Afren's (AFRNY) Q2 2014 Results - Earnings Call Transcript

Aug.29.14 | About: Afren plc. (AFRNY)

Afren plc (OTC:AFRNY) Q2 2014 Earnings Conference Call August 29, 2014 4:00 AM ET

Executives

Egbert Imomoh – Non-executive Chairman

Toby Hayward – Non-executive Director

Darra Comyn – Group Finance Director

Analysts

Michael Alsford – Citigroup Inc.

Daniel Ekstein – UBS

Brendan Warn – BMO Capital Markets

Stuart Amor – RFC Ambrian

Peter Hitchens – HSBC Bank plc

James Midgley – Mirabaud Securities

Jamie Maddock – Morgan Stanley

Thomas Martin – Canaccord Genuity Inc.

James Thompson – JPMorgan Chase & Co.

Dragan Trajkov – Oriel Securities

Egbert Imomoh

Good morning, ladies and gentlemen, and thank you all for coming. Our announcement on the 31st of July is what has led Toby and I to be here this morning, making the presentations of our half-year results. We are in the process of getting a firm handle on running the company, but I am sure you will recognize there will be operational details which we may not be able to answer questions on.

Therefore, should questions arise on our operations to which we cannot give you full information, we commit to coming back to you with appropriate answers. The current situation has been demanding, but has afforded Toby and I the opportunity to widen our knowledge of the business, and we believe that, going forward, this should lead to a stronger company.

Toby and I have different strengths. He’s been associated with Afren from the onset, has been close to the market, and led the recent shareholder dialog on remuneration issues leading to this year’s approval at the AGM. I have a technical background and have been with the company from the beginning, and helped to establish Afren Nigeria. I will continue to build on the strong relationships we have with our partners.

The investigation is still ongoing and Toby will speak about it, but from what we can see, there is no impact on company assets or financials.

I will now hand over to Toby, who will give an update on the investigation and summarize the first half results. I will then come back later on for the technical presentations. Thank you.

Toby Hayward

Thank you, Egbert. First of all, I'd like to just cover an update on the investigation. As you're aware, since the end of July the company has temporarily suspended four individuals pending further investigation into evidence of receipt of unauthorized payments from a third party. Those four individuals are; as you know, the CEO, Osman Shahenshah; COO, Shahid Ullah; and two Associate Directors; Iain Wright and Galib Virani. This evidence came to light in the course of a review by Willkie Farr into whether three transactions between Afren and its partners should have been classified as a class 2 transaction under the Listing Rules.

The Board has since instructed Willkie Farr to expand the scope of the review to investigate the circumstances of, and evidence surrounding those payments, and to determine whether any other unauthorized payments have taken place in relation of these or other transactions.

At the company's instructions, Willkie Farr has also engaged KPMG to undertake an independent review of the accounting treatment of the original three transactions that were the focus of the initial Willkie Farr review. The independent reviews being conducted by Willkie Farr and KPMG are ongoing, but substantial progress has been made and we anticipate these reviews will be complete by the end of September.

I'm sure you appreciate that whilst these reviews are ongoing, we are restricted as to how much we can say. However, we can confirm that there was no negative impact on our operational and financial position, as you will see from our interim results today. The investigation has not to-date, had any impact on our partnerships and license arrangements. We're aiming to balance thoroughness in an investigation with the need to do this in a timely manner. We are, of course, applying proper standards of fairness to those under investigation.

If I can move on to the half-year results and just to summarize the key points. The first half production, the average is 33,488 barrels per day. Our revenue, $565 million, and operating cash flow of $354 million. We have revised our 2014 net production guidance to within the range of 32,000 to 36,000 barrels per day. What we've also done in this guidance is to remove Barda Rash following the temporary suspension of activities there, which we have previously announced.

Also, as I think you're aware, there are further delays to the Ebok central fault block extension platform, which is now expected to be installed in Q3, 2014. We are maintaining our double-digit, five-year net production growth target. We're also, obviously, maintaining capital discipline and prioritizing the highest possible cash return projects. Selective E&A campaign to commence with Ebok Deep should be this year.

Now the priorities, going forward, and I've split this into different regions. First of all Nigeria, where our core assets are based, is to focus on the high return cash generative, self-funding production. We're focusing on four key developments to achieve a step up in production cash flows, and looking at the exploration upside within Ebok, Okwok, and OML 115.

