Afren 2013 half-yearly_final

Afren plc I 2013 half-yearly results 1

Afren plc (AFR LN)
Strong underlying operational performance; significant
exploration success
London, 23 August 2013 - Afren plc (“Afren” or the “Group”), (LSE: AFR, FTSE 250 index), the independent
exploration and production company announces its Half-yearly Results for the six months ended 30 June 2013
and an update on its operations year-to-date 2013, in accordance with the reporting requirements of the EU
Transparency Directive. Information contained within this release is unaudited and is subject to further review.

2013 Half-yearly Results Summary
The first half of 2013 has been a period of notable success for Afren across all operational fronts. The period
saw record production (up 13 per cent.) principally from the Ebok and Okoro fields, offshore Nigeria. The
Group’s financial results reflect the consolidation of First Hydrocarbon Nigeria Company Limited (FHN) following
the completion of the acquisition of an additional beneficial interest in FHN in the period and the early adoption
(1)
of IFRS 10 . Post period end, Afren further increased its beneficial interest in FHN and commenced sales from
the Barda Rash field in the Kurdistan region of Iraq. On the exploration front, the oil discovery at OPL 310
opens a new oil basin in an under-explored region with targeted resources believed to be in excess of pre-drill
estimates (78 mmboe). We continue to make good progress on our exploration and appraisal (E&A) work
programme targeting opportunities across the portfolio.

Financial highlights
1H 2013
Realised oil price (US$/bbl)

Change

104

109

(5%)

47,653

42,169

13%

797

778

2%

377

411

(8%)

260

311

(16%)

62

Net working interest production (boepd)
Revenue (US$m)

(1)

1H 2012 (restated )

102

(39%)

112

119

(6%)

564

571

(1%)

(2)
(2)

Gross profit (US$m)

Profit before tax (US$m)
Profit after tax (US$m)

(2)

(2)

Normalised profit after tax (US$m)
Operating cash flow (US$m)
(1)
(2)
(3)
(4)

(2) (3)

(4)

Prior period results have been restated to reflect the consolidation of FHN, following the adoption of IFRS 10 and IFRS 11. Further
details are provided in Note 1 and Note 14 of the condensed financial statements
From continuing operations, for further details see Note 13 of the condensed financial statements
See Note 4 of the condensed financial statements
Operating cash flow before movements in working capital


Key Highlights
 Strong operating cash flow driven by a 13 per cent. year-on-year increase in net production to 47,653 boepd;
on track for full year guidance of 40,000 - 47,000 boepd
 Continued E&A success
- Play opening discovery at OPL 310, offshore Nigeria
- DST programme at Simrit-2 on the Ain Sifni PSC, Kurdistan region of Iraq complete, with aggregate flow
rates of 19,641 bopd achieved. Well being prepared for Extended Well Test operations
- Completion of drilling at Simrit-3.

Multi-zone testing programme underway to confirm the resource
potential and the eastern extent of the Simrit anticline

- Active exploration programme with ongoing Ogo-1 sidetrack and upcoming Ufon-1 well on OML 115 in
Nigeria
 Active portfolio management
- Completion of farm-out (subject to Nigerian Ministerial Consent) of a 30 per cent. economic interest in
OPL 310, offshore Nigeria, to Lekoil Limited
- Acquisition by FHN of 16.9 per cent. economic interest in OML 113. Synergies expected with OPL 310
development
- Agreement for sale of CI-11 block and Lion Gas Plant for total consideration of US$26.5 million, of
which US$15.3 million will be settled in cash
- Proposed relinquishment of JDZ Block 1, Nigeria São Tomé & Príncipe
 Strong balance sheet and financial flexibility
- Cash at bank US$588 million (1H 2012: US$497 million); Net debt, excluding finance leases
US$590 million (1H 2012: US$679 million). Full year capex guidance revised to US$650 million from
US$620 million

Commenting today, Osman Shahenshah, Chief Executive of Afren plc, said:
“Afren continued to deliver strong operational results during the first half of 2013. We recorded a year-on-year
increase in underlying net production of 13 per cent. principally from our green field developments offshore
Nigeria. Our exploration campaign continues to deliver results, following the play opening discovery announced
at OPL 310 offshore Nigeria, where further exploration drilling is ongoing. Elsewhere, we are continuing with
exploration drilling and testing operations at the Ain Sifni PSC in Kurdistan. With high quality production
underpinning both our strong financial position and exploration programme, we are well placed to realise
numerous growth opportunities over the remainder of this year.”


Analyst Presentation
There will be a presentation today to analysts at 09:00 BST at the Lincoln Centre, 18 Lincoln’s Inn Fields,
London, WC2A 3ED.
The presentation will also be broadcast live at www.afren.com where the accompanying presentation will be
available, and on playback from 14:00 BST.

For further information contact:
Pelham Bell Pottinger (+44 20 7861 3232)
James Henderson
Mark Antelme

Notes to Editors
Afren Plc
Afren is an independent upstream oil and gas exploration and production company 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.
Afren has a portfolio of assets spanning the full cycle E&P value chain. Afren is currently producing from its assets in
Nigeria, Côte d'Ivoire and the Kurdistan region of Iraq and holds further exploration interests in Ghana, Nigeria, Côte d'Ivoire,
the Kurdistan region of Iraq, Congo Brazzaville, the Joint Development Zone of Nigeria - São Tomé & Príncipe, Kenya,
Ethiopia, Madagascar, Seychelles, Tanzania and South Africa. For more information please refer to www.afren.com.


Operations Review
Production to 1H 2013 (boepd)
Okoro
Ebok
OML 26
CI-11 & LGP

Working
interest

Average gross
production

Average net
production

50%

17,815

8,908

33,884

33,884

4,267

1,920

5,096

2,941

61,062

47,653

100%/50%
45%

(2)

47.96% / 100%

Total
(1)
(2)

(1)

Pre/post cost recovery
Held through First Hydrocarbon Nigeria Company Limited (FHN), a subsidiary of Afren plc with a 60 per cent. beneficial holding as at
30 June 2013 and a 78 per cent. beneficial holding following the announcement of 5 July 2013

Note: All production data remains subject to reconciliation

Nigeria and other West Africa
Nigeria
Okoro
Gross production averaged 17,815 bopd at the Okoro field during the first half of 2013, representing a year-onyear increase of 16 per cent. Following the successful discovery in early 2012, Afren and Partner Amni
International Petroleum Development Company Ltd. (Amni) commenced early development drilling at the Okoro
Further Field Development (previously referred to as the Okoro Field Extension) in July 2012, just six months
from discovery, using the available wellhead slots on the existing Okoro platform. The Okoro 14 well, is
currently producing at stabilised rates of approximately 5,100 bopd.
The Partners have commenced the Front End Engineering Design (FEED) and development plans for the
fabrication of a new wellhead platform and production unit required for the full development of the Okoro Further
Field Development. The Okoro Further Field Development wellhead platform (WHP) will be a conventional four
pile platform with a single piece jacket and deck capable of accommodating wireline and coil tubing units. The
WHP will have 12 well slots capable of holding dual trees, which would enable the platform to host up to 24
wells. The Okoro Further Field Development platform will be located close to the existing Okoro Main wellhead
platform and the two will be bridge linked.
After careful consideration it was determined that it was not possible to upgrade the existing Okoro FPSO;
therefore a new Mobile Offshore Production Unit (MOPU), will be installed as close as possible to the Okoro
Further Field Development WHP and will be bridge linked.

Ebok
Gross production at the Ebok field was 33,884 bopd during the first half of the year, representing a year-on-year
increase of 16 per cent.
During the first half of 2013, and following the discovery in 2012, the Partners successfully drilled two producers
from the Ebok North Fault Block (Ebok NFB). The wells have been tied to the existing West Fault Block (WFB)
infrastructure. The Partners successfully drilled and brought on stream an additional producer in the WFB during
the period. A water injector at the NFB is planned in Q3 2013.
The Central Fault Block Extension platform will set sail for Nigeria in November 2013. The wells from this
platform will target reservoirs which contain approximately 38 mmbbls of 2P reserves.


The Partners are looking at development options for the NFB, the most likely of which is to drill the development
wells from an extended WFB platform and produce through to the existing MOPU.

Okwok
The Partners commenced and completed drilling on the Okwok-11 side-track well during the first quarter of
2013. The well was drilled to a total measured depth of 3,997 ft and successfully encountered 95 ft of net oil
pay in the ‘D2’ reservoir. The ‘D2’ reservoir was successfully cored, logged and tested for reservoir continuity.
The newly acquired data together with the results of the Okwok-10 well (encountering 72 ft of net oil pay in the
LD-1 reservoir) and Okwok-10 side-track well (encountering 89 ft of net oil pay in the LD-1B reservoir) will be
integrated into the field model and used to update the volumetric and optimised Field Development Plan (FDP)
prior to submission to the Nigerian authorities later this year.
The most likely development scenario for Okwok, which the Partnership is reviewing, comprises the installation
of a separate dedicated production processing platform tied back to, and sharing, the Ebok Floating Storage
Offloading vessel (FSO) located approximately 13 km to the west.

