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Afren makes significant find in Nigeria

By The Rainbow
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Oil and gas explorers Afren and Gulf Keystone Petroleum had good news for traders hoping to find their fortunes at the business end of a drill.

Afren talked up the find's implications Wenesday, forecasting that 'based on evidence to date, targeted resources are likely to be significantly in excess of previous estimates' of 78m barrels of oil equivalent.

JP Morgan Cazenove was impressed, with analysts at the bank arguing that 'the discovery has the potential to form a new standalone development - adding a further hub for Afren in Nigeria'.

Osman Shahenshah, chief executive, added: 'The discovery of oil in the Ogo-1 well opens up a new oil basin in an under-explored region and represents a possible extension of the west African transform margin.'

Afren holds a 40 per cent economic interest in the block, where it is partnering local oil company Optimum and Lekoil, a company based in the Cayman Islands that last month raised £38m as it was admitted to Aim in London.

Lekoil, led by Nigerian-based chairman Samuel Adegboyega and Lekan Akinyanmi, chief executive, acquired a 30 per cent stake in the licence following a selldown of Afren's interest announced in May.

Shares in Afren rose from their Tuesday close of 121.7p to a high of 133.7p on Wednesday before settling down to a gain of 7.3 per cent on the day, valuing the company's equity at £1.4bn.

Shares in its junior partner Lekoil traded up 9.6 per cent to 38.38p on Wednesday afternoon, close to May's placing price of 40p, leaving the company's equity valued at £70m.

Success for Afren in its latest test drilling in Africa comes less than a fortnight after a rebuke from shareholders who voted down its remuneration report in a non-binding poll by a margin of four to one at its annual meeting.

It was the second year in a row that shareholders rejected Afren's executive pay regime, which granted Mr Shahenshah a £3.4m pay and bonus deal last year.

Afren also came under scrutiny over a deal that left three of its top management sitting on a paper profit of close to $23m after the explorer raised its stake in a local partner, First Hydrocarbon Nigeria, in which Afren invested three years ago.

But Egbert Imomoh, chairman, defended Afren's business dealings in Nigeria and its executive pay regime at its annual meeting on June 11 by reminding shareholders that the company had delivered total shareholder returns of nearly 560 per cent between its IPO in 2005 and the end of 2012.