agreement (as amended and restated from time to time)
On 20 March 2007, Afren Okoro as borrower entered into a US$200,000,000
revolving loan facility arranged by BNP. Afren and AERL act as guarantors under
the terms of the agreement (as amended and restated on 14 May 2007, and as
further amended on 11 August 2008 and 8 October 2009) (the "Okoro Facility").
The aggregate commitments as at 30 December 2008 consisted of US$127,500,000
"Tranche A" commitments and US$22,500,000 "Tranche B" commitments.
Afren Okoro is permitted to draw the funds available under the Okoro Facility
only for the purposes of (i) funding budgeted capital and operating expenditure
relating to the Okoro field; (ii) funding fees, expenses and interest accruing
under the Okoro Facility; (iii) funding up to 50 per cent. of cost overruns in
relation to the development of the Okoro field or any other borrowing base asset
to the extent taken into account in a projection; and (iv) on and from
completion of the Okoro project, for the lawful general corporate purposes of
Afren Okoro. Notwithstanding this, no amounts borrowed by Afren Okoro under the
Okoro Facility shall be used for anything other than to finance or refinance (or
to provide credit support in respect of the financing or refinancing of) the
ownership, acquisition, construction, development and/or operation of an asset
or portfolio of assets.
The total aggregate commitments under the Okoro Facility reduce at a rate of US$
30,000,000 per six month period from US$ 200,000,000 on 30 December 2008 to the
higher of (i) the borrowing base amount (which is readjusted every six months)
and (ii) US$ 20,000,000 on 30 December 2011, with the total commitment falling
to zero on the final maturity date, being the earlier of five years from the
closing date (as defined in the agreement) and the projected date on which the
specified assets subject to the agreement fall below 25 per cent. of their
initial reserves. The rate of interest payable is calculated on the basis of a
formula which incorporates the aggregate of the applicable margin, LIBOR, and
the mandatory cost specified.
The Okoro Facility includes representations, covenants and events of default
which are standard for facilities of this nature. The events of default comprise
a cross-default in an aggregate amount of more than US$ 1,000,000, an adverse
change in the political situation in Nigeria, and a change of control in any
Obligor other than Afren.
Fixed and floating security over all of the shares and assets of Afren Okoro and
AERL has been granted in relation to the Okoro Facility. Charges over the shares
of Afren Okoro and Afren Block One Limited, and pledges over the bank accounts
of, Afren Okoro, AERL and the AERL-Amni joint bank account and of Afren Block
One Limited, have also been granted in relation to the Okoro Facility.
US$150,000,000 Senior Secured Revolving Reducing Facility Agreement (as amended
and restated from time to time)
On 5 March 2008, Afren CI (UK) Limited ("ACL (I)") as borrower, Afren and Afren
CI (II) Limited ("ACL (II)") as guarantors and BNP (in various capacities
including "Facility Agent", "Original Lenders" and "Security Agent") entered
into the US$150,000,000 Senior Secured Revolving Reducing Facility Agreement
(the "CI Facility") to provide financing for, amongst others things, the
acquisition of Devon CI One Corporation, Devon Côte d'Ivoire Limited and Lion
G.P.L. S.A. The CI Facility was amended and restated on 23 September 2008 and
Afren CI One Corporation and Afren Cote d'Ivoire acceded as guarantors on 20
October 2008.
Under the CI Facility, the lenders make available to ACL (I) a revolving credit
facility comprising of a "Facility A Commitment" (in two tranches) totalling
US$120,000,000, and a "Facility B Commitment" (in two tranches) totalling
US$30,000,000.
ACL (I) is permitted to draw the funds available under Facility A for the
purposes of (i) on-lending to ACL (II) to fund the remainder of the acquisition
costs relating to the acquisition of Devon Côte d'Ivoire Limited and Devon CI
One Corporation and the related fees and expenses; (ii) to pay fees and expenses
related to any of the finance documents relating to the CI Facility; and (iii)
for lawful general corporate purposes.
ACL (I) is permitted to draw the funds available under Facility B for the
purposes of (i) on-lending to ACL (II) to fund the remainder of the acquisition
costs relating to the acquisition of Lion G.P.L. S.A., and to pay the related
fees and expenses; and (ii) for lawful general corporate purposes.
The total aggregate commitments under Facility A of the CI Facility reduce at a
rate of US$ 11,200,000 (rounded to three significant figures) per six month
period from US$ 112,430,000 on 30 June 2008 to US$11,240,000 on 31 December
2012. The total aggregate commitments under Facility B of the CI Facility reduce
at a rate of US$3,760,000 (rounded to three significant figures) per six month
period from US$37,570,000 on 30 June 2008 to US$ 3,760,000 on 31 December 2012.
Each of the total commitments of Facility A and Facility B fall to zero on the
final maturity date, being the earlier of 30 June 2013 and the projected date on
which the specified assets subject to the agreement fall below 25 per cent. of
their initial reserves. The rate of interest payable is calculated on the basis
of a formula which incorporates the aggregate of the applicable margin, LIBOR,
and the mandatory cost specified.
The CI Facility includes representations, covenants and events of default which
are standard for facilities of this nature. There are a number of negative
pledges and restrictions set out in the CI Facility which protect the interests
of the lenders, such as restrictions on transfers of assets, restrictions on
granting security over assets, among others.
Fixed and floating security over all of the shares and assets of Afren CI One
Corporation, Afren Cote d'Ivoire, ACL (II) and ACL (I) has been granted in
relation to the CI Facility. In addition, charges over the shares of Afren CI
One Corporation, Afren Cote d'Ivoire and ACL (I), and pledges over the bank
accounts of ACL (I), Afren Cote d'Ivoire, Afren CI One Corporation and Lion
G.P.L. S.A., have also been granted in relation to the CI Facility.