OML 115
Afren and Partner Oriental will commence drilling the Ufon South-1 well, the first exploration well on the block
towards the end of 2013. The Ufon structure has been selected (gross Pmean prospective resources of 65
mmbbls) for drilling and is structurally and geologically analogous to the nearby Ebok and Okwok fields but with
significant deeper exploration potential.

OML 26
Following shareholder approval on 20 May 2013, Afren announced on 29 May that it had completed the
acquisition of an additional 10.4 per cent. beneficial interest in First Hydrocarbon Nigeria (FHN) for a total
consideration of US$37.05 million in cash. The acquisition (and adoption of IFRS 10) results in Afren
consolidating its holding of FHN’s reserves and production as a subsidiary and further strengthens its position
onshore Nigeria. Post completion of the acquisition, Afren’s independently audited net Proved and Probable
reserves from continuing operations have increased from 209.8 mmboe as at 31 December 2012 to 268.5
mmboe, representing an increase of approximately 28 per cent.
During the period, gross average production from the Ogini and Isoko fields was 4,267 bopd (subject to final
figures from the Operator). In order to optimise production from currently active wells, a new 5.2 mmscfd gaslift
compressor unit was procured in October 2012 and has been installed. The Partners have also procured - and
are in the process of installing - a new LACT unit and have ordered new export pumps. Post period end, the
Partners submitted the Ogini FDP on 29 July 2013, and are currently awaiting DPR approvals. The Ogini FDP
consists of the drilling of 37 production wells, the execution of 13 short-to-medium term work-overs, installing a
new 18" delivery line, two 50,000 bbl/d 3-Phase Separators as well as water treatment and disposal facilities.
The Ogini FDP drilling campaign is scheduled to commence in Q4 2013 and will be targeting peak production of
35,000 bbls/d from the Ogini field alone by 2016. The Isoko FDP submission is expected in Q4 2013.
An independent assessment of the reserve and contingent resource potential of the Ogini and Isoko fields for
FHN in March 2013 has estimated the gross remaining 2P oil reserves at the fields at 134.6 million barrels and
gross contingent resources at 68.0 million barrels (gross 2P & 2C reserves and resources 202.6 million barrels;
91.2 million barrels net to FHN) as at 31 December 2012. This represents a 231 per cent. increase on 2P
reserves previously carried by FHN and a 10 per cent. increase on previously carried 2P & 2C volumes as at 31
December 2011. In addition, significant upside potential of 144 mmboe also exists within the undeveloped
Aboh, Ovo and Ozoro discoveries, together with an estimated 615 mmboe gross unrisked prospective
resources defined across multiple prospects that will continue to be worked up in parallel to, and integrated with,
future development plans.


OML 113
On 17 July 2013, FHN completed the acquisition of a 16.9 per cent. economic interest in OML 113 for a total
consideration of US$40 million. OML 113 is located offshore Nigeria, and is contiguous to the Afren operated
OPL 310 block. The Aje field located on OML 113 was initially discovered in 1996. Three (Aje-1, Aje-2 and Aje4) of the four wells drilled on the field have encountered oil and gas in various intervals across the Turonian,
Cenomanian and Albian sands, and two (Aje-1 and Aje-2) of the wells have comprehensively tested at
commercial rates. The JV Partners estimate the Pmean contingent resources to be 167 mmboe principally
related to the Aje field with an additional 205 mmboe of mean prospective resources on the block. The JV
Partners are considering drilling and commencement of early production on the Aje field with full field
development at a later stage likely in synergy with the recent discovery at OPL 310.

OPL 310
On 14 May 2013, Afren announced the completion of a farm-out agreement with Lekoil Limited (“Lekoil”)
(subject to Nigerian Ministerial Consent), in the OPL 310 licence. Under the terms of the farm out, Afren will
receive a total carry of up to US$50 million in respect of an exploration well drilled at the Ogo prospect and a
side-track well currently being drilled. Post farm-out, Afren will hold a 40 per cent. economic interest in the
licence once Afren and Optimum Petroleum Development Ltd, the named Operator, achieve cost recovery.
Afren provides technical assistance to Optimum in respect of Optimum’s obligations under a Technical
Assistance Agreement.
On 26 June 2013, Afren announced that the Ogo-1 well had encountered a significant light oil accumulation with
216 ft of net stacked pay. Following the discovery, the well was deepened to tag the crystalline basement and
reached a total measured depth of 10,648 ft. A comprehensive wireline logging programme was completed
post period end and is presently under evaluation. Following the conclusion of drilling operations at Ogo-1, the
Partners spudded a planned side-track, Ogo-1 ST, which is currently drilling ahead. The Ogo-1 ST is planned
to test both the down-dip extension of the Ogo discovery and test a new play of stratigraphically trapped
sediments that pinch-out onto the basement high.
In its most recent independent assessment, NSAI evaluated gross P50 unrisked prospective resources on OPL
310 at 476 mmboe.

OPL 907, 917
Afren is in the process of relinquishing its interests in OPL 907 and 917. The net assets in respect of this
licence were written-off in full at 31 December 2012.

Côte d’Ivoire
CI-11 and Lion Gas Plant
Average gross production during the period at CI-11 was 4,142 boepd, with the Lion gas plant processing
approximately 55.7 mmcfd of gas with yields of 459 bbls butane and 495 bcpd. During the period, Afren agreed
the sale of the CI-11 block and Lion Gas Plant to a third party for total consideration of US$26.5 million.
Completion of the transaction is expected in Q3 2013.

CI-01
Discussions are continuing with Petroci and the Côte d’Ivoire Government on the forward programme.

Nigeria São Tomé & Príncipe JDZ
Block 1
In 2012, Total commissioned and completed drilling two appraisal wells on the block, the Obo-2 well and the
Enitimi-1 well, both encountering oil and gas pay, but at lower levels than pre-drill estimates.
It is anticipated that Afren will relinquish its interest in the licence in 2H 2013 and as such have decided to impair
the associated costs in 1H 2013.

Congo Brazzaville
La Noumbi
The Kolo-1 well was spudded in late February 2013 and was drilled to a total depth of 4,472 ft, evaluating sands
in the Chela and Vandji formations. Wireline logs and borehole samples were taken to better understand
hydrocarbon shows encountered in the drilling process. Sands in the well were deemed wet and the well was
subsequently plugged and abandoned in April 2013.
Following completion of drilling operations at Kolo-1, the Operator commenced drilling on an independent
prospect, Kolo-2 in April 2013. The well was drilled to a total depth just below 1,969 ft and had oil shows in a
cored interval. Analysis of the core, log and MDT data suggested the interval had a high water content with
only minor light oil saturation, as such, the well was plugged and abandoned. The partnership has agreed to a
50 per cent. relinquishment of the block and is discussing a forward work programme.

Ghana
Keta Block
2

The Partners have progressed into the next two-year exploration phase. A 1,582 km 3D seismic survey
completed in December 2012 is currently being processed. In April 2013, Afren received a fast-track cube from
the new 3D seismic which is currently being interpreted alongside a detailed processing review. A data trade
agreement has been made with Ophir for the Starfish-1 well, which was recently drilling in the nearby offshore
Accra block and has been declared a dry-hole. The new data will be interpreted along with the Nunya-1x
exploration well, to help define the next steps to be taken on the work-programme, which requires one
exploration well to be drilled by May 2014.

South Africa
Block 2B
2

Processing of the 686 km of 3D seismic data acquired this year is progressing and results are expected during
Q3 2013.

Kurdistan region of Iraq
Barda Rash
Approximately 18,800 barrels of oil were held in storage during 1H 2013. Preliminary crude oil sales to the local
market have commenced with initial sales of 1,300 bopd achieved since 8 July 2013. Production is planned to
be initially ramped up to 5,000 as the surface facilities and well performance are stabilised and continuity of
sales monitored.
The Partners commenced drilling on the BR-5 well in March 2013 using the Romfor-23 drilling rig which is
currently drilling ahead at around 7,200 ft and commenced drilling the BR-4 in May using the Viking I-10 rig,
which is currently drilling ahead at around 10,200 ft. The wells will test the Cretaceous, Jurassic and Triassic
reservoirs previously identified on the structure.