Ogo, the third largest global discovery in 2013, we've been fast tracking some 3D interpretation. The focus now is to establish options for monetization, and to utilize our Nigerian track record of moving discoverable resources into production.

In Kurdistan, to date, we've built capital, asset value via the drill bit. Currently, obviously, we are monitoring regional developments and deploying our capital selectively.

In East Africa, we have a maturing portfolio, which we're maturing towards to get it to drill-ready status. Thank you.

Darra, would you like to comment on the financial results.

Darra Comyn

Okay. Hi good morning. Okay just focusing on the financials. The production volumes were decreased by 25% you'll see that reflected in the reduction in revenue in the period. Largely, that was reflecting the Ebok cost recovery, which we reached at the start of the year. It also reflects some natural decline in the wells at Ebok and Okoro. But the drilling campaign is largely second-half weighted in terms of when the new wells are being drilled. So we'll expect to see some of that natural decline actually reverse in the second half of the year.

DD&A; the cost of sales has increased relatively, partially because of the higher DD&A provision, and also because of a higher NPI, which is the ExxonMobil net profit interest in Ebok, which is also reflected in our cost of sales.

The profit after tax has been boosted because in 2013 we've made a deferred tax provision based on the profitability of Ebok. And that was reversed largely last year and it's obviously not present in 2014 numbers either. And our cash flow remains in excess of our capital investment in the period.

Moving on, looking at the profit and loss account, net production 33,000 barrels a day, against 44,700 barrels last year. Revenue, obviously directly related to that, $565 million, against just under $800 million. And the gross profit affected by more than the change in revenue, largely because of the impact of the relative fixed costs, which are not impacted by the fall in production, but also by the increased DD&A provision and NPI provision.

The profit after tax $160 million against $62 million last year, largely reflecting the tax status of Ebok last year. Obviously, as I said before, we were making provisions for tax, largely deferred tax, on Ebok last year. Normalized profit before tax, $127 million against $309 million. That excludes non-cash items, impairments, joint venture losses, share-based payment charges, et cetera.

Earnings per share again up from last year at $0.146 a share, again down to the tax status. Capital investment, $293 million. The capital investment is largely second-half weighted. We’re still sticking with our $845 million for the full year. Operating cash flow, $354 million, against $564 million last year and that reflects the lower revenue share. Net debt, $720 million, against $591 million. It’s higher than last year, but lower than it was at the end of the year.

Looking at the profit for the period comparison, $62 million last year; you can see the effect of the tax change, $225 million. The price change, higher realized price $33 million this year, and the volume impact on that is invisible from $264 million. I haven’t memorized those numbers.

Royalty is obviously lower because of the lower volume, $36 million. Operating costs $29 million lower. DD&A lower, but relatively higher related to on a per barrel basis. In 2013, we had some additional write-offs and impairments, which we haven’t reflected, obviously in this year and other costs and financing and hedging more or less evening out. So leaving us with a profit after tax of $160 million for the period, first six months of this year.

Looking where our cash has gone at the end of 2013 we’d $390 million. We had operating cash flow $354 million, $291 million of cash impact of the investments. Working capital movements, $32 million. A small amount of tax paid. The bulk of tax actually on the Okoro field in particular we paid in the second half of the year. And $44 million of largely debt service in the period, leaving us with a cash balance at the end of June, 2014, of $433 million.

Capital expenditure, $293 million in the first half of the year. 81% of that is development and, 19% E&A. Majority of that is seismic and other G&G studies. The full year forecast remains at $845 million with a similar 75/25 split. So I think it’s been pretty much like that for some time.

This hasn’t changed very much, looking at our debt slide. We still have our notes, as we did at the end of the year 2016, 2019 and 2020 notes. Bank facilities remain at $210 million. Other borrowings $100 million, slightly higher related to, I think, the development of OML 26. Leaving us, after taking out those capitalized borrowing costs with debt on the balance sheet at $1,153 against $1,129 and deducting the cash of $433 million. We’ve net debt of $720 million at the end of the year. And the $523 million headroom reflects our cash balance at the date, plus our undrawn bank facilities.

