Afren PLC, London, has reached a recapitalization agreement with creditors that its interim managers say would, if approved by shareholders, preclude sale of the beleaguered company.
A payments scandal leading to dismissal last year of top executives, a downgrade of reserves in the Kurdistan region of Iraq early this year, and the plunge in oil prices have battered Afren.
In addition to Iraq, the company holds exploration and production interests in 10 countries in Africa. It reported net production last year of 31,800 b/d of oil, most of it in Nigeria, and expects net production this year of 29,000-36,000 b/d.
Last October, the company dismissed its chief executive officer, chief operating officer, and two associate directors after an investigation disclosed they and several other employees had received allegedly unauthorized payments in dealings with Oriental Energy Resources Ltd., the company’s partner in Ebok oil field in Nigeria. Ebok accounts for about 70% of Afren’s total net production. Oriental Energy has disputed the investigation’s characterization of the payments.
In January, Afren’s interim managers said the company would have to take an after-tax impairment charge of $2 billion related to reclassification of 190 million bbl of proved and probable reserves at Barda Rash field in Kurdistan into more speculative categories.
The new recapitalization agreement, involving swaps of debt for equity, will provide net total funding of $300 million by the end of June. If the deal is approved and fully subscribed, existing shareholders will hold about 11% of the fully diluted share capital.
If the deal isn’t approved and the company must be sold under new credit terms, the company warned existing shareholders they “would be unlikely to see any return on their current investment.”