Afren marks profit increase

Afren plc has announced its Half-yearly Results for the six months ended 30 June 2014.

Profit after tax from continuing activities increased in the period to $160 million compared to $62 million earned in the same period 2013.

Revenue for the period was $565 million down from $797 million in the first half of 2013. This reflects a decrease in sales volumes offset by an increase in the average realised oil price.

Total working interest production from continuing operations for the period decreased from 44,712 boepd in 1H 2013 to 33,488 bopd during 1H 2014. This was primarily due to a reduced share of production and liftings from the Ebok field following the achievement of cost recovery in the period. Post cost recovery, Afren continues to fund 100% of the capital expenditure at Ebok and recovers this from field revenues.

The fall in sales volume was partially offset by a 4% increase in the average realised oil price to $107.6/bbl (1H 2013: $103.6/bbl). The average Brent price for the period was $109.0/bbl (1H 2013: $110.0/bbl).

Cost of sales
Cost of sales for the period was 12% lower at $371 million (1H 2013: $420 million). The decrease was largely due to lower net working interest production, partly offset by higher depreciation cost per barrel driven by recent investment in the Group’s producing fields to progress their development.

Finance charges and financial instruments
Finance costs for the period were in line with the corresponding period of the prior year at $37 million (1H 2013: US$38 million). During the period, the Group recognised a loss of US$9 million (1H 2013: $27 million) relating to crude oil hedging contracts and interest rate swaps.

Tax
An income tax credit of $27 million occurred for the period whereas an income tax charge of $198 million is shown for the corresponding period of 2013. This change is largely the consequence of the award during the second half of 2013 of a five-year tax exemption to the subsidiary holding the Ebok asset. This five-year tax exemption was back-dated to 2011 and will cease in May 2016.

Cash flow, financing and capital structure
Operating cash flow before movements in working capital for the period was $354 million (1H 2013: $564 million). Of this, $266 million (1H 2013: $384 million) has been used to fund the Group’s investment in development, appraisal and exploration activities.

Gross debt as at 30 June 2014 was $1,153 million (30 June 2013: $1,178 million) excluding finance leases. Cash at bank as at 30 June 2014 was $433 million, resulting in net debt (excluding finance leases) of $720 million (30 June 2013: cash of US$588 million; net debt of $590 million).

Financial outlook and strategy
Afren’s financial strategy continues to be to achieve a balance of operational cash flow with longer-term financing to support the Group’s on-going appraisal and development activities.

Toby Hayward, Interim CEO of Afren plc, said:

“Despite recent challenges Afren is totally committed to delivering on our work programme across the portfolio. With numerous growth opportunities expected to drive a step-up in near-term production, cash flow and reserves, we remain in a strong position to deliver shareholder value in 2014 and beyond. We believe we will come out stronger from the ongoing issues and I would like to thank all our shareholders for their continued support.”