Egbert Imomoh

On production, our gross production first half has been 49,870 barrels, and the net to Afren, as you heard earlier on, has been 33,483 barrels. And going forward, our guidance is 32,000 barrels to 36,000 barrels a day, and as you heard, that’s been partly due to issues related to production for the first half and partly related to the Ebok cost recovery exit, the natural decline in Ebok. But going forward, we foresee a ramp-up of production.

11 new wells will be on stream. Okwok development will hopefully start. And then, in spite of the delays we’ve had with the weather in connection with the Central Fault Block in Ebok.

However, we believe that the opportunities that we have will allow us to grow and at Ebok, you can see that the production over the period was 29,000, just over 29,000. The installation of the Central Fault Block is expected to be completed Q3 this year, and that will allow six new production wells, three from the North Fault Block and three from the Central Fault Block, and an injector well all planned for the remainder of this year.

For Okwok we’ve got FDP approval and finalization of the reservoir models and development are well ahead. And a wellhead platform has been fabricated and also awaiting installation in the third quarter of this year. And of course, with all those facilities, the whole Okwok/Ebok area were quite full of facilities with MOPUs, FPSOs and are really allowing that area to grow much, much higher than what we had expected when we entered this field many years ago.

Moving forward, Okoro, clearly the growth in this area is Okoro East, but in the interim we’re drilling an infill well, which is going ahead right now. We’re about to start the completion, and that well should bring in close to 3,000 barrels a day to the production in Okoro.

Ogini 26, the FDP was approved. We’re planning to drill about 37 wells in this area, but the FDP we’ve got is in two streams. We’ve had FDP – the first approvals for five wells. The rig is on site, rig went to site in July and actually drilled the first well. Logging is on now and the early results we’ve got are very, very encouraging. We hope to have three producers in place to the second half of this year.

The initiative allows us to actually measure how much we produce and put through the [Shell] (ph) system, has been installed and commissioning is in place. Also, there’s a field close by to the Ogini field, which is called Isoko and we expect to have approval following completion of integrated reservoir studies.

OML 113, this is to the west of the Niger Delta. We hope to have a two-phase development. The first phase is actually a tie-in of an existing well and then we’ll drill a well, all subsea. And this we are hoping that, indeed, we’ll start and allow first oil in 2015. As part of the seismic for 310, we also covered 311 and the results are looking quite exciting, but we hope to get the final results fairly soon.

Barda Rash, you already heard what issues we’ve had. There were issues earlier on with production. We’ve got some problems with H2S, but you’ve heard earlier on that indeed, we’ve had to shut down production because of the security issues. We’re monitoring it quite closely and as soon as we can reenter, we should be able to commence operations in that region.

So these are the plans. I think we probably have to just hold onto this for the time being. When we go back we should be able to commence production. As I said, we will not be able to start until it’s all clear and allow us to actually operate without any security issues to our staff.

Kurdistan, the Ain Sifni commerciality has been declared and FDP has been submitted. Again, operations had to be suspended, but you have a list of all the activities we hope to conclude. Simrit-3 well was drilled to total depth. The Simrit-4 exploration well spudded early in 2004. And the untested structure in Maqlub, along with the Barda Rash well and also testing was has been approved.

On reserves; our reserve base is quite strong, we can see that 2P developed is only 6% of what we have. And the undeveloped is 30% with a solid asset base. The challenge going forward is that how we can translate this good resource base into production that will then translate into financial flow.

We believe that there is some large remaining upside, if you look at where we are, we are in Ebok, Okwok and OML 115 is clearly an area that has good resource basin. Going forward we should have opportunities to actually convert those to production, as soon as possible.

The Okwok well re-entry Okwok drill, we hope to do that this year. The rig is going to be entering last quarter of this year and hopefully will allow us to actually evaluate Okwok properly.

Ebok Deep: we are hoping that one of the wells we’ll drill will probe a deep structure. It’s looking at the Qua Iboe in the Biafra sands below the current producing reserves – producing reservoirs. And we’ll hope that the mean success of that well will be 50 million barrels. And this well will be drilled in the fourth quarter of this year.

OML 115 is another well, already have identified a prospect for drilling, high quality analogs and drilling the similar amplitudes, so what we’ve seen in the fields close by Ebok and Okwok, and the Pmean resource was attributed to this well, this structure is 65 million barrels.

As you heard earlier on, Ogo is one of the largest discoveries worldwide. I think it was the third largest discovery. We have had to shoot seismic because once you have a better understanding of the field. And not only that we need to see closely this new features, because it’s a completely different development from the normal Niger Delta. And we are hoping that indeed, having processed and understood the 3D better, we can actually have appraisal drilling going forward.

