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Afren

Afren: Ahead of the Curve. Head Analyst: Jack Stockdale Analysts: Cameron Knight Tom Kellet Aman Khan Others…. Afren. Basic Materials. Kindly Sponsored By:. Company Summary:. Oil and gas producer Founded in 2004 >95% staffed locally in Africa

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Afren

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  1. Afren: Ahead of the Curve Head Analyst: Jack Stockdale Analysts: Cameron Knight Tom Kellet Aman Khan Others… Afren Basic Materials Kindly Sponsored By:

  2. Company Summary: • Oil and gas producer • Founded in 2004 • >95% staffed locally in Africa • Works in 12 countries, owns 25 assets Kindly Sponsored By:

  3. CEO - OsmanShahenshah • 15 years experience in the African Oil and Gas working with Shell, Chevron, Total, Eni and the Nigerian National Petroleum Corporation • 20 years experience in Oil and Gas finance – working with Credit Suisse, International Finance Corporation • Co-founder of Afren Kindly Sponsored By:

  4. Founder - Ethelbert Cooper • Co-founder of Afren • Now works in an advisory role for Afren • 35 years previous experience in African natural resource industry • In 1980’s he played a key role in Liberia in transferring ownership of LAMCO/ LIMINCO, Liberia’s largest industrial project Kindly Sponsored By:

  5. Brand Strength • CEO and founder both have a long history of working in the African natural resources industry • Good local relations; aims to be seen as an indigenous operator as opposed to foreign exploiter • In 2010 Nigeria’s Joint Revolutionary Council offered Afren an ultimatum, leave the wells within 72 hours or face a campaign of destruction in retaliation for “sucking our oil” • By the end of the deadline the crisis was resolved, with CEO Dr Shahenshah saying “We've got all their mobile phone numbers and email addresses,” “It didn't take long to smooth over.” Kindly Sponsored By:

  6. Brand Strength • Gains preferable treatment from local governments through co-operation with indigenous firms in most areas of operations, helping to secure preferential tax treatment • Sold the Ivory coast CI-11 block and Lion gas plant in August for £17m, £125m less than expected resulting in a share price fall of only 0.3p, displaying long term faith in the company from investors Kindly Sponsored By:

  7. Investment Thesis • New oil found in Ogo (Nigeria) • First well discovered an estimated 774m barrels of recoverable oil • Positively renegotiated tax deal in Ebok (reported by Goldman Sachs) • Largest seismic database in East Africa • Early mover costs into Kurdistan, granting an entry cost of $0.68 per • 2p barrel • End of year oil flows set to hit upper end of forecast due to higher • than expected production in Nigeria Kindly Sponsored By:

  8. Economic Effects • Heavy weighting in developing African Economies and recovering Iraqi economy • Ever improving technology allowing deeper oil extraction giving higher returns from oil reserves previously unobtainable Kindly Sponsored By:

  9. Economic Effects • Oil price slowly rising over the last 5 years Source: Google Finance Kindly Sponsored By:

  10. Technical Analysis Source: Google Finance Kindly Sponsored By:

  11. Risk Analysis • Primary risks are; • Falling price of oil, particularly if quotas on Iranian oil exports to EU and US are lifted, increasing supply. However, this will occur after the investment time frame in consideration • Development problems in Ogo well Kindly Sponsored By:

  12. Relative Valuation Kindly Sponsored By:

  13. Conclusion: I recommend buying 6,134 shares at a value of 163.00p each, giving a total investment value of £9,998.42 Kindly Sponsored By:

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