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Thursday, March 6, 2008
Afren plc (AIM: AFR)
Strategic acquisition of Devon Energy’s interests in
London, 6 March 2008 – Afren plc ("Afren" or the “Company”) is pleased to announce that it has entered into an agreement with Devon Energy Corporation (“Devon”) to acquire its interests in Côte d’Ivoire, comprising a 47.96% working interest and operatorship of the producing Block CI-11, a direct 65% interest and operatorship with rights over an additional 15% interest in the undeveloped Block CI-01 and a 100% interest in the onshore Lion Gas Plant (“LGP”), effective 30th June 2007.
KEY HIGHLIGHTS
§ Agreed consideration for the acquisition is US$205 million
§ The acquisition will be funded through a financing package arranged by BNP Paribas
§ The acquisition offers access to immediate oil and gas production, proven reserves and cash flow:
o Current net daily volumes of approximately 3,000 entitlement barrels of oil equivalent per day (“boepd”) from upstream oil and gas production and NGL extraction (approximately 5,000 boepd on a working interest basis)
o Combined net 2P reserves for the Block CI-01 and Block CI-11 interests of approximately 28 million barrels of oil equivalent (“mmboe”) as at 30th June 2007
§ The portfolio offers significant upside:
o Near term opportunity to optimize and increase Block CI-11 production through a low risk wireline and rig based workover programme, in addition to the development of additional reservoir intervals
o Existing proved undeveloped reserves on Block CI-01 present an attractive development opportunity
o Targeting total net daily production volumes in excess of 6,000 entitlement boepd by 2010 from the upstream assets and the LGP
§ Afren will take on operatorship, together with Afren’s partner PETROCI, the National Oil Company of Côte d’Ivoire, of a fully integrated gas project and assume a competent and skilled local workforce
§ The acquisition marks an important strategic entry into Côte d’Ivoire and Afren is delighted to have formed a broad African strategic alliance with Cherokee Allied Oil and Gas Corporation (“Cherokee”) and to be working alongside PETROCI
§ The acquisition is subject to customary regulatory and governmental approvals
AFREN POST ACQUISITION
§ The acquisition significantly strengthens Afren’s existing portfolio
o Increases Afren’s existing 2P reserve base by 67% to 70 mmboe
o Immediate production and cash flow ahead of production start-up at the Okoro Setu project in
o A material and balanced platform in a new country with significant upside, taking the total portfolio to 17 assets in 7 countries in less than three years
o Portfolio and product diversification with oil, gas and high-value liquid extraction
“This material transaction, which follows on from the Company’s acquisition of Devon’s assets in
“Through a single action, and through our partnership with the National Oil Company of Côte d’Ivoire, PETROCI, we have acquired a fully functioning business in Côte d’Ivoire, with the combination of production, near term development, appraisal and exploration upside, as well as midstream interests and a full local workforce, which we will now look to further expand. We look forward to building on our partnership with PETROCI and our overall position in
Block CI-11
Block CI-11 is located about 13 km offshore and 89 km from
The fields have been developed via a Mobile Offshore Production Platform and four tethered caissons. Oil and Gas are piped to Abidjan, where the oil is sold on the open market and gas is processed by the LGP and sold under two long term contracts to domestic end users.
Net 2P reserves are currently estimated at 11.6 mmboe as at 30th June 2007 (source: Operator). Gross average daily production at Block CI-11 throughout 2007 was 1,846 barrels per day of crude oil and 39.7 million cubic feet per day (mmcfd) of natural gas. Gas is sold under two long term contracts.
Block CI-01
Block CI-01 was awarded to UMC in 1994, and is located in the easternmost part of
Three separate significant hydrocarbon accumulations have been discovered by exploration drilling in the late 1970’s through the mid 1980’s by Esso and Agip. The discoveries are Kudu, Eland and Ibex. Net 2P reserves are currently estimated at 16.7 mmboe (source: Operator).
Afren anticipates a market opening for CI-01 gas between 2010 and 2012, offering a near term development project with significant upside. The proposed concept is to develop the Kudu and Eland fields with anticipated gas sales via the LGP. The Ibex field offers an oil development opportunity plus associated gas that could be incorporated within a broader CI-01 development solution.
The Lion Gas Plant
The Lion cryogenic straddle plant, which has an inlet capacity of 75 mmcfd, was constructed by Ocean Energy in 1998 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 (“CNRL”), 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 LGP.
The primary products from the LGP facility are butane and gasoline. The gasoline produced is spiked back into the Lion crude oil stream and is sold on the world market at existing crude prices whilst butane is sold into the local market. There is also the potential to extract and sell propane, offering further upside opportunity.
Afren is to acquire 100% ownership of the LGP, which enjoys tax exempt status, so net cash generated offers a high margin per barrel of product extracted and attractive economics.
Other
The acquisition is subject to certain conditions precedent, including customary regulatory and governmental approvals. The transaction will take the form of an acquisition of Devon’s subsidiaries Devon Côte d’Ivoire, Ltd., Devon CI One Corporation and Lion G.P.L., S.A., all of which are share purchases.
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