So, as you can see that we have got a good portfolio – exploration portfolio. Our focus, up until now has been indeed to develop production facilities, bring those wells into production. And then going forward, we will begin to look at exciting portfolio of exploration wells on our portfolio; Kenya, Seychelles, Madagascar and indeed onshore Nigeria.

In conclusion, I just like to reemphasis again that we have a high quality asset base and we’ve got a proven team that has indeed executed projects, before now.

Our partnership is strong, as I said earlier on, a good number of those partners were there, when we started the business. Some I know personally or have personal relationship.

Our technical team has proven itself and has delivered in the past. We will continue to focus on capital discipline and we need to emphasize that we need to prioritize high value projects. And, as you heard from Darra we have strong cash flow and we are well funded.

Clearly it has been exciting for us and as you can see that our operations are in tact, strong assets, strong relationships, good strong financials and a strategy that is still on track. We have considerable strength and depth in the various teams, and in the last few weeks Toby and I have spent time with these teams, probably more time than you normally do as a non-ED. But we have spent time with them.

We were in Houston, in London we listen to all the technical presentation. Toby is going to visit Lagos, Tuesday? To visit those facilities I just described to you, so that we have a better understanding of what we have. And these teams are in London, Houston, Erbil, Nairobi and going forward Toby and I are going to focus on and give everything that we have to rebuild trust and to have continuous dialog with you, our shareholders and our bond holders.

At the board level, we already made some good steps and are strengthening the board. As you’re aware, Iain McLaren joined us and going forward we’ll continue to look for people who will bring experience and strength to the board.

I just want to emphasize that our strength of strategy of realizing value from a rich opportunity sets is very much on track. Over the years we’ve built a valuable portfolio of well established hydrocarbon region, well established hydrocarbon regions, whether it’s in the Niger Delta doesn’t establish for a long time, and of course going west now to Ogo, where there is a new emerging region of East Africa. These are well established regions.

We’ve a attracted, committed, dedicated team that will deliver opportunity sets. I’m sure you’ll have questions, but I’d like to reiterate what Toby had earlier said that we cannot shed more lights or take any questions on the investigations.

Ladies and gentlemen, thank you for listening.

Question-and-Answer Session

Michael Alsford – Citigroup Inc.

Good morning, it’s Mike Alsford from Citi. I've got three questions, please. I appreciate it's very difficult and you can't make too much – in additional information on the investigations, but could you perhaps tell us whether you've had initial discussions with your partners and the government and if you have, what has the initial feedback been from those discussions?

Secondly, you mention that you don't believe that any impact to your partnerships and agreements that are currently in place, but could you remind us when the technical service agreement for Okoro is up for renewal?

And then, thirdly, can you just remind us of the rationale for the two transactions that were made with Oriental last year? The $120 million for capital allowances and the $180 million for other economic benefits, which is less clear to me? Thank you.

Egbert Imomoh

Let me take the first one and then maybe, Darra, you take the next two. Of course, we’ve kept our partners briefed. We’ve had various meetings, at least I’ve had four separate meetings with our partners, and they are fully aware of what is happening out there. But the government less so, because government doesn’t actually have an interest in these fields. There were marginal fields which were assigned to the operators and the operators then assign them to us. So the government itself, we’ve had no reason to have any dialog or discussions with them. Darra, you want to talk about the…

Darra Comyn

Yes, you mentioned two transactions as one, that’s one transaction actually is one transaction for $300 million. It was made in two payments for $180 million and $120 million. So don’t confuse as two payments. There are a number of different elements in that and one of the things which pioneer did to the economics in the field is it changed the balance and it increased obviously the value significantly. Afren can’t take that value on its own. And part of the settlement here was to give our partner, their share of the benefit that we achieved.

The other element of it was we agreed that we would take all the capital allowances going forward. Before we had pioneer, those capital allowances had relatively little value, so it wasn’t really an issue. We were thinking about, it wasn’t a big issue. Once we had the pioneer status, of course, those allowances became much, much more valuable. And much more valuable probably to us than they’re to our partner. And as a consequence, we did this transaction and part of the deal was that we would keep all those capital allowances up to a certain point.

