Afren U.K. Oil Explorer Gains After Approach From Nigeria

Afren Plc, a U.K. oil and gas explorer that previously fired members of senior management for unauthorized payments, rose in London after an approach from Seplat Petroleum Development Co. of Nigeria.

Afren gained 3.8 percent to 49.39 pence by the close. It earlier climbed 22 percent to 58 pence, the biggest intraday jump since April 3, 2009.

“There can be no certainty that an offer will be made or as to the terms of any offer,” Afren, based in London and focused on Nigeria and Kurdistan, said in a statement. The company received a “highly preliminary approach” for a possible combination, it said.

Seplat, which listed on London and Nigeria’s stock exchanges in April, has until Jan. 19 to make a firm offer. The company has onshore licenses with oil production at 60,000 barrels daily, according to its website.

“The addition of Afren’s assets in Nigeria would increase Seplat’s production and cash flow materially,” Al Stanton, an analyst at RBC Capital Markets, said in a note. “And a deal – which helps address Afren’s corporate issues – should be well received in Nigeria.”

Afren, Ophir Energy Plc and Tullow Oil Plc were among potential takeover targets as oil prices slumped, BMO Capital Markets analysts said last month. Brent, used to price more than half the world’s crude, has plunged about 45 percent since a high in June as world supply outweighs demand.

Executive Firings

Afren in October fired its Chief Executive Officer Osman Shahenshah and Chief Operating Officer Shahid Ullah for “gross misconduct” after an investigation into unauthorized payments. The inquiry examined about $433 million on the explorer’s half-year balance sheet and reviewed three transactions between the explorer and partners in 2012 and 2013. It suspended the executives at the end of July.

The company expects to produce 32,000 to 36,000 barrels of oil a day this year mainly from Nigeria, it said in November. First output may come from the Okoro and Okwok prospects in 2015.

“With Afren now in play we could see offers emerging from other players, including Nigerian private oil companies or conglomerates; or cash-rich” mid-caps, Stanton said.

South Atlantic Petroleum Ltd., also from the West African country, has recently been increasing its stake in Afren and now holds 7.05 percent.

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