Business

How Shareholders Frustrated Afren’s Board’s Refinancing, Restructuring Plan

Published

10 years ago

August 24, 2015

Indications emerged weekend that Afren Plc may be sold in bits as no company has agreed to acquire it because of its current financial crisis. Afren is an oil and gas company specialising in oil and gas exploration and production. Seplat had wanted to buy it over but withdrew its bid when it found out that the company was highly indebted. As at the time of going to press, it was not clear if the staff had been paid off or have had their appointments terminated.
Those who have working knowledge of development in the company told Vanguard that the shareholders of Afren are to be blamed for the current financial woes the company has been subjected to as the decision by its Board of Directors to put the company in administration could have been averted.
An analyst revealed to Vanguard that Afren has been forced into administration following its inability to close a $200 million funding gap deal caused by the drop in Brent crude prices. As it stands, stakeholders and customers of Afren stand the risk of losing millions of dollars of their stakes in the company.
For instance, in Nigeria, three banks that lent over $185 million (N31.45billion) to Afren stand the chance of losing this amount if the company goes ahead to sell its assets where the cash flow is not sufficient to repay the loans
How crisis started
Afren, which was valued at about 1.64 billion pounds ($2.56 billion) a year ago, has been hit by a slump in oil prices, the dismissal of top executives and the absence of proven or probable reserves at a key field in Iraqi Kurdistan. The company has since lost nearly all of its market value. The suspended shares of Afren closed at 1.785 pence on July 15.
The full scale of Afren’s funding crisis was first revealed in January when the company said it needed a $200 million (£132m) cash injection. In its bid to stay afloat, Afren tried to persuade shareholders to agree to a financial restructuring which would have substantially diluted their holdings. It had planned to appoint new chief executive, Alan Linn once the interim funding deal had been completed.
But the Nigeria-focused oil company’s woes started towards the middle of last year when prices started sliding. Having dipped as low as $45 per barrel in January 2015, they are currently hovering around the $50 mark. Afren’s struggles were compounded by the suspension and subsequent firing of chief executive, Osman Shahenshah, and chief operating officer, Shahid Ullah over the receipt of unauthorised payments last year.
Afren Plc said its board had decided to put the company into administration as it failed to secure support from its shareholders for a vital refinancing and restructuring plan. Vanguard gathered that Afren in the first quarter of the year, held talks with bondholders, banks and its partners on its possibility of meeting targets after the company cut its production forecast for the year earlier this month, just as its shares were suspended on the same day.
The board believes that all the possible routes have now been explored during the course of its plan to refinance and restructure operations which was subject to a strict timetable, driven by the company’s short-term liquidity issues. According to a statement by Afren on its website, “These discussions have failed to deliver support for a revised refinancing and restructuring proposal that would result in Afren being able to pay its debts as they fall due.
“As a result, the board has taken steps to put Afren Plc into administration and appoint Simon Appell, Daniel Imison and Catherine Williamson of AlixPartners as administrators. The relevant documentation will be filed in court during the course of the day. “Whilst the overall capacity of the assets to deliver field life production remains broadly unchanged, the near-term deferral of production revenues has undermined the immediate liquidity position of the business.”
Afren also ended takeover talks with Nigeria’s Seplat Petroleum Development Co Plc in February, 2015 and began defaulting on its debt payments, before agreeing to a $300 million funding lifeline from bondholders.