So, I think we go to a certain point in expenditure and everything on that all those capital allowances, will belong to us and they become very valuable once we exit the pioneer stages. And that means that our effective tax rate in 20 – mid-2016, through to 2021, will be much lower than the 65% tax rate. And there's a genuine very large benefit in all that.

So the overall, that transaction was very accretive for our shareholders and that’s why it was done that way.

Michael Alsford – Citigroup Inc.

And, sorry, the timing on when the technical service agreement on Okoro is up for renewal?

Darra Comyn

I think it does.

Egbert Imomoh

No time okay, remember there is no time element in at all, as far as I can remember, but I can double check and come back to you.

Michael Alsford – Citigroup Inc.

Thank you.

Daniel Ekstein – UBS

It’s Daniel Ekstein from UBS. Your shareholders are faced with an investment trading deeply discounted to underlying value at the moment, and it seems you’ve got various options at your disposal to try and address that. The one you laid out at the end was restoring trust and rebuilding the management team. But would you agree that given the implied cost of capital of the equity market is applying is high, was high and is likely to remain high for quite some time? But it’s your responsibility to examine other avenues to realize shareholder value including assessing whether your assets might be worth more in the hands of new owners than they are at the equity market. Thanks.

Toby Hayward

The position with our current share price reflects uncertainty to a very large extent. Uncertainty is to an impact on our interims and hopefully we've clarified that this morning, and uncertainty as to the outcome in the investigation. And all the resources that we can dedicate to that investigation are being utilized to get that available to the shareholders, the outcome of that is quickly as possible.

So, I think where we are with the share price now reflects those issues as much as anything else. Having completed the investigation in September then, of course, we will always look at any options that we consider to be in the benefit of shareholders, but right now it’s not a focus of ours. Right now our focus is on the investigation.

Daniel Ekstein – UBS

Okay. And perhaps a follow-up on the investigation. Osman Shahenshah was one of the founders of Afren and I guess, given the level of input priority has been potentially uncovered at such a high level, does the scope of the investigation in your view need to be significantly broadened to become a more thorough root and branch review of Afren’s history?

Toby Hayward

We’re doing that. As part of this we are having a thorough review of the many things within the business to ensure that when we’ve completed this investigation we will draw a line completely under any consensus that stake holders may have about the company.

Daniel Ekstein – UBS

And you expect that process to be complete by end of September.

Toby Hayward

Yes. I think yes.

Brendan Warn – BMO Capital Markets

Thank you. It’s Brendan Warn from BMO Capital Markets. Just two questions, one on culture and then one technical one. Just firstly, I guess to Toby and Egbert, just on the culture obviously this investigation is still ongoing sort of long process and our question that you’re going to have it complete by September. But what are you doing at this point to change the culture within Afren. And then also just in investigation how far reaching is it down call it the management change – chain.

And then just secondly on technical question, just in terms of Ebok Deep, just what are the technical risks associated with the Ebok Deep test. And then just lastly, you talked about monetization or value creation from Ogo, but can you just step forward I guess next year’s plan with Ogo in terms of drilling, drill stem tests and there’s question mark over monetization of the asset.

Toby Hayward

If I can just answer on culture. It’s very difficult for us to assess exactly what the culture was like before, because as a non-Executive Director, he didn’t spend probably spend enough time actually understanding issues like that. But one thing I can assure you that the culture that myself and Egbert are now bringing within the organization is one of complete openness. And we have implemented number of new initiatives within the organization to ensure that there is openness. We want everybody to understand what our objectives are, and we want to understand what everybody believes to be for the best interest of the company. So there are changes going on, but it’s still early days of course. If you could.

Egbert Imomoh

Ebok Deep so when I think about two, three years ago we actually proved deeper structure in Ebok and this one has always been there, it’s an extension we think of what’s happening in Equatorial Guinea. Remember there’s a big Zafiro field that we think that some of that play actually goes across to Nigeria. This well is going to probe it. As for technical risks, we are aware that Ebok has some bit of over-pressures, but you know that – I think we’ve drilled the 38th well now in Ebok so we should have a good handle of where those over-pressures are.

So I don’t really see any issues related to actual drilling. But you know that if you drill an exploration well, the structure may be there, but you have to probe and prove by the bit that indeed is that chart, it is charged. So I think that’s for me that’s only the risk where they indeed, the structure which comes out very, very clearly in 3D, whether that’s charged.