US$66,666,636 Subordinated Facility Agreement
On 5 March 2008, ACL (I) as borrower, Afren and ACL (II) as guarantors, BNP ("as
Arranger") and FCMB ("as Subordinated Agent") entered into a "Facility A" term
loan and "Facility B" term loan, for the total aggregate amount of
US$66,666,636. ACL (I) shall apply the Facility A loan towards (i) on-lending to
ACL (II) to fund (i) acquisition costs relating to the acquisition of Devon Côte
d'Ivoire Limited and Devon CI One Corporation and related fees and expenses,
(ii) paying fees and expense in relation to any finance documents; and (iii) for
general corporate purposes. ACL (I) shall apply the Facility B loan towards (i)
on-lending to ACL (II) to fund the remainder of the acquisition costs relating
to the acquisition of Lion G.P.L. S.A and related fees and expenses; and (ii)
for general corporate purposes. The facility agreement includes representations,
covenants and events of default which are standard for facilities of this
nature. The events of default comprise a cross-default in an aggregate amount of
more than US$1,000,000, and a change of control provision triggered in the event
that Afren ceases to wholly own any obligor or the target companies, or any
persons acting in concert gain control of Afren.
With the exception of the French law bank account pledge over the proceeds of a
treasury account, the security package provided in respect of the CI Facility is
also for the benefit of the Subordinated Lenders.
US$50,000,000 Facility Agreement
On 17 August 2007, Afren Nigeria and Afren entered into a US$50,000,000 Facility
Agreement with FCMB, under which FCMB granted Afren Nigeria an amortising
facility over five years with an interest rate of LIBOR plus 4.45 per cent. per
annum solely for the use by Afren Nigeria for its general corporate purposes and
those of Afren and their subsidiaries. The loan principal (together with
interest and fees) is repayable in six equal semi-annual instalments commencing
30 months from the drawdown date. Payment of interest and fees is also payable
during the initial 30 month period. In return for the grant of the facility,
Afren (as guarantor of Afren Nigeria's obligations) issued a detachable warrant
to FCMB to subscribe for 12,000,000 ordinary shares. The agreement includes
representations, covenants and events of default which are standard for
facilities of this nature. There are a number of negative pledges and
restrictions set out in the agreement which protect the interests of FCMB, such
as restrictions on transfers of assets, restrictions on granting security over
assets, including an undertaking from each of Afren Nigeria and Afren not to
dispose of, and that no substantial subsidiary will dispose of, a substantial
part of its assets.
ISDA Documentation
On 8 May 2007, Afren Okoro and BNP entered into an International Swaps and
Derivatives Association ("ISDA") master agreement. On 1 June 2007 and 11 July
2007, respectively, Afren Okoro and BNP entered into a swap and a cap
transaction pursuant to such agreement. The purpose of these transactions is to
protect Afren Okoro from volatility in the price of dated Brent oil. Each
transaction is effective on 1 May 2008 and is in respect of the price of a total
notional quantity of 1,571,982 barrels of dated Brent oil, with 32 monthly
determination periods terminating on 31 December 2010.
On 8 May 2007, Afren Okoro and BNP entered into an International Swaps and
Derivatives Association ("ISDA") master agreement. On 23 June 2009, Afren Okoro
and BNP entered into a swap and a cap transaction pursuant to the agreement. The
purpose of these transactions is to protect Afren Okoro from volatility in the
price of dated Brent oil. The transaction is effective on 1 July 2009 and is in
respect of the price of a total notional quantity of 1,004,646 barrels of dated
Brent oil, with 32 monthly determination periods terminating on 31 December
2011.
On 12 May 2008, Afren CI (UK) Limited and BNP entered into an ISDA master
agreement in respect of the hedging policy set out in the US$150,000,000 Senior
Secured Revolving Reducing Facility Agreement and the US$66,670,000 Subordinated
Facility Agreement, each dated 5 March 2008. A transaction was entered into
pursuant to such agreement on 29 September 2008, effective 1 October 2008, under
the terms of which Afren CI (UK) Ltd and BNP entered into a synthetic put option
in respect of the price of a total notional quantity of 1,576,611 barrels of
dated Brent oil. The aim of this transaction is to hedge against volatility in
the movement in the price of oil by guaranteeing that Afren CI (UK) Ltd will
always receive at least a minimum price in the case of a reduction in the market
price of crude oil. The arrangement has 15 quarterly determination periods and
terminates on 30 June 2012.
On 23 September 2008, Afren CI (UK) Limited and, one of its indirect
subsidiaries, Afren Cote d'Ivoire, entered into an ISDA master agreement which
follows from the agreement between Afren CI (UK) Limited and BNP referred to
above. A transaction was entered into pursuant to a confirmation dated 23
September 2008, effective 1 October 2008, whereby Afren Cote d'Ivoire and Afren
CI (UK) Limited entered into a synthetic put option in respect of the price of a
total notional quantity of 1,576,611 barrels of dated Brent oil. The aim of the
transaction is to hedge against volatility in the movement in the price of oil
by guaranteeing that Afren Cote d'Ivoire will always receive at least a minimum
price in the event of a reduction in the market price of crude oil. The
arrangement has 15 quarterly determination periods and terminates on 30 June
2012.
Agreements relating to Afren's assets
Afren has entered into agreements relating to its assets which are summarised
below.
Okoro and Setu Fields
Production Sharing and Technical Services Agreement
A Production Sharing and Technical Services Agreement was entered into between
Amni, Afren and AERL on 24 March 2006 (as amended) with respect to the Okoro and
Setu fields. Afren's rights and obligations were novated to Afren Okoro pursuant
to a novation deed dated 1 March 2007. Under the agreement, AERL is appointed as
the contractor and technical operator. Afren Okoro is obligated to lend to AERL
and Amni the initial field development costs. Afren Okoro is entitled to recover
such costs (plus interest of eight per cent. per annum) from 90 per cent. of the
sales proceeds of crude oil (net of royalties and taxes). Thereafter, proceeds
are to be shared equally between Amni and AERL (unless a separate OML has been
issued in respect of the Okoro and Setu fields). Until such amount is repaid,
Amni and AERL have granted a bank account charge, an asset charge and a share
option agreement (in respect of shares in Amni) as security for the repayment of
the amounts loaned by Afren Okoro. To the extent the development does not result
in sales proceeds being generated, Afren Okoro is not entitled to recoup any
amounts from Amni or AERL. The agreement remains in effect until terminated in
accordance with its terms.