Ain Sifni
During the first half of 2013, Operator Hunt Oil completed testing of the Simrit-2 well with aggregate flow rates of
19,641 bopd achieved from the planned Drill Stem Test (DST) programme. The well is currently being
completed for an Extended Well Test (EWT) in the Jurassic age, Mus/Adaiyah reservoirs. Produced crude is
expected to be trucked to local markets. The Simrit-3 well, exploring the eastern extent of the large scale Simrit
anticline reached a final maximum depth of 12,300 ft in the Triassic Kurra-Chine formation in 1H 2013
encountering hydrocarbon bearing intervals in the Cretaceous, Jurassic and Triassic reservoirs. A multi-zone

testing programme is underway to confirm the resource potential of the well.
expected to be available from the Operator shortly.

Results from the tests are

Operator Hunt Oil spudded the Maqlub-1 well testing the high potential Maqlub structure in June 2013. The
drilling programme is expected to last 110 days followed by drilling at Maqlub-2. The Maqlub structure is
located adjacent to the Barda Rash PSC and will be testing the Cretaceous, Jurassic and Triassic reservoirs.

Afren East Africa Exploration
Kenya
Block 1
Processing of the new 1,900 km 2D grid has been completed and interpretation is underway. The seismic is
showing faulting and evidence of a working petroleum system. Initial mapping should be completed by early
September and will guide well location selection for anticipated drilling in 2014. Afren have traded for well data
in the area and are purchasing additional local well data from the National Oil Corporation of Kenya.

Blocks L17 & L18
2

Afren completed processing of the 120 km onshore 2D seismic in June 2013 and on the 1,006 km offshore 3D
seismic in July 2013. Data is currently being interpreted to refine previous leads across the acreage. The
regional Mombasa high structure has remained as a viable target for near-shore or onshore drilling. Further
advanced processing of the 3D (AVO Analysis) began in mid-July and will complete in September. This work
should help de-risk the offshore prospects in preparation for a two well drilling programme.

Block 10A
On 1 March 2013, the Operator Tullow Oil announced the temporary suspension of the Paipai-1 exploration
well. The well, which was drilled to a total depth of 13,960 ft, encountered light hydrocarbon shows across a 180
ft thick gross sandstone interval. This sandstone is overlain by a 656 ft thick source rock which forms an
effective regional top seal. The Partners have agreed to return to Paipai for testing at a later date dependent on
rig availability. Current work on the block includes further evaluation of the well results and a passive seismic
programme to better define basement.

Tanzania
Tanga Block
2

Following completion of a 620 km 3D seismic survey in January 2013, Afren received final processing of the
dataset in early July and subsequently initiated advanced seismic analysis (AVO). Initial interpretation of the 3D
has highlighted structures with conforming amplitudes. Afren and its Partners have identified a rig to drill the
deeper water Mkonge-1 prospect (previously Calliope) and have a Letter of Intent (LOI) in place with the rig
contractor. Drilling is expected on the prospect in Q1 2014, which is the first of two wells expected to be drilled
on the block in 2014.

Seychelles
Areas A & B
In Q1 2013, Afren completed a major 3D seismic programme, the first 3D survey to be conducted in the
Seychelles. The programme consisted of two surveys in Afren’s licence areas. The first 3D survey was
2
conducted in the southern portion of the licence over the Bonit prospect and covered 600 km . The second
2
survey was in the northern section of the licence area and covered an area of 2,775 km . The new 3D seismic


combined with existing 2D data are being processed by the Partners to assess in detail the Tertiary, Cretaceous
and Jurassic prospectivity. Fast-Track versions of the datasets have now been received and final processing
should be available in September 2013.

Madagascar
Block 1101
In June 2013, Afren ran a successful fieldtrip across the block with OMNIS, the state oil and gas company,
viewing exposures of the probable reservoir targets. Additional 2D seismic acquisition and a shallow borehole
coring programme are planned for Q3 2013 to enhance our subsurface understanding ahead of exploration
drilling. The borehole effort would further assess reservoir quality, perform petrophysical and geochemical
analysis to infer burial depth and search for heavy oil deposits near a known oil show.

Ethiopia
Blocks 7 & 8
Operator New Age plans to spud the El Kuran-3 well in early September. The drilling programme is expected to
last 45 days and will test the reservoir productivity in the Adigrat and Hamanlei zones, targeting 100 mmbbls of
gross prospective resources. Previous drilling on the block at the El Kuran-1 identified gas shows in the Adigrat
and a potential oil zone in the Hamanlei.


Exploration and appraisal drilling schedule

Country

Asset

Effective
Working
Interest

Gross
prospect
size mmboe

E&A wells / activity

Timing

Wells completed - 2013
Kurdistan
region of Iraq

Ain Sifni

20%

Discovery

Kurdistan
region of Iraq

Ain Sifni

20%

TBC

Kenya

Block 10A

Nigeria

Okwok

Congo
Brazzaville

La Noumbi

20%

70%/56%

100

(1)

Appraisal

Simrit-2, EWT operations to
commence

Completed

Simrit-3 well complete. Multizone testing programme
underway

Completed

Suspended pending reevaluation

Completed

Okwok appraisal drilling
complete. FDP submission to
follow

Completed

Abandoned – non-commercial
discovery

Completed

14%

-

20%

661

Maqlub-1 well spudded June
2013

2H 2013

202

Ogo-1 side-track well

2H 2013

100

El Kuran-3 well

2H 2013

65

Ufon South-1 well

2H 2013

New well spuds - 2013
Kurdistan
region of Iraq

Ain Sifni

Nigeria

OPL 310

Ethiopia

Blocks 7 & 8

Nigeria

OML 115

(1)
(2)

40%

(2)

30%
(1)

100%/50%

Pre/post cost recovery
Following the announcement of the farm-out to Lekoil Limited (“Lekoil”) on 14 May 2013, subject to Nigerian Ministerial consent.
Economic interest post Afren and Optimum achieving cost recovery.


Finance Review
1. Result for the period (1)
Revenue
Revenue for the period from continuing operations was US$797 million, of which US$21 million was generated
by FHN (1H 2012: US778 million, of which US$25 million related to FHN). The increase in revenue is largely
driven by increased production from the development of the Ebok field, offshore Nigeria. Working interest
production from continuing operations for the period increased from 39,044 boepd (including FHN) to 44,712
boepd in 1H 2013.
In 1H 2013, the Group realised an average oil price from continuing operations of US$103.6/bbl (1H 2012:
US$108.8/bbl), before all royalties and hedging. The average Brent price for the period was US$110/bbl (1H
2012:US$112/bbl).

Gross profit
Gross profit for the period from continuing operations was US$377 million (1H 2012: US$411 million) which
reflects the higher DD&A charge on oil and gas assets in the period, due to increased production, and a higher
level of royalties paid on Ebok. The DD&A charge in 1H 2013 was US$195 million, an increase of 7 per cent.
compared to 1H 2012. Of this, US$2 million related to OML 26.

Profit for the period
Profit after tax from continuing operations was US$62 million (1H 2012: US$102 million), the decrease on the
prior period being impacted by impairment charges, non-recurring administrative expenses and losses on
derivative financial instruments arising from the inclusion of FHN’s results for the period. The impairment
charge of US$5 million largely relates to the write-off of costs of drilling the Kola 1 and Kola 2 wells at La
Noumbi, Congo Brazzaville. In addition to this, the Group’s interest in JDZ was impaired in advance of the
expected relinquishment, which is reflected in the share of joint venture loss of US$25 million in the financial
statements.
These increases have been offset by lower finance costs charged to the income statement (total finance costs
in the period were US$69 million, of which US$31 million was capitalised; 1H 2012: total finance costs of US$76
million, of which US$18 million was capitalised). Administrative expenses for the period were US$27 million,
compared to US$15 million in 1H 2012. The increase principally relates to share options and other nonrecurring share based expenses.
During the period, the Group recognised a loss of US$27 million from derivative financial instruments (1H 2012:
US$15 million), relating to crude oil hedging contracts, as the oil price in the period averaged consistently above
the hedged price, and mark-to-market losses on interest rate swaps.
The income tax charge for the period was US$198 million, of which US$126 million related to deferred tax (1H
2012: charge of US$209 million, of which US$159 million related to deferred tax). The Group’s effective tax rate
has increased as a result of greater losses incurred in corporate entities in which the related tax losses have not
been recognised as deferred tax assets or which cannot be offset against taxable profits. During the second
half of 2013 we will continue discussions with the Nigerian Tax Authorities to finalise our tax returns from
previous periods, including discussions over the applicable tax rate. Whilst a range of outcomes are possible,
we continue to believe the taxation provisions held remain sufficient.
(1) Notes on basis of preparation: During the period ended 30 June 2013, Afren adopted IFRS 10 which resulted in a
change in accounting policy for consolidating its investees. 1H 2012 and year ended 31 December 2012 comparative
information have been restated accordingly. Further information is provided in Note 1 to the condensed financial
statements.
In addition, in May 2013, Afren’s holding companies for the CI-11 and Lion Gas Plant assets in Cote d’Ivoire were
classified as held for sale. Further information is provided in Note 13 to the condensed financial statements.