For Ogo we’ve been very careful and cautious as you can imagine, you find a field in an area which has been completely new to the play in Nigeria, about 770 million barrels, third largest in the world last year. And we took a cautious step that we will shoot seismic, evaluate that seismic and then decide where the next appraisal wells will be and is looking excited. So always there is when do you move? Do you get more information before you then monetize? My style is that get more information first before you sell in and we find that you saw some valuable assets which you didn’t quite understand.

So we’ve got to be very careful and cautious, so be patient with us.

Stuart Amor – RFC Ambrian

Stuart Amor from RFC Ambrian. You’ve suspended your operations at Barda Rash. What would it take to get those operations up and running again and once you’ve taken the decision how long will it actually take to get them running?

Egbert Imomoh

It’s a tough question. I mean, as you probably know, my background is from Shell, I’m not going to risk anybody’s life for anything. As I’ve told people not be one drop of blood one million barrels. So the security situation is not in our hands. We’re monitoring that very closely. We had some rigs on there, they have been demobilized when we can go in, we have to go for the process of actually reestablishing presence, mobilizing rigs. And frankly, it’s one of those things we haven’t actually spent time in saying how long would it take, because it’s something really we haven’t had enough time to think.

But I can tell you we are going to be very careful in deciding when and how to go and just to make sure we don’t risk, because I don’t know how it's going to pan out, whether indeed a declaration of safety means that you don’t have pockets of little (indiscernible) at your legs when you’re moving in the fields and we don’t want that. I’m not saying it will happen, but we’re going to evaluate the situation and our security people are doing that religiously.

Toby Hayward

Yes, we have a series of trigger points which caused us to cease operations. And we have another series of trigger points which will cause us to they required to be fulfilled for a longer period of time, which will cause us to resume operations. So it’s a very controlled process as you would expect.

Egbert Imomoh

There’s somebody here.

Peter Hitchens – HSBC Bank plc

It’s Peter Hitchens from HSBC. I had two questions for you. One is on the production guidance for this year, it still seems to be very wide and what’s the – what’s governing the gap between 32,000 and 36,000. The other question was more on the Ogo seismic and the size of the drilling you’ve completed; what’s it looking like for other prospects in that block?.

Egbert Imomoh

Well, the guidance, indeed, as you see that is governed by the fact that we’ve had to leave Barda Rash and also there’s some decline. We’re also aware that, going forward – we told you about some delays we’ve had already with platforms because of the weather situation in Nigeria by this time of the year. And you have to place those platforms to be able to drill through them, and we still can’t control that element of life though, whether the weather will allow us or not. So we want to have a situation that allows us to be able to deliver against what we said. And I always prefer that the forecast is that way, because there’s so many elements, some of which you control, some of you can’t control. And we just hope that we don’t have any more delays in going forward. I think the question on Ogo seismic, can you just repeat the question.

Peter Hitchens – HSBC Global Research

I was just wondering what the seismic is looking like for the Ogo block, whether you’ve pointed more prospects.

Egbert Imomoh

Exciting, that’s all I can say, exciting.

James Midgley – Mirabaud Securities

It’s James Midgley from Mirabaud Securities. You’ve got some pretty important decisions to make with regard to capital allocation coming up. And how do you see the recent events impacting these decisions? Is there likely to be a change in direction when the new management come in, and should we expect a period of hiatus associated with that? Secondly, a more specific question. I think you mentioned appraisal wells on OPL 310. Are you expecting a campaign comprising more than one well?

Darra Comyn

In terms of capital discipline, I don’t think the equation has changed. We still have the same prospects we had before. We still have the same decisions to make. I don’t think that the situation is going to change that. The operating team and the structure is still in place to support that. So, I think the message is it’s going to go on as it would have done irrespective of what’s happened recently.

Egbert Imomoh

Ogo, as I said earlier, we’re just in the process of finalizing the 3D seismic. And if you know that the Ogo field has a range of depths from fairly shallow right to deep, and to drill that kind of structure you need to identify the appropriate rig and get the long lead items. 3D is not finalized yet, but we hope that this year we should be able to complete that. So, frankly I don’t think we’re in a position yet to give you date when we can support the appraisal wells for Ogo. I don’t want to give information that I just can’t confirm, because we haven’t had in-depth discussions on that program yet. But when we do, hopefully in the future, we should be able to demonstrate to you when those dates are.