The deal, which was thought to be too complicated by analysts and investors alike, would have reduced existing shareholders’ stake to 11 per cent. As at January 7, 2015, Afren’s largest shareholder was Nigeria’s South Atlantic Petroleum with a 7 per cent stake. Standard Life Investments, another shareholder, cut its more than 8 per cent stake in Afren to 1 per cent in January this year.
Analysts’ views:
“The core issue of Afren has been governance and communication,” FirstEnergy Capital analyst, Stephane Foucaud told Reuters, adding that the company was far too leveraged and had misunderstood the risk profile of its Nigerian assets. Also Renaissance Capital Research, in its report made available to Vanguard said “Afren is in administration and in this note, we explore the possible implications for Nigerian banks. We conclude that Zenith Bank is in the most comfortable position, followed by Access Bank and then Stanbic IBTC.”
According to Afren documents, Nigerian banks have at least a $185mn principal exposure to Afren. Zenith Bank has $100mn (N17 billion) to OML26, $5mn (N850 million) to Ebok; Access Bank has $50mn (N8.5billion) to Okwok/OML113 (Aje), $5mn (N850 million) to Ebok; and Stanbic has $25mn (N4.25 billion) to Ebok.
According to Rencap: “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. The asset is producing, located onshore, and has a low operating cost – which implies 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 $114million.”
Rencap in the report, said: “According to Access management, it has a first-ranking lien on the Okwok and Aje fields, though we note that some of the bank’s claims are subject to counterparty consent. Both assets are offshore and not producing.
While most of the $50million was spent developing Okwok, Aje is expected to produce first, by late 2015; Okwok production could happen in 2016/2017. At $50/bl, our oil & gas analysts value Okwok negatively at -$161million and Aje at $45million, implying 90 per cent potential credit recovery for Access.”
Rencap further stated that 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 April 30, 2015, when Afren secured life-saving interim funding of $200 million.
This implies that in a liquidation scenario, the providers of the interim funding have a superior lien to the Ebok creditors and bondholders. At a $50/bl long-term oil price and at 15 per cent WACC, our oil & gas analysts value Afren’s share in Ebok at $158 million unrisked NPV, leading us to conclude that the creditors would likely have to write off this exposure,” it noted.
In conclusion, Rencap said “After speaking to bank management teams and reading multiple documents on Afren, we think the devil is in the detail. We view the feedback from the banks as the optimistic scenario and note that there are legal and contractual technicalities that could cause significant losses with regard to exposure to Afren.”
Afren in administration:
The board has appointed Simon Appell, Daniel Imison and Catherine Williamson of AlixPartners as administrators and said it was working with its partners to continue operations. The administrators were appointed on July 31, 2015. The Joint Administrators are licensed in the UK by the Insolvency Practitioners Association.
The affairs, business and property of the company are being managed by the Administrators, who act as agents of the company without personal liability. According to Afren, ” For the avoidance of doubt, no other company in the Afren Group has appointed administrators or taken any other step to commence insolvency proceedings.”
About Afren:
Afren Plc is an international independent exploration and production (E&P) company with a Premium Listing on the London Stock Exchange and a constituent of the FTSE 250 Index. Afren is a dynamic, entrepreneurial organisation with a portfolio of world-class assets located in several of the world’s most prolific and fast-emerging hydrocarbon basins in Africa and the Middle East. Its activities span the full-cycle E&P value chain of exploration, appraisal and development through to production.
Its success depended on its ability to deliver long-term value for all stakeholders through a clear and consistent strategy, which recognises that its responsibilities go beyond operations. To leverage its track record of operational delivery and effective portfolio and financial management, its business has been strategically positioned into three core business units, Nigeria and other West Africa, Afren East Africa Exploration and the Kurdistan region of Iraq.