The profit for the period from discontinued operations in Cote d’Ivoire of US$16 million largely relates to the
partial release of creditors no longer expected to crystallise.

Hedging and hedging strategy
At 30 June 2013, crude oil hedges covering approximately 1.9 million barrels are in place for the period 1 July
2013 to 31 December 2013, providing minimum floor prices on these volumes of between US$80-US$90/bbl.
As in prior periods, the policy of the Group is to protect its minimum cash flow requirement against a downturn in
oil prices. As such the maximum amount of working interest Afren would seek to protect with these
arrangements is between 20-30 per cent. of estimated production for a rolling period of up to 24 months
forward.

2. Financing and capital structure
Operating cash flow
Operating cash flow before movements in working capital was US$564 million in 1H 2013 (1H 2012: US$571
million), of which US$446 million has been used to fund the Group’s investment in development, appraisal and
exploration activities as well as fund the purchase of the Group’s additional equity investment in FHN.

Financing
In March 2013, the Group successfully renegotiated the terms of its Ebok Reserve Based Lending Facility, with
14 international banks involved in the syndication of a new facility which significantly extends the maturity of the
Group’s debt. Repayments of the new US$300 million facility begin in January 2015.
Gross debt at 30 June 2013 was US$1,178 million, excluding finance leases. Cash at bank at 30 June 2013
was US$588 million, resulting in net debt (excluding finance leases) of US$590 million (30 June 2012: cash of
US$497 million; net debt of US$679 million).
Subsequent to the period end, the Group repaid its US$50 million unsecured facility.

3. Development, appraisal and exploration activities
The Group invested US$130 million in exploration and appraisal activities in 1H 2013 (1H 2012: US$91 million).
The main areas of expenditure being Nigeria (including US$42 million for further drilling on Okwok, US$10
million of pre-drilling activities on OML115 and US$6 million for drilling on OPL310), testing and drilling at Ain
Sifni in the Kurdistan region of Iraq (US$19 million), and seismic and other pre-drilling activities in East Africa
(total of US$36 million on Seychelles Areas A&B, South Africa Block 2B, Tanga Block in Tanzania, and Ethiopia
Blocks 7 and 8).
Expenditure on oil and gas assets was US$202 million, largely related to the continued development of
producing wells and facilities upgrades at Ebok (US$142 million) and further drilling at Barda Rash (US$56
million).

4. Related party transactions
Related party transactions are disclosed in Note 11 of the condensed financial information. There have been no
material changes to the level or nature of related party transactions since the last annual report.


5. Principal risks to 2013 performance
The Directors do not consider that the principal risks and uncertainties of the Group have changed since the
publication of the Annual Report and Accounts for the year ended 31 December 2012. The principal risks faced
by Afren relate to: operational risk relating to field delivery, exploration failure, environmental and safety
incidents, and unfulfilled work / PSC obligations; external risks being geo-political risk, security incidents, host
community action and oil price volatility; strategic risk including exposure to bribery and corruption, managing
growth and the loss of key employees; and financial risk including changes to taxation and other legislative
changes, and treasury management.
A detailed explanation of these risks can be found on pages 28 to 31 of the 2012 Annual Report and Accounts
which is available at www.afren.com.

6. Going concern
As stated in Note 1 to the condensed financial information, the Directors are satisfied that the Group has
sufficient resources to continue in operation for the foreseeable future, being a period of not less than twelve
months from the date of this report. Accordingly, they continue to adopt the going concern assumption in
preparing the condensed financial information.

7. Financial outlook and strategy
Our 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.


Responsibility Statement
The Directors confirm that to the best of their knowledge:
a) the condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim
Financial Reporting’;
b) the interim management report includes a fair review of the information required by DTR 4.2.7R
(indication of important events during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) the interim management report includes a fair review of the information required by DTR 4.2.8R
(disclosure of related parties’ transactions and changes therein).
By order of the Board,

Osman Shahenshah
Chief Executive
23 August 2013

Darra Comyn
Group Finance Director
23 August 2013


Independent review report to Afren plc
We have been engaged by the company to review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2013 which comprises the statement of comprehensive
income, the balance sheet, the cash flow statement, the statement of changes in equity, and related Notes 1 to
15. We have read the other information contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements
(UK and Ireland) 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the
Entity” issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an independent review report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company, for our review work, for this report, or for the conclusions we have formed.

Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom’s Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as
adopted by the European Union. The condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard 34, “Interim Financial
Reporting,” as adopted by the European Union.

Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the
half-yearly financial report based on our review.

Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland)
2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the
Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of
making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical
and other review procedures. A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of
financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in
all material respects, in accordance with International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
23 August 2013


Condensed consolidated statement of comprehensive income
Six months ended 30 June 2013

(1)

6 months to

Restated
6 months to

Restated
Year to

30 June 2013
Unaudited

30 June 2012
Unaudited

31 December 2012
Unaudited

US$m

US$m

US$m

796.8

778.4

1,571.4

Cost of sales

(419.5)

(367.7)

(780.9)

Gross profit
Administrative expenses

377.3
(26.9)

410.7
(15.1)

790.5
(55.1)

Other operating expenses
– derivative financial instruments

(26.6)

(15.4)

(60.2)

Notes
Continuing operations
Revenue

– impairment of exploration and evaluation assets

(1)

(4.6)

(12.2)

(15.0)

319.2
1.8

368.0
0.4

660.2
1.6

(38.0)

(58.1)

(90.8)

1.6
0.9

0.1
(2.5)

(25.1)

0.7
(0.1)
-

260.4

310.9

568.9

(198.0)

(209.0)

(380.0)

62.4

101.9

188.9

16.1

(1.5)

(2.1)

78.5

100.4

186.8

79.6
(1.1)

100.7
(0.3)

198.4
(11.6)

78.5

100.4

186.8

Gain/(loss) on revaluation of available-for-sale
investment

0.4

-

(0.9)

Total comprehensive income for the period

78.9

100.4

185.9

Equity holders of Afren plc

80.0

100.7

197.5

Non-controlling interests

(1.1)

(0.3)

(11.6)

78.9

100.4

185.9

9

Operating profit
Investment revenue
Finance costs
Other gains and (losses)

2

– foreign currency gains
– fair value of financial liabilities and financial assets
Share of joint venture (loss)/profit

12

Profit before tax from continuing operations
Income tax expense

5

Profit after tax from continuing operations
Discontinued operations
Profit for the period from discontinued operations
attributable to equity holders of Afren plc

13


0.3

Attributable to:

Attributable to:

Earnings per share from continuing activities
Basic
Diluted
Earnings per share from all activities

3
3

5.8c
5.5c

9.5c
9.1c

18.6c
17.7c

Basic

3

7.4c

9.4c

18.4c

Diluted

3

6.9c

9.0c

17.6c

(1) Restated due to the adoption of IFRS 10 and IFRS 11, as described in Note 1 and Note 14


Condensed consolidated balance sheet
As at 30 June 2013

(1)

30 June 2013
Unaudited

Restated
30 June 2012
Unaudited

Restated
31 December 2012
Unaudited

US$m

US$m

US$m

1,013.0
1,880.7
115.2
77.0
2.9
1.1
3,089.9

764.9
1,803.2
115.2
1.3
7.3
2,691.9

851.3
1,853.0
115.2
88.4
0.9
7.8
2,916.6

80.7
229.6
19.8
587.7
917.8

60.6
276.4
496.8
833.8

94.4
326.1
7.4
598.7
1,026.6

47.9
4,055.6

3,525.7

3,943.2

(365.9)
(77.0)
(175.3)
(19.9)
(30.0)
(668.1)

(337.0)
(208.3)
(82.6)
(18.7)
(14.0)
(660.6)

(485.3)
(216.4)
(156.4)
(19.3)
(31.3)
(908.7)

(50.6)
247.0

173.2

117.9

(603.6)
(28.9)
(1,101.3)
(88.1)
(17.1)
(1,839.0)
(2,557.7)
1,497.9

(385.1)
(33.8)
(967.6)
(107.9)
(43.5)
(7.3)
(1,545.2)
(2,205.8)
1,319.9

(477.6)
(39.4)
(943.6)
(98.1)
(43.5)
(9.8)
(1,612.0)
(2,520.7)
1,422.5

Equity
Share capital
Share premium
Other reserves
Merger reserve
Retained earnings
Total equity attributable to parent company

