Afren Oil says it achieved significant exploration success with discoveries in Nigeria, Iraq

The Company said despite security challenges in the region, it has been successful in its operations.

Afren Oil, an independent upstream oil and gas exploration and production company, said it has achieved significant exploration success with its discoveries in Nigeria and Iraq, despite the security and political stability concerns of both regions.

The Chairman of the Company, Egbert Imomoh, made this known on Tuesday at the firm’s 2013 AGM in London.

He said while the organisation operates in oil and gas provinces in the world where security and political stability is of great concern, “2012 proved to be yet another defining year; we delivered record financial results driven by strong production performance at our greenfield developments, offshore Nigeria, and achieved significant exploration success with discoveries in Nigeria and the Kurdistan region of Iraq.”

In a communiqué made available, Mr. Imomoh said the firm commenced early production from both the Okoro Field Extension and Ebok NFB within ten months of discovery and is moving towards the finalisation of full field development solutions for discoveries, using fast track development skills and existing infrastructure.

He said in 2012, the firm made discoveries at the Okoro Field Extension, Ebok North Fault Block (“Ebok NFB”), both offshore Nigeria, and at Simrit-2, located on the Ain Sifni PSC, Kurdistan region of Iraq.

“Our success with the drill bit in Nigeria led to a 265% 2P reserves replacement ratio and increase in net 2P (Proven plus Probable) reserves to 210 million barrels of oil equivalent (mmboe). This was achieved while lowering our operating cost per barrel by 16% to US$15.0 per barrel and with a reduction in the Total Recordable Incident Rate by 33% to 1.47.

“We have started 2013 strongly, with year-on-year growth of 14% in net production in quarter one 2013 and remain firmly on-track to achieve our production guidance of 40,000 to 47,000 barrel of oil equivalent per day (boepd) net to Afren. We have also made a successful start to our 2013 drilling campaign with the successful Okwok-10 and Okwok-11 appraisal wells. The results from the appraisal programme are currently being integrated into the field model and optimised Field Development Plan (FDP), prior to submission to the Nigerian authorities later this year,” he said.

The firm, which is listed on the main market of the London Stock Exchange and a constituent of the Financial Times Stock Exchange Index of the leading 250 UK listed companies, said as part of its active portfolio management process, it will look to farm-out and divest assets at different points in the value chain to either increase the rate of return on investment from its portfolio or to use the proceeds to recycle cash and maintain capital efficiency.

Last month, the firm announced that it had completed its farm out of 17.14 per cent participating interest in the OPL 310 licence, offshore Nigeria, to Lekoil. An exploration well is currently being drilled at the Ogo prospect and together with a planned side-track which, in aggregate, will be targeting gross P50 prospective resources of 202 mmboe.

Dwindling oil production

Exploration success and investment into Nigeria’s oil production are welcome development, following the challenges the nation is facing as regards oil production. Over the months, available reports reveal that domestic oil production and output has been negatively affected and is dwindling due several disruptions such as pipeline vandalism, bunkering and force majeure among others.

Industry watchers say there is the urgency to bring new technologies and capital to revive stagnating production and that for Nigeria the challenge is even bigger as it is competing with other emerging countries some of which have an advantage due to recent discoveries and often more favourable regulatory and security environments such as East Africa or Brazil.

According to them, if production remains at current levels due to under-investment, the net amount of barrels available for exports will shrink quickly putting further pressure on the budget and future economic growth.

“We have heard a lot of discussions around the upcoming Petroleum Industry Bill which should arguably provide incentives for indigenous producers although we also heard a few critical comments about this bill. Despite the overall positive impressions we think it’s important to be reminded that global majors including Shell and Cononco Phillips are looking to reduce their exposure to Nigeria with security being one of the most often cited reasons,” Renaissance Capital, an investment bank, said.

“We have discussed security issues with local producers at length and noticed that very thorough work with local communities is one of the efficient ways to address this. To conclude, despite obvious risks of rising production from new regions and falling prices, there seem to be quite a few opportunities in mature regions such as Nigeria especially buoyed by the rampant growth of its domestic market,” the firm said.