Business

FG earned N2.78trn from Company Income Tax in second quarter 2025—NBS

Published

1 week ago

November 28, 2025

Business News Report

National Bureau of Statistics has said that Nigeria’s Company Income Tax rose sharply in the second quarter of 2025, hitting N2.78 trillion.

The figure represents a significant 40.27 per cent increase compared to the N1.98 trillion recorded in the first quarter of the year, reflecting both improved tax compliance and stronger corporate performance across key economic sectors.

The NBS report said that domestic company income tax payments accounted for the bulk of the revenue, contributing N2.31 trillion, while offshore collections stood at N469.36 billion during the period under review.

According to the NBS, the financial and insurance sector recorded the highest quarter-on-quarter growth, rising by an astonishing 772.29 per cent, driven by improved profitability among banks, fintechs, and insurance firms following robust half-year earnings.

This, according to NBS, was followed by wholesale and retail trade, as well as motor vehicle repair activities, which grew by 538.38%.

Activities of households as employers also surged by 526.79%, although their overall contribution to total company income tax remained negligible.

On the flip side, some sectors experienced sharp declines in company income tax remittances.

Activities of extraterritorial organizations and bodies dropped by –45.01%, while education, public administration, defence, and compulsory social security recorded declines of –26.61% and –18.17% respectively.

The contraction in these sectors, particularly education and public administration, highlights persistent structural and fiscal challenges confronting government-funded institutions.

In terms of contribution to total tax revenue, financial and insurance activities led with a dominant 44.13%, reflecting the sector’s continuing expansion and strong capital flows.

Manufacturing followed with 15.57%, bolstered by increased production output and improved supply chain activity.

Mining and quarrying ranked third, contributing 9.18%, supported by higher commodity prices and renewed interest in solid mineral development.

At the bottom of the contribution chart were activities of households as employers, which accounted for just 0.01%, as well as activities of extraterritorial organizations and bodies, and water supply, sewerage, waste management, and remediation services, each contributing 0.04%. Despite economic headwinds, year-on-year company income tax collection still rose by 12.66% when compared to Q2 2024, underscoring moderate but steady improvement in government revenue mobilisation.

Company income tax collection in the same period of 2024 rose by 150.83 per cent N2.47 trillion. In the first three months of the year, company income tax collection stood at N984.61 billion. According to the report, local payments in the period under review amounted to N1.35 trillion, while foreign CIT payments contributed N1.12 trillion. On a quarter-on-quarter basis, the agriculture, forestry, and fishing sectors exhibited the highest growth rate at 474.50%, followed by financial and insurance activities at 429.76%, and manufacturing at 414.15%.

Business

Lagos govt promises MSMEs continued visibility, market access

Published

3 weeks ago

November 16, 2025

Business News Report

Lagos State government has reaffirmed its unwavering commitment to supporting micro, small, and medium enterprises (MSMEs) across the state through visibility, capacity building, and market access. Commissioner for Commerce, Cooperatives, Trade, and Investment, Folashade Ambrose-Medebem, made the pledge on Sunday at the closing ceremony of the 2025 Lagos International Trade Fair (LITF). The 38th edition of the event, organised by the Lagos Chamber of Commerce and Industry (LCCI), had its theme as “Connecting Business, Creating Value.”

Ms Ambrose-Medebem said every entrepreneur, regardless of scale, deserves an enabling environment to thrive and contribute meaningfully to the state’s economic prosperity. She said the state, through strategic investments in infrastructure, institutional reforms, and continuous engagement with the private sector, was building a Lagos that worked for business. The commissioner added that the state would continue to foster innovation, competitiveness, and sustainability.

“As a government, we remain steadfast in our commitment to making Lagos the preferred destination for commerce and enterprise. This fair has once again demonstrated the power of connection: connection between producers and consumers, investors and innovators, the government and the private sector, and local entrepreneurs and global brands. Every handshake, every conversation, every business card exchanged here is a building block toward the future we are creating, a future of prosperity that leaves no one behind,” she said.

The commissioner urged businesses to continue to connect, collaborate, and create value, saying, “In Lagos, we do not just trade goods; we trade ideas, build futures, and transform lives. “Together, let us continue to make Lagos not just a place of commerce, but a symbol of progress, innovation, and endless opportunity.” Gabriel Idahosa, president of LCCI, urged governments at all levels to continue addressing the issues of creating an enabling environment in the country.Mr Idahosa said focus should be on infrastructure, security, and implementing the right policies to address the key drivers of high inflation.