18.9
923.0
7.9
179.4
346.0
1,475.2

18.9
919.8
(5.7)
179.4
167.5
1,279.9

18.9
920.3
6.9
179.4
265.4
1,390.9

Non-controlling interest
Total equity

22.7
1,497.9

40.0
1,319.9

31.6
1,422.5

Notes
Assets
Non-current assets
Intangible oil and gas assets
Property, plant and equipment
Goodwill
Prepayments and advances to partners
Derivative financial instruments
Available for sale investments
Investments in joint ventures
Current assets
Inventories
Trade and other receivables
Prepayments and advances to partners
Cash and cash equivalents
Assets of disposal group classified as held for sale
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Obligations under finance lease
Liabilities of disposal group classified as held for
sale
Net current assets
Non-current liabilities
Deferred tax liabilities
Provision for decommissioning
Borrowings
Obligations under finance leases
Other payables

13

7

8

13

7

8

Total liabilities
Net assets

(1)



Condensed consolidated cash flow statement

(1)

6 months to
30 June 2013
Unaudited
US$m

Restated
6 months to
30 June 2012
Unaudited
US$m

Restated
Year to
31 December 2012
Unaudited
US$m

Operating profit for the period from continuing operations
Operating profit for the period from discontinued operations

319.2
18.2

368.0
0.1

660.2
3.1

Operating profit for the period from continuing and discontinued
operations
Depreciation, depletion and amortisation
Unrealised losses/(gains) on derivative financial instruments
Impairment charge on exploration and evaluation assets
Share based payments charge
Operating cash-flows before movements in working capital
Decrease/(increase) in trade and other operating receivables
(Decrease)/increase in trade and other operating payables
Decrease in inventory (crude oil)
Tax paid
Net cash generated by operating activities

337.4
200.6
6.0
4.6
15.8
564.4
45.4
(74.2)
8.2
(52.2)
491.6

368.1
186.9
(1.7)
12.2
5.3
570.8
(98.8)
50.5
25.4
(7.0)
540.9

663.3
380.1
20.0
15.0
29.4
1,107.8
(251.9)
124.2
6.0
(11.7)
974.4

Purchases of property, plant and equipment

(182.6)

(196.6)

(394.5)

Acquisition of participating interest in licences in Kurdistan
region of Iraq
Exploration and evaluation expenditure

(201.4)

(190.2)
(105.3)

(190.2)
(138.0)

(65.4)

-

-

2.5
1.1
(445.8)

1.2
(18.9)
(509.8)

1.3
(18.7)
0.5
(739.6)

Issue of ordinary share capital – share based plan exercises
Issue of ordinary share capital – non-controlling interests
Net proceeds from borrowings
Repayment of borrowings and finance leases
Deferred consideration – finance cost paid
Interest and financing fees paid
Net cash (used in)/provided by financing activities

2.6
26.4
(26.0)
(57.2)
(54.2)

1.6
390.9
(222.9)
(9.7)
(49.0)
110.9

2.2
1.8
397.4
(271.0)
(9.7)
(111.0)
9.7

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of period

(8.4)
598.7
0.9
591.2

142.0
353.9
0.9
496.8

244.5
353.9
0.3
598.7

Cash and cash equivalents at end of period - continuing
operations

587.7

496.8

598.7

Cash and cash equivalents at end of period - from discontinued
operations

3.5
591.2

496.8

598.7

Investment in subsidiary - additional shares purchased from third
parties
Cash received on disposal of equipment of discontinued
operations
Decrease/(increase) in inventories - spare parts and materials
Investment revenue
Net cash used in investing activities

(1)



Condensed consolidated statement of changes in equity
As at 30 June 2013

Attributable
to equity
NonMerger Retained
holders of controlling
reserve earnings
parent
Interest

Share
capital

Share
premium
account

Other
reserves

US$m

US$m

US$m

US$m

US$m

US$m

US$m

US$m

18.7

918.1

26.4

179.4

64.7

1,207.3

-

1,207.3

Effect of change in accounting
policy (Note 1)

-

-

(36.7)

-

(2.5)

(39.2)

37.7

(1.5)

At 1 January 2012 as restated

18.7

918.1

(10.3)

179.4

62.2

1,168.1

37.7

1,205.8

Total
equity

Group
At 1 January 2012

Issue of share capital

0.2

1.7

-

-

-

1.9

-

1.9

Share based payments

-

-

9.0

-

-

9.0

2.6

11.6

Transfer to retained earnings

-

-

(4.4)

-

4.4

-

-

-

Exercise of warrants

-

-

-

-

0.2

0.2

-

0.2

Net profit for the period

-

-

-

-

100.7

100.7

(0.3)

100.4

18.9

919.8

(5.7)

179.4

167.5

1,279.9

40.0

1,319.9


-

0.5

-

-

-

0.5

-

0.5


-

-

11.6

-

-

11.6

4.0

15.6

Reserves transfer on exercise
of options, awards and LTIP

-

-

(0.2)

-

0.2

-

-

-


-

-

-

-

97.7

97.7

(11.3)

86.4

-

-

2.1

-

-

2.1

(1.1)

1.0

-

-

(0.9)

-

-

(0.9)

-

(0.9)

18.9

920.3

6.9

179.4

265.4

1,390.9

31.6

1,422.5


-

2.7

-

-

-

2.7

-

2.7


-

-

16.5

-

-

16.5

1.1

17.6

Transfer to retained earnings

-

-

(1.0)

-

1.0

-

-

-

Change in equity ownership of
subsidiary

-

-

(14.9)

-

-

(14.9)

(8.9)

(23.8)

-

-

-

-

79.6

79.6

(1.1)

78.5

-

-

0.4

-

-

0.4

-

0.4

18.9

923.0

7.9

179.4

346.0

1,475.2

22.7

1,497.9

Balance at 30 June 2012

Gain/(loss) on change in noncontrolling interest
Other comprehensive expense
for the period
Balance at 31 December
2012

Other comprehensive profit for
the period
Balance at 30 June 2013


Notes to the half-yearly financial statements

1. Basis of accounting and presentation of financial information
The condensed Group interim financial statements, comprised of Afren plc (‘‘Afren’’) and its subsidiaries
(together, ‘‘the Group’’), have been prepared in accordance with International Accounting Standard (‘‘IAS’’) 34,
‘‘Interim Financial Reporting’’, as adopted by the International Accounting Standards Board (“IASB”).
Accordingly, certain information and note disclosures normally included in annual financial statements prepared
in accordance with International Financial Reporting Standards (“IFRS”), as issued by the IASB, have been
omitted or condensed as is normal practice. The condensed Group interim financial statements are unaudited,
and do not constitute statutory accounts as defined in sections 435(1) and (2) of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2012 were published and copies of which have been
delivered to Companies House. The report of the auditors on those accounts was unqualified, did not include a
reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report,
and did not contain any statement under sections 498(2) or (3) of the Companies Act 2006.

Changes in accounting policy
With the exception of the early adoption of IFRS 10, IFRS 11, IFRS 12, IAS 27 (revised), IAS 28 (revised) and
the adoption of IFRS 13, the same accounting policies, presentation and methods of computation have been
followed in these condensed Group interim financial statements as were applied in the preparation of the
Group's financial statements for the year ended 31 December 2012. These interim financial statements should
be read in conjunction with the Group’s consolidated financial statements for the year ended 31 December
2012. Details of the changes in accounting policies arising from the adoption of IFRS 10 and IFRS 11 are
discussed below. IFRS 12 relates to the disclosure of interests in other entities, and IFRS 13 establishes a
single framework for measuring fair value, replacing guidance previously included in other standards. Neither
IFRS 12 nor IFRS 13 has had a significant impact on the financial statements of the Group.

IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements
IFRS 10 replaces the parts of the previously existing IAS 27 which dealt with consolidated financial statements.
As a result of adopting IFRS 10, and to ensure compliance with that standard, the Group has changed its
accounting policy for determining whether it consolidates its investees. IFRS 10 requires consideration of
whether the Group has power over an investee, exposure or rights to variable returns from its involvement with
the investee and ability to use its power to affect those returns. In particular, IFRS 10 explicitly requires that the
Group consolidates investees on the basis of de facto circumstances that give it power over the investee
irrespective of the Group’s shareholding. Under previous accounting standards the Group’s accounting policy
determined consolidation of investees primarily on the basis of its legal shareholding.
In accordance with the transitional provisions of IFRS 10, the Group reassessed the consolidation conclusion for
its investees at 1 January 2013. As a consequence, the Group has changed its conclusion in respect of its
investment in FHN, which was previously accounted for as an associate using the equity method. Although
prior to May 2013 the Group owned less than half of the voting rights of the investee, the Directors have
determined that under IFRS 10 the Group has had the power to direct the relevant activities of the investee.
This is because the Group has held more voting rights of FHN than other vote holders and the Group had the
ability to cast the majority of votes at shareholder meetings due to non-attendance by some shareholders.
Accordingly, the Group has applied acquisition accounting to its original investment at 21 October 2010 as if the
investee had been consolidated from that date.
Following the conclusion that FHN should be consolidated from 21 October 2010, Afren applied the transitional
requirements of IFRS10, and restated the balance sheet as at 1 January 2012. These condensed financial
statements present restated comparative periods to include the consolidation of FHN as a subsidiary. The
effects of the change in accounting policy on the restated periods are presented in Note 14.