James Midgley – Mirabaud Securities

Okay. Thank you.

Jamie Maddock – Morgan Stanley

Jamie from Morgan Stanley. I’ve two points of clarification. With regards to the delays on Ebok, it’s purely weather related, nothing to do with management time being taken elsewhere, we’re starting to see the impact on operations?

Egbert Imomoh

No, a point of correction; we had problems because the lay barge that is there now, had to do carry out some work. If you remember some months ago, Shell had a force majeure because we’re repairing their line in Forcados. So they got delayed because of we took longer and longer and longer. And in planning this, we plan for a particular weather window and when you miss that weather window you have problems with rather choppy water. So that’s part of the reason.

Jamie Maddock – Morgan Stanley

And then, again, sorry to labor the point, but just to be clear on something, again a clarification. With regards to the investigation being concluded in September, does that also include these other identified additional rates at party transactions in addition to the three that are stipulated here?

Egbert Imomoh

Yes, that captures both of those. Yes, it does. Yes.

Jamie Maddock – Morgan Stanley

Thank you.

Unidentified Analyst

(indiscernible) I had two questions. The first is on management. How you see that evolving going forward, what measures you’ve taken, if you’ve started looking to bring new people into the Company. And following on from that is the Board as well. Are you looking to make changes to the Board? You’ve mentioned additions, but are we going to see some more people leave the Board at this point?

And then the second question is on Ebok. I’ve never fully understood how the relationship works in terms of what was actually invested by Afren, to bring the field on line. So I was just wondering if at some point you’re going to provide us with information as to how much the Company has invested to date in Ebok, so that we can better understand the nature of the future cash flows from the license; so we can better understand the impact of pioneer status, as well as the capital allowances. I don’t think you’ve disclosed total CapEx on the field today.

Toby Hayward

I’m sorry. Go ahead with the management question, first on that one.

Egbert Imomoh

Take the tough one first.

Toby Hayward

I think that information is out there. I’m not sure that information is there. I think…

Unidentified Analyst

Is it historical, total amount of dollars spend, I think, in Ebok? I don’t know. I don’t think so.

Toby Hayward

I’m looking at Simon here, and seeing – I think, yes. We’ll have a look at that, yes. There’s no secret about that. I think there’s no – we’re not hiding anything there.

Egbert Imomoh

So your one on management, well, you’re aware that our statement said they were suspended, and whilst in that mode, you really can’t go out in the market and start, because then you have pejorative situation. That means that Toby and I are stuck, as I say here; we’ve got to run the Company, and as much as we can and we would be doing it. And that’s the way it’s going to be until there’s clarity and the conclusion of the investigations. Then, of course, you can move. As for the Board, we took a policy that we did not want to change the Board too quickly. You know at Board levels, you’ve got to be careful how quickly you introduce, because it takes time to bond on Boards. It takes time to understand what happens.

So, we’ve been on the nomination committee for a while and we wanted to introduce (indiscernible) one a year. And we have done some clear definition of what areas we wanted to have Board coverage, whether it’s geographic, whether it’s in a discipline, whether it’s the experience which people will bring. And that’s why, indeed, you can see that right through we brought different people in. Patrick Obath came in East Africa; Sheree came in Corporate Social Responsibility; Iain comes in with experience in audits and risk, and that’s the way we’re going to be going there.

So we will look again and certainly, right now, be on the position of independence, but we’ve got to take carefully. I don’t want to bring people on Board and spend time on managing the Board rather than managing the business. So that’s the way we’re going to do it.

Thomas Martin – Canaccord Genuity Inc.

It’s Thomas Martin, Canaccord. I have three questions, please. Firstly, on Okoro and the payments that you’ve disclosed in the year-end 2013 results. Can you through what specific benefits Afren receives in return for those payments? I think there might be payments to be made in the future, but what are you receiving in return for those?

Second one was, I guess, the approvals process for large payments. The payments that you mentioned in today’s release were detailed in the 2012 and the 2013 results. And then there was an investigation that occurred a while later to understand whether or not they would qualify for type 2 transactions or whatever. It seems kind of weird that you approve the payments and that they are disclosed in the results and then you investigate them. Are you happy with the way that you approve payments within the Company?