This, he said, was needed to fully harness the vast enterprising resources of domestic and foreign investors for the diversification of our economy and the welfare of our people. He pledged the commitment of the organised private sector to stand solidly behind the state in its quest to actualise its innovative initiatives on all fronts. NAN

Business

Jumia posts $17.7m pre-tax loss in Q3, down 1% in 12 Months

Published

3 weeks ago

November 12, 2025

Business News Report

Jumia Technologies AG posts a $17.7 million loss before income tax in the third quarter of 2025, down 1% year-on-year from $17.8 million in the third quarter of 2024. The road to profitability has remained long as ecommerce continues to face uncertainties, including widening competition with rivals in the same industry. The e-commerce company revenue came in at $45.6 million compared to $36.4 million in the third quarter of 2024, representing a 25% year-over-year surge in the period. The company reported gross merchandise value of $197.2 million compared to $162.9 million in the third quarter of 2024, up 21% year-over-year. Excluding South Africa and Tunisia, physical goods GMV grew 26% year-over-year, Jumia revealed in the unaudited financials.

Jumia said in its report that the GMV growth was driven by supply and strong marketing execution, partially offset by lower corporate sales in Egypt. Excluding corporate sales, GMV in reported currency grew 37% year-over-year. Nigeria’s momentum accelerated, with order growth up 30% and GMV up 43% year-over-year, Jumia said. The e-commerce giant’s operating loss reduced by 13% year-over-year to $17.4 million compared to $20.1 million in the third quarter of 2024. The company’s adjusted earnings before interest tax depreciation and amortisation loss dropped by 17% to $14.0 million compared to $17.0 million in the third quarter of 2024.

Jumia reported a loss before income tax of $17.7 million, a slight reduction of 1% compared to $17.8 million in the third quarter of 2024. Liquidity printed at $82.5 million, a decrease of $15.8 million in the third quarter of 2025, compared to an increase of $71.8 million in the third quarter of 2024, which included the net proceeds from the August 2024 At-the-Market (ATM) offering, and a decrease of $12.4 million in the second quarter of 2025.

Its net cash flow used in operating activities settled at $12.4 million compared to net cash flow used in operating activities of $26.8 million in the third quarter of 2024 and $12.7 million used in the second quarter of 2025. The result includes a positive working capital contribution of $0.4 million.

Jumia reported that customers’ orders grew 34% year-over-year, driven by strong execution, enhanced product assortment, and healthy consumer demand across key categories. It said quarterly active customers ordering physical goods grew by 23% year-over-year, highlighting continued engagement and customer loyalty. As of September 30, 2025, the Company’s liquidity position was $82.5 million, comprised of $81.5 million in cash and cash equivalents and $1.0 million in term deposits and other financial assets, it said in the report Jumia’s liquidity position decreased by $15.8 million in the third quarter of 2025, compared to an increase of $71.8 million in the third quarter of 2024, which included net proceeds from the August 2024 At-the-Market (ATM) offering, and a decrease of $12.4 million in the second quarter of 2025.

Net cash used in operating activities was $12.4 million in the third quarter of 2025, compared to a net cash used of $26.8 million in the third quarter of 2024 and $12.7 million used in the second quarter of 2025. The result includes a positive working capital contribution of $0.4 million in the third quarter of 2025, compared to a negative working capital contribution of $9.1 million in the third quarter of 2024, primarily reflecting improvements in operating performance.

In addition, the Company reported $1.4 million in capital expenditures in the third quarter of 2025, compared to $0.9 million in the third quarter of 2024, primarily reflecting investments in infrastructure and facility enhancements to support business growth. “This quarter marks a significant acceleration in customer demand and order growth, driven by strong execution across our markets and growing consumer trust in the Jumia brand. We believe Jumia has reached an inflection point as our compelling value proposition, and improved operational discipline position us for sustainable, profitable growth.

“We continue to strengthen our cost structure and sharpen operational discipline, reinforcing our path toward profitability. Our focus remains on execution and customer engagement as we build a more efficient business.
“We believe that we are on track to reach breakeven on a Loss before Income tax basis in Q4 2026 and achieve full-year profitability in 2027, positioning Jumia for long-term growth and value creation.”