1. Basis of accounting and presentation of financial information
continued
IFRS 11 Joint Arrangements
As a result of adopting IFRS 11, and to ensure compliance with that standard, the Group has changed its
accounting policy for its interests in joint ventures. Entities over which the Group exercises joint control are now
accounted for using the equity method, whereas they were previously proportionately consolidated. The Group
has applied IFRS 11 retrospectively, in accordance with the transitional provisions, therefore 2012 results have
been restated accordingly. On transition, the Group has collapsed the proportionally consolidated net asset
value into a single investment. This change was not material. The effects of the change in accounting policy on
the restated periods are presented in Note 14.

Accounting policy for goodwill
As a result of the adoption of IFRS 10, the Group consolidates FHN’s financial statements, which include
goodwill. Therefore, the Group has adopted the following accounting policy for goodwill:
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in
the entity over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed. Goodwill is not amortised but is reviewed for impairment at least annually.

Going concern
The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable
future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the
going concern basis in preparing the condensed financial statements.

2. Finance costs
(1)

6 months to
30 June 2013
US$m
Bank interest payable
Borrowing costs amortisation and facility fees
Interest on finance lease
Interest on loan notes
Corporate facility interest payable
Unwinding of discount on decommissioning and deferred consideration
Less: capitalised interest

Restated
6 months to

30 June 2012
US$m

4.7

9.7

14.5

17.9

3.4
44.4
1.3
0.9
69.2
(31.2)
38.0

4.4
38.8
1.3
4.0
76.1
(18.0)
58.1



3. Earnings per share
Period ended 30 June
Restated
2013

(1)

2012

From continuing and discontinued operations
Basic

7.4c

9.4c

Diluted
From continuing operations

6.9c

9.0c

Basic

5.8c

9.5c

Diluted

5.5c

9.1c

The profit and weighted average number of ordinary shares used in the calculation of the earnings per share are as follows:
Profit for the period used in the calculation of the basic and diluted earnings per share
for continuing and discontinued operations (US$m)

79.6

100.7

Result for the period from discontinued operations (US$m)

16.1

(1.5)

Profit used in the calculation of the basic and diluted earnings per share from continuing
operations (US$m)

63.5

102.2

The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted
average number of ordinary shares used in the calculation of basic earnings per share as follows:
Weighted average number of ordinary shares used in the calculation of basic
earnings per share

1,088,811,128

1,074,928,695

60,049,344

44,998,849

198,443

207,224

1,149,058,915

1,120,134,768

Effect of dilutive potential ordinary shares:
Share based payments schemes
Warrants
Weighted average number of ordinary shares used in the calculation of diluted
earnings per share


4. Reconciliation of profit after tax to normalised profit after tax
6 months to
30 June 2013

Unrealised losses/(gains) on derivative financial instruments

(1)

US$m

US$m
101.9

6.0

Profit after tax from continuing operations

30 June 2012

62.4

Notes

6 months to

(1.7)

Share based payment charge

15.8

5.3

Foreign exchange gains

(1.6)

(0.7)

25.1

-

4.6

12.2

-

1.8

112.3

118.8

Share of joint venture losses

12

Impairment of exploration and evaluation assets
Finance costs on settlement of borrowings
Normalised profit after tax from continuing operations
(1) Excludes realised losses on derivative financial instruments of US$20.6 million (30 June 2012: US$17.1 million loss).

Normalised profit after tax is a non-IFRS measure of financial performance of the Group, which in
management’s view more accurately reflects the Group’s underlying financial performance. This may not be
comparable to similarly titled measures reported by other companies.

5. Taxation
6 months to
30 June 2013
US$m

6 months to
30 June 2012
US$m

-

-

Overseas corporation tax

72.0

50.2

Total current tax

72.0

50.2

126.0
198.0

158.8
209.0

UK corporation tax

Deferred tax charge

The Group’s effective tax rate has increased as a result of greater losses incurred in corporate entities in which
the related tax losses have not been recognised as deferred tax assets or which cannot be offset against
taxable profits.
During the second half of 2013 we will continue discussions with the Nigerian Tax Authorities to finalise our tax
returns from previous periods, including discussions over the applicable tax rate. Whilst a range of outcomes
are possible, we continue to believe the taxation provisions held remain sufficient.


6. Operating segments
For management purposes, the Group currently operates in three geographical markets which form the basis of
the information evaluated by the Group’s chief operating decision maker: Nigeria and other West Africa, East
Africa and Kurdistan Region of Iraq. Unallocated operating expenses, assets and liabilities relate to the general
management, financing and administration of the Group. Assets in Cote d’Ivoire which have been classified as
held for sale (Note 13) are included in the Nigeria and other West Africa segment for management purposes but
have been deducted in a separate column in the segmental analysis below to enable reconciliation to the
income statement and balance sheet.

Nigeria and
other West
Africa
US$m

Kurdistan
East Africa Region of Iraq
US$m
US$m

Unallocated
US$m

Held for sale
US$m

Consolidated
US$m

Six months to June 2013
Sales revenue by origin

818.1

-

-

-

(21.3)

796.8

Operating gain/(loss) before derivative
financial instruments
Derivative financial instruments losses
Segment result
Finance costs

368.6
(15.3)
353.3

(0.1)
(0.1)

(0.3)
(0.3)

(4.2)
(11.3)
(15.5)

(18.2)
(18.2)

345.8
(26.6)
319.2
(38.0)

Other gains and losses - fair value of financial
assets & liabilities
Other gains and losses - share of joint venture
loss

0.9
(25.1)

(25.1)

Other gains and losses - forex and investment
revenue

3.4

Profit from continuing operations before tax

260.4

Income tax expense
Profit from continuing operations after tax

(198.0)
62.4

Loss from discontinued operations
Segment assets – non-current
Segment assets – current
Segment liabilities
Capital additions – oil and gas assets
Capital additions – exploration and evaluation
Capital additions – other
Depletion, depreciation and amortisation

16.1
78.5
1,831.6

307.3

841.3

120.2

(10.5)

3,089.9

681.8

7.3

29.2

236.9

(37.4)

917.8

(1,634.9)

(39.9)

(25.5)

(857.4)

50.6

(2,507.1)

145.8

-

86.5

-

-

232.3

99.4

36.7

18.6

11.6

-

166.3

1.1

0.7

0.4

1.3

-

3.5

(199.8)

-

(0.3)

(0.5)

-

(200.6)

Share of joint venture loss

(25.1)

-

-

-

-

(25.1)

Exploration costs write-off

(4.6)

-

-

-

-

(4.6)


6. Operating segments continued
Nigeria and
other West
Africa
US$m (1)

Kurdistan
US$m (1)
US$m (1)

Unallocated
US$m (1)

Held for Sale
US$m (1)

Consolidated
US$m (1)

Year to December 2012 (Restated) (1)
Segment result
Finance costs

1,611.2

-

-

-

(39.8)

1,571.4

709.5
(60.2)
649.3

(1.2)
(1.2)

(0.1)
(0.1)

15.3
15.3

(3.1)
(3.1)

720.4
(60.2)
660.2
(90.8)


(2.5)

revenue
Share of profit of joint venture

1.7
0.3
568.9

Income tax expense

(380.0)
188.9

Segment liabilities

(2.1)
186.8
1,779.3

277.1

736.1

124.1

-

2,916.6

692.0

2.6

13.5

318.5

-

1,026.6

(1,541.0)

(63.9)

(12.8)

(903.0)

-

(2,520.7)


204.3

-

121.1

-

-

325.4


152.2

67.4

25.0

0.7

-

245.3

1.4

-

1.4

2.8

-

5.6

(378.0)

-

(0.5)

(1.6)

-

(380.1)

(14.9)

(0.1)

-

-

-

(15.0)




6. Operating segments continued
Nigeria and
other West
Africa
US$m (1)

Kurdistan
US$m (1)
US$m (1)

Unallocated
US$m (1)

Held for sale
US$m (1)

Consolidated
US$m (1)