Marketing Services and Sale and Purchase Agreement for Crude Oil
A Marketing Services and Sale and Purchase Agreement for Crude Oil was entered
into between BP Oil International Limited ("BP") and AERL (acting on its own
behalf and on behalf of its partner, Amni) on 13 May 2009 with an effective date
of 1 March 2009. This contract supersedes and replaces the Marketing Services
and Sale and Purchase Agreement for Crude Oil between BP and AERL made on 27
June 2008. Under the terms of this agreement, BP will provide certain services
to AERL which will include the purchase by BP of the Okoro crude oil from AERL
and the on-sale of such oil by BP to a third party buyer. The agreement
commences on the effective date and continues for a minimum of 12 months and
then until such time as terminated by either party. During the term of the
agreement, AERL agrees not to sell any of the Okoro crude oil except through
BP's services and BP will be the only face to market in respect of the services.
The total quantity of Okoro crude oil to be sold under this agreement is the
total production from the Okoro field during the term of the agreement. The
price of the crude oil is set by the calculation of a formula. In addition, a
formula to calculate profit sharing is provided with reference to certain
differences between the price paid by BP to AERL for the crude oil and the price
paid to BP by the third party buyer from BP's onward sale of the crude oil.
Contract for the Provision of Floating Production Storage and Offloading Unit
A Contract for the Provision of Floating Production Storage and Offloading Unit
was entered into between AERL (on behalf of itself and its co-venturers) and
Bumi Armada Berhad on 3 April 2007. This contract was then novated and split
pursuant to a novation agreement dated 8 February 2008 between AERL, Bumi Armada
Berhad (as guarantor of the contractor), Armada Floating Solutions Limited (as
contractor) and Bumi Armada (Singapore) PTE. Limited into (i) the Bareboat
Charter Contract (entered into between AERL and Armada Floating Solutions
Limited); and (ii) the Operation and Maintenance Contract (entered into between
AERL and Bumi Armada (Singapore PTE. Limited). Bumi Armada (Singapore) PTE.
Limited is responsible for the operation and maintenance of the FPSO and Armada
Floating Solutions Limited is to provide the FPSO. The term for both contracts
is five years from the issuance of the provisional acceptance certificate on the
first flow of oil into the FPSO with an option for AERL to extend the term for
at least one year to a maximum of five years. The provisional acceptance
certificate was issued on 1 July 2009. Rates are applied daily for the FPSO hire
at US$42,426 per day and the operation and maintenance services at US$26,000 per
day, subject to review. The technical fee in the Operation and Maintenance
Contract is US$1.88 million per annum. Under the Bareboat Contract, AERL has an
exclusive option to purchase the FPSO at its sole discretion. AERL may terminate
the Bareboat Contract and the Operation and Maintenance Contract on 180 days'
notice provided that if termination occurs before the end of the primary term of
the contracts, an early termination payment is payable by AERL. An early
termination payment is not incurred in the case of termination as a result of
certain conditions including force majeure events or the actual or constructive
loss of the FPSO. The contracts also provide each party with the right to
terminate upon a default by the other party. Events of default are linked
between the two contracts. Parent company guarantees are to be provided by
Armada Floating Solutions Limited and Bumi Armada (Singapore) PTE. Limited from
Bumi Armada Berhad and by AERL from Afren and are to be valid until the expiry
of 180 days after the demobilisation of the FPSO, or in the case of a total loss
of requisition of the FPSO, the date of termination of the contracts. In
addition, AERL is obliged to provide Armada Floating Solutions Limited and Bumi
Armada (Singapore) PTE. Limited with a bank guarantee or letter of credit for a
sum not exceeding US$6 million.
Ebok
Farm-Out Agreement
The Mobil/NNPC Joint Venture holds participating interests in several oil mining
licences, including OML 67, in which the Ebok field is situated. The Mobil/NNPC
Joint Venture entered into a Farm-Out Agreement with Oriental on 25 May 2007
under which Oriental was granted a 100 per cent. working interest in an area
within OML 67 for the purpose of conducting petroleum operations for a period of
60 months in consideration for Oriental making monthly payments to the
Mobil/NNPC Joint Venture of 30 per cent. of the profit oil and profit gas
arising from the farm-out area and certain other payments and complying with a
number of obligations in relation to OML 67. Subject to obtaining approval from
the Department of Petroleum Resources of Nigeria and to Oriental complying with
its obligations under the Farm-Out Agreement, the Farm-Out Agreement continues
for so long as the Mobil/NNPC Joint Venture continue to have the right to
conduct petroleum operations within the relevant area of OML 67.
Farm-In Agreement
Oriental entered into a Farm-In Agreement with Afren Resources on 31 March 2008.
This agreement sets out the terms upon which Afren Resources accepts the
assignment and transfer of a 40 per cent. participatory interest in the rights
and obligations of Oriental in respect of the Farm-Out Agreement (including
those referred to above), the farm-out area and the Joint Operating Agreement.
In consideration for such participating interest Afren Resources was to pay
US$11.5 million to Oriental and US$1 million to Sovereign Oil & Gas Company II,
LLC following satisfaction of certain conditions precedent, and US$11.5 million
to Oriental and US$1 million to Sovereign Oil & Gas Company II, LLC following
any development plan submitted to the Government of the Federal Republic of
Nigeria being approved. Oriental has the right to require such payment to be
satisfied in whole or in part by the issue of shares in Afren at a number of
shares to be agreed between the parties. The conditions precedent were satisfied
in respect of the agreement on 22 August 2008 and Afren Resources paid the
initial payments referred to above within 15 business days of that date. The
field development program was approved by the Department of Petroleum Resources
on 5 October 2009 and payment was made within 15 business days. Under the
agreement, Afren Resources also agreed to bear and pay all capital costs and all
operating costs (until Afren Resources has recovered all capital costs) as well
as 40 per cent. of the payment obligations of Oriental and the provision of
abandonment security under the Farm-Out Agreement referred to above, Afren has
provided a parent company guarantee in favour of Oriental and the Mobil/NNPC to
guarantee Afren Resources' obligations in respect of the farm-in.