The third question was relating to shareholdings of Directors and Management of Afren. Historically, it was disclosed that there were some shareholdings in FHN. Can you confirm that Directors and Management do not have any shareholdings in any of your other partner companies?

Egbert Imomoh

Shall I deal with the second question first and then to do with the payments? All the payments are subject to Board papers and Board approval that process you would expect to see in place. The issue with it relates to whether or not they triggered the requirement under the Listing Rules to make an announcement as to the nature of the payment. And sometimes it’s a fine judgment. It’s a classification based on a number of different criteria. And sometimes it’s a fine judgment which way it falls. And it was brought to my attention that that process was not thorough enough and it was that that led me to appoint Willkie Farr to look at the circumstances surrounding that discussion or that decision as to whether or not it was always not a class 2 transaction.

And that’s what initiated this whole process and this was an internal investigation led by myself to ensure that we correctly classify those transactions. That has got caught up in the other information has come to light and that investigation would normally have been announced by now or that the outcome of it would, but it has been had to be delayed because it got caught up in these other issues, so that’s the process we got in payments and I think it is we’re also looking at whether there is ways to improve that, but it was they were all approved at board level.

Darra Comyn

So your second question where I’m aware that directors have any shareholdings in the subsidiaries or…

Thomas Martin – Canaccord Genuity Inc.

I guess in company.

Egbert Imomoh

The answer is as far as I know, I don’t think anybody has right now.

Thomas Martin – Canaccord Genuity Inc.

Thanks. And the other one just on the Okoro…

Egbert Imomoh

Okoro, summarize the question again.

Darra Comyn

I mean Okoro the benefits of the deal when we did. I think yes, I mean that this relates to the development of the field extension for Okoro and also settlement of some prior differentials in economics in terms of the development of the extension to some extent had stalled because our partners weren’t actually economically as well off from as we were given the different this structure is very beneficial to Afren.

We wanted to keep that structure, but we also wanted to gain more control over the development and gain approval for the development from our partners. When you look at the economics of it, they are much more beneficial to us than they’re to them, and this settlement for them was to resolve a number of historical issues to give us more control and to ensure that they prove the development going forward.

James Thompson – JPMorgan Chase & Co.

Hi. Thanks it’s James Thompson from JPMorgan. A couple of questions one was in terms of the investigation, you identified transactions in 2012 and 2013, just could you tell us how far back in the past that investigation is going? And following on from that, I'd be interested to know what sort of information we should expect to come out of that review, not necessarily details, but in terms of what actions you’re going to be taking, are you going to be giving us what to say your updated results or restated results on those prior years, if you can just sort of spell out what sort of information we should expect to come out of that review that will be very, very helpful.

Egbert Imomoh

I mean, the investigation is looking at those transactions, conducted by Willkie Farr and if that is not in itself came back we are as a company looking back other transactions, we’re focusing and guiding them only where we think there are issues that need to be looked at.

As regards to the announcement, I can't give you any clear guidance on that. I suspect we will be constrained as to what we can say in certain areas, but I will be seeking to clarify, as much as possible, the outcome of that investigation because I understand the concern at the moment is uncertainty. And that uncertainty is only going to be cleared up by us making as full a possible disclosure as we can at the time. But we're a listed company and we may well be constrained by exactly what we can say, but we will seek to give us much information as we can.

Darra Comyn

So it maybe just in terms of financial statements, I don't – in terms of specifically in the two transaction we did with Oriental last year, we'd adopted a very conservative, a very prudent approach to that transaction, we basically expensed it. I don't think that any – and we've asked KPMG, are doing their review, but we don't expect that the results of that review will have a significant change to our net assets.

Egbert Imomoh

Can we have one more question? Thank you.

Dragan Trajkov – Oriel Securities

Yeah. This is Dragan Trajkov from Oriel. The investigation that you started it was all internal, or started internal, and then you asked someone independent agents to come in and look at it. Has so far in this month been any other regulatory agency that have maybe express any interest in this case without you asking them to look at this, including the exchange (indiscernible).

Darra Comyn

I understand. Of course, we have dialog with our regulator and the FCA, but I'd rather not comment; we're not making any comment on any other involvement of anybody else.

Egbert Imomoh

Okay, thank you very much. It's been nice to be here and I’ve – hopefully been able to present to you our company, some of the challenges and the opportunities we have. Have a good weekend.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!