Six months to June 2012 (Restated) (1)

796.4

-

-

-

(18.0)

778.4

Segment result
Finance costs

394.4
(15.4)
379.0

(0.3)
(0.3)

(0.3)
(0.3)

(10.3)
(10.3)

(0.1)
(0.1)

383.4
(15.4)
368.0
(58.1)


(0.1)

revenue

1.1


310.9

Income tax expense

(209.0)
101.9

Segment liabilities

(1.5)
100.4
1,786.6
665.9
(1,241.2)
120.5
62.3
0.6
(186.0)
(12.1)

228.1
3.1
(43.5)
17.7
(0.1)

642.7
9.7
(6.7)
42.1
11.2
0.6
-

34.5
155.1
(914.4)
0.7
(0.9)
-

-

2,691.9
833.8
(2,205.8)
162.6
91.2
1.9
(186.9)
(12.2)


7. Borrowings
Ebok facility
On 22 March 2013, Afren signed a new US$300 million Ebok facility which has a three-year term and bears
interest at Libor plus 4.0-4.8 per cent. The new facility replaces the previous facility of approximately US$185
million. The new extended facility will be used to fund on-going capital expenditure and general corporate
requirements including Group loans.
During the period FHN 113, a subsidiary of Afren, utilised a US$34 million facility for the acquisition of a 9 per
cent. interest in the OML 113 licence. The facility bears interest at Libor plus 9 per cent. and has a two-year
term.
The SOCAR loan of US$50 million was repaid on 5 July 2013 in accordance with the agreement.


8. Fair values
The financial instruments on the Afren balance sheet are measured at either fair value or amortised cost. Set
out below is a comparison by category of carrying amounts and fair values of all the Group’s financial
instruments. The measurement of fair value can sometimes be subjective. For financial instruments carried at
fair value, the different valuation methods are called hierarchies. Afren currently only has level 2 fair value
items, which are described below;

Carrying amount
30 June 2013
US$m

Fair value
30 June 2013
US$m

Financial liabilities
Derivative financial instruments – Level 2
Borrowings – Ebok RBL
Borrowings – Socar

(47.1)

(47.1)

(178.6)

(170.6)

(50.0)

(50.7)

(781.8)

(971.3)

(1,057.5)

Loan notes

(1,239.7)

Level 2 fair values are measured using inputs (other than quoted prices from active markets) that are
observable for the asset or liability either directly or indirectly. Okoro commodity call options and Ebok
commodity deferred put options are valued using the forward oil price curve.
The fair value of bank borrowings (including loan notes), which are recognised at amortised cost in the balance
sheet, have been determined by discounting future cash outflows relating to the borrowings. Senior loan notes
have been discounted at 12-13 per cent. All other borrowings have been discounted at 10 per cent.
Cash and cash equivalents, trade and other receivables, trade creditors, other creditors and accruals have been
excluded from the above analysis as their fair values are equal to the carrying values.

9. Impairment charge on exploration and evaluation assets
The charge during the period relates to Afren’s share of costs for drilling Kola 1 and Kola 2 on the La Noumbi
licence in Congo Brazzaville. Both wells were drilled in the period and following the conclusion that the wells
were unsuccessful, they were plugged and abandoned.
During the period the costs associated with Afren’s interest in JDZ Block 1 were impaired, further details are
provided in Note 12.

10. Contingent liabilities
In addition to the contingent liabilities in the annual report for the year ended 31 December 2012, the Group
entered into further letters of credit during the period totalling US$13 million in respect of East Africa related
exploration activity.


11. Related parties
The following table provides the total amount of transactions which have been entered into with related parties
during the six months ended 30 June 2013 and 2012.

Sale of goods/services

Purchase of goods/services

Amounts owed
to/(by) related parties

Six months
ended
30 June 2013
US$ m

Six months
ended
30 June 2012
US$ m

Six months
Six months
ended
ended
As at
As at
30 June 2013 30 June 2012 30 June 2013 30 June 2012
US$ m
US$ m
US$ m
US$ m

St John Advisors Ltd

-

-

0.1

0.1

-

-

STJ Advisors LLP

-

-

0.1

0.1

-

-

St John Advisors Ltd and STJ Advisors LLP are the contractor companies for the consulting services of John St.
John, a Non-Executive Director of Afren, for which they receive fees, including contingent completion and
success fees, from the Company. Both St John Advisors and STJ Advisors LLP also receive monthly retainers
of £18,000 and £36,000 under contracts which started from 27 June 2008 and 15 December 2011 respectively.
The contracts have a twelve month period which automatically continues unless terminated by either party.

12. Share of joint venture
During the period, the Group recognised a loss from its share in joint ventures of US$25.1 million. The loss
comprises the write-off of the Group’s interest in joint ventures of US$7.7 million and impairment of amounts
receivable from the joint venture of US$17.4 million. This predominantly relates to the impairment of exploration
and evaluation assets in respect of JDZ Block 1. It is anticipated that the Group’s interest in the licence will be
relinquished in the second half of 2013 and therefore the associated costs have been impaired.


13. Non-current assets held for sale and discontinued
operations
The assets and liabilities related to Afren Cote d’Ivoire Limited and Lion GPL SA, which hold Afren’s interest in
the CI-11 block and Lion Gas Plant, have been classified as held for sale following the signing of an agreement
to sell the entities to a third party on 16 May 2013. Consideration for the sale is US$26.5 million, subject to
working capital adjustments, of which US$15.3 million will be settled in cash and the balance of US$11.2 million
settled through the assumption of certain liabilities. Completion of the transaction is expected in the second half
of 2013.

Assets of disposal group classified as held for sale
30 June 2013
US$m
10.5
30.8
3.1
3.5
47.9

Inventories

Liabilities of disposal group classified as held for sale
30 June 2013
US$m
(40.0)
(10.6)
(50.6)


An analysis of the result from discontinued operations is presented below:

Revenue
Expenses
Profit before tax from discontinued operations
Taxation
Profit after tax from discontinued operations

Six months to
30 June 2013
US$m
21.3
(3.3)
18.0
(1.9)
16.1

Six months to
30 June 2012
US$m
18.0
(18.1)
(0.1)
(1.4)
(1.5)

Six months to
30 June 2013
US$m
2.7
(0.1)
2.6

Six months to
30 June 2012
US$m
15.9
(0.1)
15.8

An analysis of the cash flows from discontinued operations is presented
below:

Cash flow from operating activities
Cashflow from investing activities
Cashflow from financing activities


14. Effect of change in accounting policies
As discussed in Note 1, the financial performance and position of the Group has been restated for the six
months ended 30 June 2012 and the year ended 31 December 2012 to reflect the adoption of IFRS 10 and
IFRS 11. The quantitative impact on the prior period financial statements of adopting these standards is set out
in the following tables. The adoption of IFRS 10 has resulted in the consolidation of FHN as a subsidiary in all
comparative periods restated. The adoption of IFRS 11 has had an effect on the accounting for Afren’s two joint
ventures held through Afren Global Energy Resources Limited and Dangote Energy Equity Resources Limited.

31 December
2012 as
previously
stated
US$m

Adoption
of IFRS 10
US$m

Adoption
of IFRS 11
US$m

31 December
2012 as
restated
US$m

Assets
Goodwill
Investments

875.9
1,703.8
10.4
16.6
262.7
524.8

0.9
149.2
115.2
(10.4)
(15.7)
46.8
73.9

(25.5)
7.8
16.6
-

851.3
1,853.0
115.2
0.9
7.8
326.1
598.7

Liabilities
Current borrowings
Current tax liabilities
Derivative financial instruments - current
Non-current borrowings

(429.2)
(189.4)
(155.8)
(14.0)
(383.9)
(36.7)
(823.9)

(57.2)
(27.0)
(0.6)
(17.3)
(93.7)
(2.7)
(119.7)

1.1
-

(485.3)
(216.4)
(156.4)
(31.3)
(477.6)
(39.4)
(943.6)

(6.7)
-

(3.1)
(43.5)

-

(9.8)
(43.5)

35.9
272.9
-

(29.0)
(7.5)
31.6

-

6.9
265.4
31.6

Adjustments to the consolidated
balance sheet

Derivative financial instruments - noncurrent
Other payables
Equity
Other reserves
Retained earnings


14. Effect of change in accounting policies continued

Operating profit for the period from continuing
and discontinued operations
Unrealised losses on derivative financial
instruments
Impairment charge on exploration and evaluation
assets
Increase in trade and other operating receivables
Increase in trade and other operating payables
Issue of subsidiary's share capital to noncontrolling interest
Net proceeds from borrowings
Repayment of borrowings and finance leases