Joint Operating Agreement
Oriental and Afren Resources entered into a Joint Operating Agreement on 31
March 2008 to set out the parties' obligations with respect to the conduct of
petroleum operations in the farm-out area, with Oriental as operator and Afren
Resources as technical adviser. Afren Resources is liable to fund all costs to
drill of one exploration well and (unless Afren decides to relinquish its rights
in the interest at that time) one exploration, appraisal or development well and
other work program costs. Available crude oil from the farm-out area (after
deducting royalty amounts due to the Federal Government of Nigeria, overriding
royalty amounts due to the Mobil/NNPC Joint Venture and Sovereign Oil and Gas
Company II, LLC and amounts due for taxes) will be allocated 100 per cent. to
Afren Resources until Afren Resources has recovered its capital and operating
costs. Thereafter, available crude oil will be shared between Afren Resources
and Oriental equally. The Joint Operating Agreement is effective for so long as
both the parties retain an interest in the Farm-out Agreement referred to above
and farm-out area.
Contract C-1527 (Rig Contract)
Afren Resources (on behalf of itself and its co-venturers) entered into Contract
Number C-1527 for the provision of jack-up drilling unit "GSF Adriatic IX" and
drilling rig services with GlobalSantaFe International Drilling Corporation in
association with Global Offshore Drilling Limited (collectively with
GlobalSantaFe International Drilling Corporation, the contractor) on 7 August
2009. The contractor is to provide the drilling unit together with certain other
equipment, material, supplies, services and personnel necessary to carry out
drilling operations. Afren Resources is to pay the contractor varying defined
rates during the different operating terms of drilling operations which range
from US$85,000 per day to US$97,000 per day. Certain other rates are also
applicable for various situations such as force majeure, repair and re-drilling
with such rates calculated as a percentage (either 80 per cent. or 100 per
cent.) of the applicable term rate. In addition, the contractor is entitled to
certain lump sums in relation to mobilisation and other fees and is entitled to
mark up reimbursable items on a sliding scale linked to cost, ranging from 10
per cent. to five per cent. The contract continues in force until the date that
drilling operations are deemed to be complete under the contract, initially for
a period of 250 days beginning on the date of acceptance of the drilling unit by
Afren Resources or unless earlier terminated. Afren Resources may extend the
term for another 175, 250 or 425 days. Afren Resources may terminate at any time
without reason on 10 days' notice in which case liquidated damages for early
termination will apply.
Okwok
Addax Farm-Out Agreement
On 7 July 2009, Afren Exploration and Addax entered into a farm out agreement
whereby Addax agreed to assign 70 per cent. of the rights, entitlements and
obligations of Addax a joint venture agreement dated 14 September 2005 between
Oriental and Addax, a technical services agreement dated 16 September 2006
between Oriental and Addax, a joint operating agreement dated 9 May 2006 between
Oriental and Addax, a deed of assignment dated 6 June 2006, a crude oil sales
and agency agreement dated 16 November 2005 and a conveyance of overriding
royalty interest dated 14 September 2005 between Oriental, Addax and Sovereign,
in consideration for Afren Exploration agreeing to drill one appraisal well in
the farm-out area and paying all costs associated therewith. Afren Exploration
was also granted an option, exercisable within six months after the drilling of
the well is complete (and, if Afren Exploration elects, the production testing
of one or more of the crude oil bearing sections of that well), to purchase
Addax's residual interest in the project. In consideration for such option,
Afren Exploration is to pay US$55 million together with an amount equal to the
sum of all expenditure and liabilities incurred by Addax in respect of its
residual interest on or after such completion of the drilling of the first well
(and production testing if applicable). The agreement is conditional on a number
of matters, including consent to the assignment from Oriental, NNPC, Mobil and
the Minister, which Afren is still awaiting to receive. The assignment under the
agreement of Addax's interests is not effective until Afren Exploration
completes the drilling of the well. Afren Exploration is required to have
completed the drilling of the well by 31 March 2011 (subject only to delays
caused by force majeure).
Joint Operating Agreement
On 19 August 2009, Oriental, Addax and Afren Exploration entered into a joint
operating agreement to determine how the Okwok oil field is to be managed. Under
the agreement, Oriental is appointed as operator and Afren Exploration is
appointed as its technical adviser. The parties can elect to take part in
proposed site projects. Oriental may propose and conduct site projects where
neither of the other parties is willing to approve a work programme containing a
firm well, or a development plan within a fixed period of time. If parties elect
not to participate in such a project, they have an option to reinstate such
rights and participate within a specified timeframe and subject to certain
conditions and payments. No exclusive operations shall conflict with projects in
which all three parties have agreed to participate. Each party shall have the
right to own, take in kind and separately dispose of its share of total
production in such quantities and in accordance with such procedures as set out
in an offtake agreement.
OPL 310
Participation Agreement and Production and Revenue Sharing Agreement
A participation agreement was entered into by Optimum and Afren Investments on 8
September 2008 and was amended by a Production and Revenue Sharing Agreement on
19 December 2008. Optimum, as holder of 100 per cent. of the participating
interest in OPL 310, agreed to assign 40 per cent. of such interest to Afren
Investments. Under the agreement, Afren Investments agreed to pay US$10 million
to the Government of Nigeria as initial payment for revalidation of the OPL 310
licence being allocated to Optimum and to take on certain liabilities and
obligations in relation to operations pursuant to the OPL 310 licence. These
included the obligation to make a payment to Optimum of (i) US$3 million
following governmental approval being given to Optimum's proposed assignment to
Afren Investments, (ii) US$10 million after the issue of the oil mining lease
with respect to the area the subject of the OPL 310 licence in the joint names
of Optimum and Afren Investments, (iii) US$4 million after the date on which
production of petroleum commences pursuant to the first development plan with
respect to the area the subject of the OPL 310 licence which receives all
necessary governmental consents ("Production Date"), and (iv) subject to an
independent third party having certified there is at least 100 mmboe of
recoverable reserves in the area of the subject of the OPL 310 licence, US$8
million after the date on which the cumulative production of petroleum from such
area reaches 50 mmboe. If the first well drilled after 8 September 2008 results
in the discovery of petroleum and an independent third party certifies that the
discovery will produce at least 10,000 boe per day, then Afren Investments is to
pay Optimum US$5 million, with the amount to be paid pursuant to (ii) above
reduced to US$9 million and the amount to be paid pursuant to (iii) above
reduced to zero. Afren Investments must also pay the Government of Nigeria US$10
million after the issue of the oil mining lease in the joint names of Optimum
and Afren Investments and the same amount again once the Production Date is
achieved. Afren Investments is required to pay all capital and operating
expenditures from 8 September 2008 until the Production Date. After the
Production Date and until Afren Investments recovers certain costs incurred as a
result of carrying Optimum's capital and operating expenditure obligations until
the Production Date, Afren Investments will bear all capital expenditures. After
Afren Investments has recovered its costs, Optimum and Afren Investments will
bear 70 per cent. and 30 per cent. of capital expenditure respectively. After
the Production Date, operating expenditures will be apportioned between the
parties in proportion to each party's share of net available production. Optimum
is to pay the royalty and concession rental on behalf of the parties and
liability for such payments will be shared in proportion to each party's share
of net available production. Until Afren Investments recovers certain costs, it
is entitled to 91 per cent. of net available production. Optimum then has an
entitlement to 79 per cent. of net available production until it recovers
certain costs, then the parties are to share in net available production with
Optimum being entitled to 30 per cent. and Afren Investments being entitled to
70 per cent. The agreement is effective from 8 September 2008 and continues for
a term of the OPL 310 licence or such replacement licence, including any
extension thereof, unless otherwise terminated. The Department of Petroleum
Resources transmitted the ministerial approval for the assignment of 40 per
cent. equity to Afren on 26 May 2009.
