Friday, 13 March 2015

Omne trium perfectum

by Will Forbes

Everything comes in threes
This week was not a good one. It has seen three major announcements by well-known London-listed oilers, resulting in week-to-date share prices falls of 20% for Cairn, 38% for Soco and 12% for Afren.

For Cairn, a tax bill of more than your market cap is not the best news in the world, especially when it comes unexpectedly during the day of your full year results. See a blog post earlier this week from Kim Fustier (link)


Soco's downgrade of 2P reserves from 130.1 to 40.8mmboe. This triggers a useful recap of exactly what constitutes resources and resources - see a lengthy blog post from Ian McLelland.


Are Afren's woes now over?

In all likelihood, the refinancing announced this morning will  result in existing shareholders holding just 11% of the fully diluted shares of Afren. This may provide a near-term solution to financing requirements and stave of a complete write-off of investors' cash but a number of questions still remain that an incoming CEO and management will need to address.


  • How does Afren move forward with its relationship with Oriental and AMNI (partners in Ebok and Okoro respectively)? These fields accounted for 95% of Afren's 2014 production;
  • What should Afren do with Barda Rash, where 2P +2C reserves were downgraded from 1,400 to  250mmbbls in January 2014?
Hat tip to Spark notes - Spark notes link

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