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the
period

Adoption
of IFRS 10

Adoption
of IFRS 11

31
December
2012
restated

US$m

Adjustments to the consolidated cash flow
statement

31 December
2012 as
previously stated

US$m

US$m

US$m

675.4
374.4

(11.8)
5.7

(0.3)
-

663.3
380.1

6.7

13.3

-

20.0

19.7
17.3
(231.3)
78.6
(389.6)
(136.7)

12.1
(20.6)
45.6
(4.9)
(6.0)

(4.7)
4.7

15.0
29.4
(251.9)
124.2
(394.5)
(138.0)

403.4
(264.2)
(101.0)

1.8
(6.0)
(6.8)
(10.0)

-

1.8
397.4
(271.0)
(111.0)

232.4

12.4

(0.3)

244.5

291.7
0.7
524.8

62.2
(0.4)
74.2

(0.3)

353.9
0.3
598.7



income statement

Year ended
31 December
2012 as
previously
stated
US$m

Adoption
of IFRS
10
US$m

1,498.8
(742.6)
(34.6)

Revenue
Cost of sales
Other operating expenses:
– service fees receivable from
associate company
– impairment of exploration and
evaluation assets
Investment revenue
Finance costs
– gain on derivative financial
instruments - options over shares in
associate company
Share of joint venture profit
Dilution gain on investment in
associate company
Share of profit/(loss) of associate
company
Income tax expense
Attributable to:

Basic
Diluted
Basic
Diluted

Adoption
of IFRS
11
US$m

Disposal
group
held for
sale
US$m

Year ended
31
December
2012 as
restated
US$m

112.4
(70.8)
(19.9)

(5.0)

(39.8)
32.5
4.4

1,571.4
(780.9)
(55.1)

(31.2)

(29.0)

-

-

(60.2)

4.7

(4.7)

-

-

-

(19.7)
(72.8)

1.6
(18.5)

4.7
-

0.5

(15.0)
1.6
(90.8)

-

(0.9)

-

1.0

0.1

0.2
-

(0.2)
-

0.3

-

0.3

0.8

(0.8)

-

-

-

(6.9)
(390.8)

6.9
7.3

-

3.5

(380.0)

203.4

(16.6)

-

-

186.8

203.4
203.4

(5.0)
(11.6)
(16.6)

-

-

198.4
(11.6)
186.8

18.7
17.9

(0.1)
(0.2)

-

-

18.6
17.7

18.7
17.9

(0.3)
(0.3)

-

-

18.4
17.6


balance sheet

30 June 2012 as
previously
stated
US$m

Adoption
of IFRS 10
US$m

Adoption
of IFRS 11
US$m

30 June 2012
as restated
US$m

792.8
1,658.3
13.7
22.0
59.7
219.2
443.7

144.9
115.2
(12.4)
(22.0)
0.9
38.6
53.2

(27.9)
7.3
18.6
(0.1)

764.9
1,803.2
115.2
1.3
7.3
60.6
276.4
496.8

(323.1)
(201.5)
(6.7)
(288.8)
(31.2)
(824.7)

(16.0)
(6.8)
(7.3)
(96.3)
(2.6)
(142.9)

2.1
-

(337.0)
(208.3)
(14.0)
(385.1)
(33.8)
(967.6)

(7.6)
-

0.3
(43.5)

-

(7.3)
(43.5)

29.0
169.5
-

(34.7)
(2.0)
40.0

-

(5.7)
167.5
40.0

Assets
Goodwill
Investments in associates
Inventories
Liabilities
Current borrowings
Derivative financial instruments - current
Non-current borrowings
Derivative financial instruments - noncurrent
Other payables
Equity
Other reserves
Retained earnings

Operating profit for the period from continuing and
discontinued operations
Unrealised losses on derivative financial instruments
Increase in trade and other operating receivables
Increase in trade and other operating payables
(Increase)/decrease in inventories - spare parts and
materials

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period

30 June 2012 as
previously stated

Adoption of
IFRS 10

30 June 2012
restated

US$m

Adjustments to the consolidated cash flow statement

US$m

US$m

363.9
181.1
(3.2)
4.3
(75.5)
35.5
(190.4)
(103.5)

4.2
5.8
1.5
1.0
(23.3)
15.0
(6.2)
(1.8)

368.1
186.9
(1.7)
5.3
(98.8)
50.5
(196.6)
(105.3)

(18.0)
(44.8)

(0.9)
(4.2)

(18.9)
(49.0)

150.9
291.7
1.1
443.7

(8.9)
62.2
(0.2)
53.1

142.0
353.9
0.9
496.8



income statement

Revenue
Cost of sales
Other operating expenses
– service fees receivable from associate
company
Investment revenue
Finance costs
Share of profit/(loss) of associate company
Income tax expense

Period ended
30 June 2012
as previously
stated
US$m

Adoption of
IFRS 10
US$m

Disposal
group held
for sale
US$m

Period
ended
30June 2012
as restated
US$m


Basic
Diluted
Basic
Diluted

24.7
(7.9)
(3.9)

(18.0)
15.8
2.2

778.4
(367.7)
(15.1)

(9.1)

(6.3)

-

(15.4)

2.5
0.1
(49.1)

(2.5)
0.3
(9.2)

0.2

0.4
(58.1)

1.1
0.2
(215.9)

(0.3)
(0.2)
5.5

(0.1)
1.4

0.7
(209.0)

-

-

(1.5)

(1.5)

100.2
100.2
100.2

Profit for the period from discontinued
operations

771.7
(375.6)
(13.4)

0.2
0.5
(0.3)
0.2

-

100.4
100.7
(0.3)
100.4

9.3
9.0

0.2
0.1

-

9.5
9.1

9.3
9.0

0.1
-

-

9.4
9.0


15. Post balance sheet events
FHN further acquisition
On 5 July 2013, Afren announced the acquisition of an additional 23.3 per cent. of the outstanding share capital
of FHN from a combination of Capital Alliance Energy Nigeria Limited (CAPE), Earl Act Global Investments
Limited and other FHN shareholders (excluding any related parties) for a total consideration of US$105.4 million
with US$22 million payable on the first anniversary and US$22 million on the second anniversary, in each case
to CAPE. Following this transaction, Afren held a 78 per cent. beneficial interest in FHN. On 5 July 2103, Afren
also announced that it has entered into a put/call option with Earl Act Global Investments Limited for an
additional 18,299,993 FHN shares (representing a further 12.5 per cent. of the outstanding share capital of
FHN) at a price of US$3.32 per share. These options may only be exercised after 24 months and for a period of
6 months thereafter.

Redemption of convertible loan note
On 5 July 2013 the Group redeemed convertible loan notes issued by FHN in 2011. US$50m of senior
unsecured unsubordinated convertible notes were issued by FHN in September 2011 to fund ongoing
development activities. The loan notes could have been converted to shares in FHN at any time from the date of
issue until maturity (2017) in minimum tranches of US$5 million, at a conversion price of US$1.85 per share,
which equated to approximately 27 million FHN shares. If not previously repaid or redeemed, the notes would
be redeemed by FHN at maturity at a premium of 200 per cent. of the par value of the notes. The notes were
redeemed for US$62.5 million. At 30 June 2013, the liability component of the convertible notes had a value of
US$56.3 million in the Afren group balance sheet and US$2.5 million was included in other equity reserves.

Repayment of borrowings
The SOCAR loan of US$50 million was repaid on 5 July 2013 in accordance with the terms of the agreement.


Advisors and Company Secretary
Company Secretary and Registered Office
Shirin Johri & Elekwachi Ukwu
Afren plc
Kinnaird House
1 Pall Mall East
London SW1Y 5AU

Legal Advisers
White & Case LLP
5 Old Broad Street
London EC2N 1DW
www.whitecase.com

Sponsor and Joint Broker
Bank of America Merrill Lynch
2 King Edward Street
London EC1A 1HQ
www.ml.com

Dr Ken Mildwaters
Walton House
25 Bilton Road
Rugby CV22 7AG

Joint Broker
Morgan Stanley
20 Bank Street
London E14 4AD
www.morganstanley.com

Principal Bankers
HSBC Bank PLC
60 Queen Victoria Street
London EC4N 4TR
www.hsbc.co.uk

Auditors
Deloitte LLP
Chartered Accountants and Registered
Auditors
2 New Street Square
London EC4A 3BZ
www.deloitte.com
Financial PR Advisers
Pelham Bell Pottinger
5th Floor
Holborn Gate
330 High Holborn
London
WC1V 7QD
www.pelhambellpottinger.co.uk
Registrars
Computershare Investor Services PLC
PO Box 82, The Pavilions
Bridgwater Road
Bristol BS99 7NH
www.computershare.com

Afren plc I 2013 Half-yearly Results 37

Afren 2013 half-yearly_final

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