Anambra Basin - OPL 907 and OPL 917
Master Loan and Production Sharing Agreement
AGER, Afren, GEC and AERL entered into a Master Loan and Production Sharing
agreement on 22 December 2005 to set out the basis on which Afren, GEC and AERL
are to lend monies to AGER. The agreement provides that for each of OPL 907 and
OPL 917, the lending parties are to enter into a loan memorandum with AGER in
respect of the purpose of the loan, the interest rate, the default interest rate
and repayment obligations. AGER, Afren, GEC and AERL entered into a loan
memorandum for each of OPL 907 and OPL 917 on 1 February 2006. Under the loan
memorandum in respect of OPL 907, Afren agreed to loan to AGER amounts not
exceeding 47.3 per cent. of the work commitment for OPL 907 (or such further
amounts as Afren may in its absolute discretion make available to AGER) at an
interest rate of 10 per cent. accruing daily. Afren is entitled to 60 per cent.
of allocated profit oil and AGER is entitled to 40 per cent. of allocated profit
oil. Under the loan memorandum in respect of OPL 917, Afren agrees to loan to
AGER an amount equal to 70 per cent. of the US$13 million work commitment for
OPL 917 at an interest rate of 10 per cent. accruing daily. Afren is entitled to
60 per cent. of allocated profit oil and AGER is entitled to 40 per cent. of
allocated profit oil.
Production Sharing Contract
AGER entered into a production sharing contract on 20 February 2008 with a term
of 30 years in relation to OPL 907 with NNPC, Buston Energy Resources Limited,
Allenne Exploration and Production Limited, Kaztec Engineering Limited, VP
Energy Limited, De Atai Oil Services International Limited and Bepta Oil and Gas
Limited. The current parties to the agreement and their respective participating
interests are: AGER (41 per cent.), Buston Energy Resources Limited (25 per
cent.), Allenne Exploration and Production Limited (14 per cent.), Kaztek
Engineering Limited (5 per cent.), Bepta Oil and Gas Limited (10 per cent.) VP
Energy Limited (3 per cent.) and De Atai Oil Services International Limited (2
per cent.).
AGER entered into a production sharing contract on 20 February 2008 with a term
of 25 years in relation to OPL 917 with NNPC, VP Energy Limited, Petrolog Oil
and Gas Limited, De Atai Oil Services International Limited, and Goland
Petroleum Development Company Limited. The current parties to the agreement and
their respective participating interests are: AGER (42 per cent.), Petrolog Oil
and Gas Limited (18 per cent.), VP Energy Limited (17 per cent.), De Atai Oil
Services International Limited (10 per cent.) and Goland Petroleum Development
Company Limited (13 per cent.).
Under the production sharing contracts the parties other than NNPC were
appointed as contractor for OPL 907 and OPL 917 respectively and such parties
are required to ensure minimum work programmes (including minimum financial
commitments) are complied with and pay NNPC a production bonus once certain
levels of production have been attained. Subject to the contractor fulfilling
its obligations, each of the production sharing contracts are for a term of 30
years, being a 10 year exploration period and a 20 year oil mining licence
period. Upon the discovery of a commercial quantity of hydrocarbons NNPC may
apply for a conversion of the oil prospecting licence into an oil mining licence
and on expiry of the 20 year mining period, NNPC is to seek the maximum allowed
renewal period of the oil mining licence.
Block CI-11
Share Purchase Agreement
On 5 March 2008, Devon Energy, Devon International Holdings Ltd, Afren C1 (II)
Limited and Afren entered into a share purchase agreement pursuant to which on
24 September 2008, Afren CI (II) Limited acquired Devon Energy and Devon
International Holdings Ltd's interests in Côte d'Ivoire comprising (i) a 47.9592
per cent. working interest and operatorship of the producing Block CI-11, (ii) a
65 per cent. direct interest and operatorship with rights over an additional 15
per cent. interest in the undeveloped Block CI-01, and (iii) a 100 per cent.
interest in the onshore Lion Gas Plant. The consideration for the acquisition
was US$184 million (after working capital adjustments).
