June 10, 2008 / 10:20 AM / 12 years ago

Afren begins Nigeria production, sees first profits

LONDON, June 10 (Reuters) - Loss making Africa-focused oil and gas explorer Afren Plc AFRE.L announced on Tuesday it will begin production on its Nigerian Okoro Setu Project, setting it on a path to profitability this year.

Afren said Okoro Setu will produce a peak of 15,000 barrels of oil per day (bopd) by the third quarter, which together with an acquisition in Cote D’Ivoire will give it total oil production of 21,000 bopd by year-end.

“What’s important for us is that this establishes us as a credible operator,” Galib Virani, Afren’s Vice President of investor relations told Reuters, adding that Afren’s move to the FTSE’s main list is on track for the fourth quarter.

Afren shares, which were up 1.2 percent to 170 pence by 0950 GMT, have doubled since they began trading on London’s junior AIM market in April 2006.

“This is good news for Afren. The company had targeted first oil in the second quarter and is basically on time,” said Ambrian analyst Dougie Youngson.

“There is still some development work required at the field to bring it up to full production, but we do not anticipate that the company will have any issues in achieving this.”

In December, Chief Executive Officer Osman Shahenshah said Afren should see revenues of up to $300 million this year.

But with oil at record levels that number could rise. At an average of 17,500 bopd sold at $100 for the rest of the year, Afren should have revenues of $315 million in 2008.

The company should post net income of $127 million this year on sales of $418 million, Merrill Lynch said in an April note.

Afren made after-tax losses of $39 million in 2007, more than double the 16 million it lost a year before that. (Reporting by Hsu Chuang Khoo; editing by Rory Channing)

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