Afren Troubles escalate: owes Zenith, Access, Stanbic banks N37b

Afren Plc’s debt to Zenith Bank Plc, Access Bank Plc and Stanbic IBTC Bank Limited stands at N37 billion ($185 million) says Renaissance Capital (RenCap).

A report released yesterday by RenCap, an investment and research firm, showed that the three lenders have at least N37 billion principal exposure to Afren, which is currently in administration, with “little likelihood that it can continue as a going concern”.

RenCap analysts concluded that as far as the loan is concerned, Zenith Bank is in the most comfortable position, followed by Access Bank, and then Stanbic IBTC.

Afren Plc is an independent oil and gas company listed on the Main Market of the London Stock Exchange, with a diversified portfolio of production, development and exploration assets.

RenCap, quoting Afren documents, said Zenith Bank has $100 millon to Oil Mining Licence (OML) 26 and $5 million to Ebok; Access Bank has $50 million to Okwok/OML113 (Aje), $5 million to Ebok; and Stanbic IBTC Bank has $25 million to Ebok.

“From our discussions with Zenith management and Renaissance Capital’s oil & gas analysts, we believe that of all the banks with credit exposure to Afren, Zenith is in the most comfortable position,” it said.

RenCap said the asset is producing, located onshore, and has low operating costs – which imply that its production economics still make some sense at currently low oil prices.

“The February 2014 facility, is primarily secured by a charge over Afren’s interest (via FHN 26 – the SPV) in OML26, and its cash flows. According to Zenith management, other Afren creditors do not have claim to OML26. We do not think Afren plans to sell this asset and our oil & gas analysts believe that its cash flows should be sufficient to repay the loan, valuing the asset at $114 million,” the report said.

Further analysis of the assets showed that Access Bank’s $50 million to Okwok/OML113 (Aje), according to the bank’s management, showed it has a first-ranking lien on both, but some of the bank’s claims are subject to counterparty consent.

“Both assets are offshore and not producing. While most of the $50 million was spent developing Okwok, Aje is expected to produce first, by late 2015; Okwok production could happen in 2016/2017. At $50 per barrel, our oil & gas analysts value Okwok negatively at ($161 million) and Aje at $45 million, implying 90 per cent potential credit recovery for Access (facility recovery value largely dependent on Aje),” it said.

Ebok is located offshore and is Afren’s largest producing field. Afren has a $300 million syndicated facility from a series of local and international banks on this asset. While the loan was originally secured using Ebok reserves, cash flows and material contracts, the creditors’ rights were relegated via an inter-creditor agreement on 30 April 2015, when Afren secured life-saving interim funding of $200 million.

RenCap analysts concluded that there are legal and contractual technicalities that could cause significant losses with regard to the lenders’ exposure to Afren.

Source: Nation