Petroleum Production Sharing Contract
A Petroleum Production Sharing Contract was entered into by The Republic of Côte
d'Ivoire, UMIC Côte d'Ivoire Corporation and Petroci on 27 June 1992 (the
"Petroleum Production Sharing Contract"). Under the contract, Petroci and UMIC
Côte d'Ivoire Corporation were appointed as contractor in respect of carrying
out crude oil and natural gas operations in Block CI-11. The term of the
contract is expressed to be until the expiry, surrender or withdrawal of the
last existing exclusive exploitation licence granted to the contractor. The
contractor was granted an exclusive exploration authorisation for an initial
period of 18 months from 4 January 1993. Such right is extendable at the
contractor's request provided it fulfils its exploration work commitments under
the contract for renewals of further exploration periods to an aggregate further
term of 5.5-6.5 years. The contract requires the contractor to surrender parts
of the initial area of Block CI-11 in stages except to the extent any appraisal
or exploitation perimeters have been granted. If the contractor conducts an
appraisal and considers the field to be commercial it may apply to the
Government for an exclusive exploitation authorisation, which shall be for a
period of 25 years from the date of issue and may be extended for a further 10
years. The grant of an exclusive exploitation authorisation obligates the
contractor to undertake all petroleum operations necessary for the exploitation
at its sole costs and risk. Exploration decrees for the Lion and Panthère fields
were granted for 25 years on 12 September 1994.The contractor is entitled to no
greater than 63 per cent. of production of crude oil and natural gas, or such
lesser percentage which would be sufficient to recover costs. Any other crude
oil or natural gas produced is to be shared between The Republic of Côte
d'Ivoire and the contractor on a tiered basis linked to daily total production
of crude oil or natural gas (as applicable). The contractor is also required to
pay bonuses to the Directorate General of Taxes of Côte d'Ivoire linked to
production rates of crude oil. Petroci retained a greater participating interest
in respect of two wells drilled in Block CI-11 which were developed prior to the
effective date. Except for such area, Petroci's initial participating interest
in Block CI-11 is 10 per cent. with an option to increase up to a maximum of 20
per cent. for a particular exploitation area provided Petroci notifies the other
contractor parties within four months of a grant of an exclusive exploitation
authorisation for such area. Any additional participation is assigned from each
of the other contractor parties in proportion to their participating interests.
There have been three subsequent amendments to the contract and the current
parties to the contract are The Republic of Côte d'Ivoire, Afren Cote d'Ivoire,
Petroci, the IFC and SK Energy. UMIC Côte d'Ivoire Corporation changed its name
to Ocean International Limited and then to Devon Côte d'Ivoire, Ltd., and the
shares in Devon Côte d'Ivoire, Ltd. were subsequently acquired by Afren CI (II)
Limited on 24 September 2008 pursuant to a share purchase agreement dated 5
March 2008. The IFC are currently in the process of selling their participating
interest in CI-11. This is subject to the government's approval, which, if not
obtained after a certain period of time, is deemed to have been given.
Joint Operating Agreement
A Joint Operating Agreement was entered into by UMIC Côte d'Ivoire Corporation
and Petroci on 27 June 1993, with an effective date of 4 January 1993. There
have been eight amendments to the agreement. The current parties to the
agreement are Afren Cote d'Ivoire, Petroci, IFC and SK Energy. Under the
Production Sharing Agreement, Petroci retained a greater interest in a special
area of Block CI-11 encompassing two previously drilled wells. The parties now
hold the following percentage participating interests in Block CI-11: Afren
Cote d'Ivoire (47.9592 per cent.), Petroci (20.1360per cent), IFC (18.9456per
cent) and SK Corporation (12.9592per cent). The parties can elect whether or not
to take part in proposed projects which are in addition to the minimum
exploration work commitments set out in the Petroleum Production Sharing
Contract. Parties have the right, but not the obligation, to assume any
non-consenting parties' participating interest in such case. If parties elect
not to participate in such a project, they have an option to reinstate such
rights and participate within a specified timeframe and subject to certain
conditions and payments. The agreement continues until only one party holds 100
per cent. of the interest in Block CI-11 or when the Petroleum Production
Sharing Contract terminates, whichever is the earlier.
Unitization Agreement
Petroci, UMIC Côte d'Ivoire Corporation, IFC, Pluspetrol Côte d'Ivoire CI-11
Corporation (which later transferred its interest to Yukong Limited) and GNR
(Côte d'Ivoire) Limited entered into a Unitization Agreement on 1 July 1996. The
Petroleum Production Sharing Contract covers two areas (being Block CI-11 and
the special areas inside Block CI-11 in which Petroci is entitled to enhanced
participating interest) and both the Lion field and the Panthère field are
covered by the contract and are each partly located within and without the
special areas. As the participating interests of the parties in the special area
differ from that of the parties in Block CI-11 excluding the special area, the
parties agreed to unitise the Lion field and the Panthère field to obtain an
equitable allocation of production and cost for the two areas. The Unitization
Agreement provides for the formation of a unit area for the purposes of
unitising the reserves in the two areas, the ownership of all joint property
used for petrol operations and reserves in any future exploitation perimeter
within the two areas. For that purpose, unit interests over the area are
determined and calculated by a selected engineering firm first on 1 July 1996,
and subsequently recalculated on a yearly basis on 1 July; the amount of
reserves determined, however, takes into account reserves that were produced and
sold between the Petroleum Production Sharing Contract effective date (4 January
1993) and the date of the Unitisation Agreement.
Gas Sale and Purchase Agreements
(a) An agreement for the Sale and Purchase of Natural Gas in Block CI-11 was
entered into between Société Ivoirienne de Raffinage (as buyer), UMIC Côte
d'Ivoire Corporation, IFC, G.N.R. (Cote d'Ivoire) Ltd, Pluspetrol S.A., Petroci
and The Republic of Côte d'Ivoire (collectively as sellers) on 28 February 1996
(as amended on 1 January 1998). Under the agreement, the sellers are required to
deliver a daily quantity of up to 24 million cubic feet of natural gas, and a
minimum annual quantity of 4.7 billion cubic feet of natural gas on a take or
pay basis, with pricing determined pursuant to specified formulae. The agreement
is due to expire on the 31 December 2009 and the parties are currently
negotiating the terms of a new gas sale and purchase agreement.
(b) An agreement for the Sale and Purchase of Natural Gas in Block CI-11 was
entered into between La Caisse Autonome d'Amortissement (as buyer) (now SOGEPE),
UMIC Côte d'Ivoire Corporation, IFC, G.N.R. (Côte d'Ivoire) Ltd, Pluspetrol S.A.
