Afren PLC is engaged an independent oil and gas exploration and production company. The Company produces from its assets offshore Nigeria and Cote d'Ivoire. The Company operates in four geographical markets: Nigeria, Cote d'Ivoire, Other West Africa and Eastern Africa. As of December 31, 2010, the Company had 29 assets in 11 countries, from Nigeria, Ghana, Cote d'Ivoire, Nigeria and Sao Tome & Principe JDZ, Congo Brazzaville, Ethiopia, Kenya, Madagascar, the Seychelles, Tanzania, South Africa and Kurdistan (Iraq). The Cote d'Ivoire includes Lion Gas Plant and CI-01; Nigeria includes OPL 310, JDZ Block 1, OPL 907 and OPL 917; Congo Brazzaville includes La Noumbi; South Africa includes Block 2B; Kenya includes Block 10A, Block L17/L18; Seychelles includes Blocks A,B,C, and Tanzania includes Tanga Block. On October 7, 2010, the Company acquired Black Marlin Energy Holdings Limited.
Numbers
Market Cap $1.4B
Sales $266M (increase from 27M in 2008 or by 1000% and if you think about future potential in Africa/Kurdistan then another 1000% over years is possible)
Quarterly Sales Growth -25% (decline is attributed to lower Oil/Gas prices and decrease in production)
EBITDA $142M
Income $18M (first time positive income since inception in 2004)
Quarterly Earnings Growth -60% (Africa is a volatile same as Iraq, I value this stock only based on P/S ratio as I expect sales to reach few billions USD in 1 decade and then Afren PLC will be acquired by a big Oil companyfor a premium)
Cash $320M
LT Debt $343M
Employees 225
Assets $2.1B
Liabilities $1.2B
Shares Outstanding 1,070,000,000
Major Shareholders
Carmignac Gestion SA 19.06m 1.6%
Norges Bank Investment Management 18m 1.5%
Resume: This stock is cheap compared to Oil/Gas sector and it's bigger rivals like major global Oil&Gas companies, the assets are bigger than liabilities, no problem with debt and good cash level, high take over possibility for a bigger rival looking to enter Africa or increase market share there. Compared to P/S ratio stock is not cheap but on the other side this is how much Africa's energy resources are worth to investors, it's normal to value it over Western Oil/Gas companies whos production is declining. There is no balance sheet risk but only political risk because there is uncertainty in Africa and Kurdistan. I don't advise to buy this stock without hedging, there are few possibilities you may think about, one is long Afren/short (XOP) Oil Exploration&Production ETF. For every ex. $100,000 long in Afren sell short $100,000 XOP. This way you protect your investment in case Oil/Gas prices will fall, same if prices will rise Afren will rise more than XOP. If you are looking for Africa energy bet, then this stock is worth considering. It trades in London, U.S (as orinary shares in US$ and 1 ADS representing 5 shares), Frankfurt so you can decide in what currency you want to invest. The liquidity for small investors is good in U.S and Frankfurt but for bigger fund the LSE is O.K. same as ordinary shares traded on OTC Markets but you must get the quote from mm's for big order. Expect the gap between XOP and (AFRNF.PK) to narrow and Afren to outperform. But if you are bullish on Africa, Iraq and Oil/Gas prices, you don't have to do any hedging.
90 days performance.
