Afren now well positioned in two of the world’s top ten oil reserves in Nigeria and Iraq (Kurdistan region)
BNP Paribas and VTB Capital mandated and terms and conditions agreed for an up to US$200 million corporate credit facility
The balance to be funded by a combination of equity financing, existing cash resources and cash flows from existing operations
Osman Shahenshah, Chief Executive of Afren, commented:
“We are delighted to acquire a high quality portfolio of assets in the Kurdistan region of Iraq, covering the full E&P spectrum of development, appraisal and low risk exploration upside. The acquisition is consistent with Afren’s strategy of acquiring low cost barrels in areas of strategic advantage and increases Afren’s current 2P and 2C recoverable reserves base by over 700% at a cost of under US$1 per barrel. With a team in place, we expect to generate an incremental 75,000 barrels of oil per day net to Afren within five years from the Barda Rash field alone.”
Background on the Acquisition and funding
The Acquisition has been executed through Afren’s wholly owned subsidiary Beta Energy Limited (“Afren Beta”).
Under the terms of the farm-in agreement and joint operating agreement agreed with Komet and the KRG, a 60 per cent. participating interest in and operatorship of the Barda Rash PSC is being transferred to Afren Beta. Komet will retain a 20 per cent. participating interest in the Barda Rash PSC in which the KRG also holds a 20 per cent. interest.
Terms have also been agreed whereby the KRG will transfer a third party 20 per cent. non-operated participating interest in the Ain Sifni PSC to Afren Beta. The operator of the Ain Sifni PSC is Hunt Oil Middle East with a 60 per cent. interest and the KRG will retain a 20 per cent. interest.
The total consideration payable for the Acquisition is US$588.25 million, of which US$388.25 million will be due on closing and US$200 million six months from closing. The consideration will be satisfied in cash by Afren, through a combination of equity financing by way of a placing of new ordinary shares, through secured term loan facilities (part of which will also be used to fund the capital expenditure and minimum work commitment in relation to the blocks where the participating interests have been acquired), available cash at bank and future cash flows generated by the Company’s ongoing production operations.