(collectively as sellers) and Petroci and The Republic of Côte d'Ivoire
(collectively as delivering parties) on 30 September 1994 (as amended on 1
August 2003). The seller's obligation to deliver a set annual quantity and
buyer's obligation to take or pay have expired in accordance with the terms of
the agreement. Afren Cote d'Ivoire terminated the purchase price provisions of
the amendment (setting natural gas price of US$2.35 per million btu for all
natural gas received up to an annual base quantity, and thereafter of US$2.15
per million btu) in accordance with the terms of the amendment. The parties are
currently negotiating a new gas price; in the interim, it has been agreed to use
a provisional price of U$4 per million btu. The agreement expires (if not
earlier terminated) on the expiry of the last exclusive exploration
authorisation issued by The Republic of Côte d'Ivoire to the contractor under
the Petroleum Production Sharing Contract.
(c) On 17 April 1998, Lion GPL, S.A. ("Lion") and SIR entered into an LPG
Sales Contract whereby Lion agrees to sell, and SIR agrees to purchase,
commercial butane received in SIR's storage facility. The quantities which SIR
agrees to purchase are determined by a formula set out in the agreement. Lion
has the exclusive right to supply to SIR any shortage of commercial butane which
SIR needs to supply the Ivorian market. The price for the commercial butane is
determined by governmental decree. Such price was determined by decree of The
Republic of Côte D'Ivoire on 7 July 1997, which specified that the sale price
would be US$244 per metric ton from the date that the volume of sales by Lion
reaches 5000 tons or following the expiry of the period of the first 18 months
of production. The agreement is renewable annually. Lion has the right to close
down the LPG plant if it is no longer economically viable (thereby terminating
the agreement).
Gas Transportation Agreement
On 25 October 2005, a Block CI-26 and Block CI-40 Gas Transportation Agreement
was entered into between CNR International (Côte d'Ivoire) SARL, Svenska
Petroleum CI AB, Petroci Holding, Petroci Overseas Limited and The Republic of
Côte d'Ivoire (collectively, as charterer for CI-40), CNR International (Côte
d'Ivoire) SARL, Tullow Côte d'Ivoire Limited, Petroci Holding, and The Republic
of Côte d'Ivoire (collectively, as charterer for CI-26), Ocean Energy Côte
d'Ivoire Corporation, IFC, SK Corporation and Petroci Holding (collectively, as
transporter). Under the agreement, the transporter is required, subject to
minimum and maximum specified quantity requirements, to receive, transport and
deliver natural gas (and certain other associated liquids and gases) on behalf
of the charterers at a price of US$0.13 per thousand cubic feet for actual
volumes of gas delivered by the charterer to the transporter less any
unaccounted for line losses. The transporter is required to maintain the CI-11
pipeline and the Azito pipeline as part of its obligations under the agreement.
The agreement expires (unless earlier terminated) on the date of expiration of
any exclusive exploitation authorisation to be issued by The Republic of Côte
d'Ivoire to the contractor under the production sharing contract (such contract
is not defined but it may be referring to the Petroleum Production Sharing
Contract).
Block CI-01
Production Sharing Contract
A production sharing contract was entered into by The Republic of Côte d'Ivoire,
UMIC Côte d'Ivoire Corporation and Petroci on 5 December 1994 (as amended), with
UMIC Côte d'Ivoire Corporation and Petroci as contractor and UMIC Côte d'Ivoire
Corporation appointed as operator. The contract provides that the duration of
any exclusive exploration authorisation together with an approved appraisal work
programme is for a total of eight years and nine months and the duration of any
exclusive exploitation authorisation is 25 years from the date of issue, which
may be extended for a further period of 10 years. A commercial petroleum
discovery entitles the parties to an exploitation authorisation and several such
discoveries in respect of the relevant area. Afren is currently in the process
of obtaining an exclusive exploitation authorisation. The contractor is entitled
to take no more than 60 per cent. of total production of crude oil (or 40 per
cent. in the case of natural gas) or such lesser percentage as would be
sufficient for it to recover its costs. Any other crude oil or natural gas
produced is to be shared between The Republic of Côte d'Ivoire and the
contractor on a tiered basis linked to daily total production. The contractor is
also required to pay bonuses to the Directorate General of Taxes of Côte
d'Ivoire linked to production rates of crude oil. Under the agreement, Petroci
had an initial participating interest of 10 per cent. Petroci elected to take a
40 per cent. participating interest on 14 February 1996, but reduced such
interest effective on 31 December 1997 so that it holds a 20 per cent. carried
interest in exploration and appraisal. Petroci has an option to convert the 20
per cent. carried interest into a total exploitation participation of 20 per
cent. or less in respect of each area where exploitation is being conducted.
UMIC Côte d'Ivoire Corporation assigned its interest under the contract to UMIC
(CI-01) Corporation which assigned a portion of its interest to Yukong Limited
on 19 January 2006. UMIC (CI-01) Corporation changed its name to Ocean (CI-01)
Corporation and then to Devon CI One Corporation, and the shares in Devon CI One
Corporation were subsequently acquired by Afren C1 (II) Limited pursuant to a
share purchase agreement dated 5 March 2008. Currently the parties have the
following participating interests: Devon CI One Corporation (65 per cent.);
Petroci (20 per cent.) and SK Corporation (which acquired Yukong Limited's
interest) (15 per cent.).
Keta Block
Petroleum Agreement
Under a Petroleum Agreement between the Republic of Ghana, GNPC, Devon Energy
Ghana Limited and EnCana International (Ghana) Limited dated 29 July 2002 (as
amended), Afren Energy Ghana Limited ("Afren Ghana") (formerly Devon Energy
Ghana Limited) is designated as the contractor in respect of the Keta Block.
Under the agreement, Afren Ghana and GNPC have 90 per cent. and 10 per cent.
initial participating interests respectively, with the option for GNPC to
acquire an additional 15 per cent. participating interest subject to GNPC
contributing a proportionate share of development and production costs within
designated commercial discovery areas. The agreement was to expire on 31 January
2008 but would be extended for two additional periods up to 31 December 2009 for
each well drilled beyond the minimum work requirements. On 29 July 2009 the
Ministry of Energy of Ghana confirmed such extension to 31 December 2009. Afren
Ghana also has the option under the agreement to require the Ministry of Energy
and GNPC to enter into a new petroleum agreement, covering 4,400 km2 of the
contract area as selected by Afren Ghana. The new petroleum agreement is to
contain the same terms and conditions as the Petroleum Agreement except that the
term shall be six years divided into three periods of two years each with one
exploration well work obligation and a minimum expenditure of US$25 million for
each period. Afren Ghana assigned a two per cent. participating interest to Gulf
and entered into a joint operating agreement with Gulf on 18 June 2008.
