Troubled Afren buys time with deferral of US$50 million debt payment

By Amy McLellan

Shares in beleaguered Afren plc surged almost 20 per cent in morning trading on Monday as the London-listed company provided an update on its capital structure. The oil producer, which pumps around 32,000 bpd from fields in Nigeria, has been under pressure since last summer when serious governance issues were unveiled, leading to the dismissal of its CEO and COO.

Meanwhile, low oil prices have left it is struggling to service its debts, leaving it vulnerable to low ball bids such as the interest from fellow Nigerian oil producer Seplat, a dalliance that ended last month.

This week the London-listed company revealed it has secured vital breathing space with a deferral of the US$50 million amortisation payment due on its US$300 million Ebok debt facility until the end of March.

The company also has a looming US$15 million interest payment due on its 2016 bonds but said it is utilising a 30 day grace period that is giving it extra time to review its capital structure and explore funding alternatives – although that would seem to be near expiry.

In the meantime, the London-listed company, which grew quickly on the back of rising production from its fields in Nigeria, said it is “continuing constructive discussions” with its largest bond holders regarding the immediate liquidity and funding needs of the business.

It is also in talks with other stakeholders and new third party investors regarding recapitalising the company.

Analysts welcomed the latest update. “After what has been a torrid time for the company, that it is able to report some progress in its debt restructuring is a significant positive,” said the team at SP Angel Corporate Finance.

Lewis Sturdy, dealer at London Capital Group, also welcomed the reprieve from bondholders but added: “At 10p, down from 150p a year ago, today’s double digit percentage share price relief rally needs to be seen in context of an explorer still in intensive care financially.’

A tense few weeks ahead for the company’s investors and bondholders.