The Nigerian tax arrangements are extremely divisive to oilers. You may recall that in early 2012 even SHELL started to proactively sell its most prolific Nigerian interests... I think that says something ...
work out the specific Nigeria Tax contribution as the interim statement doesn't provide clear guidance. However, for the whole of 2011 the tax charge was 96m and for the first six month of 2012 was 215.9m. The reason for 224% increase in Tax liability was given as all deferred tax losses had been used up and first all from Eboke. Interesting that Afren have generated almost the same amount of profit after Tax in the first six month of 2012 than they did in the whole of 2011. However 97% of revenue presently comes from Nigeria.
I'm not sure Afren in their various partnerships in Nigeria do pay 85% I intend checking this out when I have a little more time, there are many individual agreements in place with the marginal fields. I seem to remember Azza looked into this sometime ago, no doubt we'll find out shortly.
What concerns me is even though Afren is amazingly cash generative the 85% tax rate is horrific. Even if they doubled production in Nigeria to say 80k a day they still would not be left with much net profit, when you consider how much they would need to spend of that drilling in the other parts of their folio. The lack of net profit means you would struggle to pay a dividend at these modest prices and that is the problem. The oil price currently is a bet on the Chinese economy, if it falls it won't take much to wipe net profits out due to how highly Afren is geared. Cracking company but the TAX is a big headache at 85%.
$209M was deferred tax, which may suggest it has accumulated in previous years.
Ebok comes under the Marginal field fiscal and tax regime which carry incentives.
Okoro may now be paying at 85% after allowances, as this doesn't have Marginal field status.
Regarding losing 50% on Nigerian production...... Okoro has already been factored in the past 9 months as stated in the IMS.
Bear in mind the average production for the 9 months on Ebok was 29359 bpd , the current production is now roughly 39000 bpd, add at least 1 well Ebok North next year, I do believe there are still several months of 100% cost recovery.
Okoro producing an average for the 9 months of 16158 bpd (net to Afren = 8284 bpd) now with Okoro East well, 21000 gross production, (10500 bpd net to Afren.)
next year should see Barda Rash 10k+ bpd, FHN should more than double output. Afren is growing in all directions I think the BoD are doing a good job. I estimate Revenues for the full year should come in at $1.5B ( net profit haven't got a clue.........)
As Mr 1400 says its the Market that determines the SP!!!..... and the Market's in a fine old mess.
Afren today. As much as I rate afren the share price is incapable of rising. We are only 3p better off now than 9 months ago, despite so much good news. It's just not good enough considering there is no dividend. I think afren short term is not going to do anything so I am selling half my holding for now.
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