Farm-Out Agreement
On 24 October 2008 Afren Ghana and Mitsui Ghana entered into a Farm-out
Agreement and this agreement completed on 20 November 2008. Under the agreement,
Mitsui Ghana acquired a 20 per cent. participating interest in the Petroleum
Agreement together with a 22.2 per cent. interest in a joint operating agreement
with Gulf. Mitsui Ghana agreed to pay 50 per cent. of all costs and claims
incurred in the drilling programme in respect of the exploration well (subject
to a cap), certain well costs incurred prior to the date of the agreement, and
to fund 20 per cent. of cash calls in funding any costs relating to the
exploration well exceeding the approved budget.
La Noumbi Permit
Production Sharing Agreement
A Production Sharing Agreement was entered into between the Republic of Congo
(the "Government"), Les Établissements Maurel & Prom, Tacoma Resources Ltd and
Heritage Congo Ltd (in which Afren acquired the entire issued share capital of
in November 2006) (together the contractor) with an effective date of 9 February
2004. The agreement terminates on expiry or termination of the research permit
or exploration permit. The research permit, granted by the Presidential Decree
to Zetah Maurel & Prom Congo dated 10 February 2003 enters into force on the
date that the Production Sharing Agreement is approved by law and is granted for
a period of four years. Such permit can be renewed twice for a three year period
each. The contractor is represented by the company Zetah Maurel & Prom Congo.
Les Établissements Maurel & Prom was appointed operator. Oil costs may be
recovered in the following priority; exploration costs, development costs,
research costs and last, the deposit agreed for the purpose of the
rehabilitation works. Such oil costs may be recovered up to a limit of 60 per
cent. of the net oil production and certain other limits determined by a sliding
scale formula relating to the oil price. If the determined price (the parties
are to meet every quarter to agree the price applicable for each month of the
quarter) of oil is less than US$22 then the contractor is entitled to 45 per
cent. of the oil produced and the Government is entitled to 55 per cent. If the
determined price is more than US$22 then 25 per cent. of the oil production will
be shared as if the determined price was less than US$22 and the contractor will
be entitled to 40 per cent. and the Government will be entitled to 60 per cent.
of the remainder. Excess oil will be shared between the contractor and the
Government in shares of 40 per cent. and 60 per cent. respectively. The
Government may request the contractor sell up to 30 per cent. of its oil
entitlement to Congolese industries.
DEFINITIONS
In this announcement:
"Admission" means the admission of the issued Ordinary Shares of Afren to
listing on the Official List becoming effective in accordance with the Listing
Rules and admission to trading having been granted and becoming effective on the
London Stock Exchange's market for listed securities;
"AIM" means the alternative investment market of the London Stock Exchange;
"Afren" or the "Company" means Afren plc;
"announcement" means this announcement (including the appendices to this
announcement);
"CREST" means the relevant system, as defined in the Uncertificated Securities
Regulations 2001 (SI 2001/3755) (in respect of which Euroclear UK & Ireland
Limited is the operator);
"Directors" means the directors of Afren;
"Evolution" means Evolution Securities Limited, which is authorised and
regulated in the United Kingdom by the FSA and is a member of the London Stock
Exchange;
"FSA" means the Financial Services Authority;
"FSMA" means the Financial Services and Markets Act 2000, as amended;
"GM" means the general meeting of the Company to be held at the offices of White
& Case LLP, 5 Old Broad Street, London EC2N 1DW at 11 a.m. on 30 November 2009;
"Group" means Afren and its subsidiary undertakings from time to time;
"JDZ" Joint Development Zone;
"Jefferies" means Jefferies International Limited, which is authorised and
regulated in the United Kingdom by the FSA and is a member of the London Stock
Exchange;
"Joint Bookrunners" means Merrill Lynch and Morgan Stanley;
"London Stock Exchange" means the London Stock Exchange plc;
"Listing Rules" means the rules and regulations made by the UK Listing Authority
pursuant to Part VI FSMA, as amended from time to time;
"Merrill Lynch" or "Merrill Lynch International" means Merrill Lynch
International, which is authorised and regulated in the United Kingdom by the
FSA and is a member of the London Stock Exchange;
"Morgan Stanley" means Morgan Stanley Securities Limited which is authorised and
regulated in the United Kingdom by the FSA and is a member of the London Stock
Exchange;
"Nomura" means Nomura International Plc, which is authorised and regulated in
the United Kingdom by the FSA and is a member of the London Stock Exchange;
"NSAI" means Netherland, Sewell & Associates, Inc.;
"NSAI Report" means the competent person's report by NSAI;
"Ordinary Share" means an ordinary share of 1 penny each in the capital of the
Company;
"Placee" means any person (including individuals, funds or otherwise) by whom or
on whose behalf a commitment to acquire Placing Shares has been given;
"Placing" means the placing of the Placing Shares by Merrill Lynch, Morgan
Stanley, Jefferies, Nomura and Evolution on behalf of the Company, with both new
and existing institutional investors;
"Placing Agreement" means the placing agreement dated 10 November 2009 among the
Company, the directors of the Company, Merrill Lynch, Morgan Stanley, Jefferies,
Nomura and Evolution in respect of the Placing;
"Placing Price" means the price per Ordinary Share at which the Placing Shares
are placed;
"Placing Shares" means the new Ordinary Shares to be issued pursuant to the
Placing;
"Prospectus Directive" means the Directive of the European Parliament and of the
Council of the European Union 2003/71/EC;
"Securities Act" means the US Securities Act of 1933, as amended;
"UK Listing Authority" means the FSA acting in its capacity as the competent
authority for the purposes of Part VI of FSMA;
"Underwriters" means Merrill Lynch International, Morgan Stanley, Evolution,
Nomura and Jefferies;
"United Kingdom" or "UK" means the United Kingdom of Great Britain and Northern
Ireland; and
"United States" or "US" means the United States of America, its territories and
possessions, any state of the United States and the District of Columbia.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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