Afren-Seplat takeover talks cancelled

Afren plc, an oil and gas company which has been reviewing the funding and liquidity requirements of the business, has today said that it has terminated the talks with Nigeria’s Seplat over a possible takeover.

To remind, the company in December last year said it had received a highly preliminary approach from SEPLAT Petroleum Development Company plc regarding a possible combination with Afren.

Seplat had until February 13, 5.00 p.m. to make a firm offer for Afren, or declare it does not intend to make it. However, according to Afren, after several delays, Seplat has again asked for an extension for the deadline.

No deadline extension

In its statement Afren said: “The Board has not received any proposal from Seplat that it believes is capable of being implemented on terms satisfactory to all relevant stakeholders in the Company, including the indicated value being significantly below the aggregate value of the debt of the Company.

Accordingly, the Board has concluded that continuing discussions with Seplat is not in the best interests of the Company’s stakeholders and will not agree to Seplat’s request for an extension of the Deadline. This announcement is made without Seplat’s consent.

The Company is continuing discussions with the advisers to the ad hoc committee of its largest bond holders regarding the immediate liquidity and funding needs of the business. The Company is also having discussions with its existing stakeholders and new third party investors regarding recapitalising the Company.”

Afren recently said it would need to find new funds to meet interest and principal repayments, working capital and a reduced capital expenditure program.

On January 30, Afren said it had obtained from the lenders of the US$300m Ebok debt facility a deferral of the US$50m amortisation payment due on 31 January 2015 until 27 February 2015.

In addition, the Board decided to utilise a 30 day grace period under its 2016 bonds with respect to US$15m of interest due on 1 February 2015 while the review of the capital structure and funding alternatives is completed.

More woes ahead

The problems for the company, which recently fired its CEO and COO for accepting unauthorized payments, do not stop there.

Oil company Taipan Resources on February 9. said that its Kenya based subsidiary Lion Petroleum Corp began an arbitration action against East African Exploration (Kenya) Limited (“EAX”), a wholly owned subsidiary of Afren Plc.

According to Taipan, the action has been filed in response to certain breaches to the Joint Operating Agreement (“JOA”) signed between EAX and Lion in respect of Block 1, onshore Kenya. Taipan is seeking no less than US$10 million as restitution for the damages it has suffered as a result of EAX’s breaches of contract.

Only time will tell

As for the termination of takeover talks, it is worth noting that it was Afren and not Seplat who cancelled the discussion, a move that shows a big vote of confidence. In its statement today Afren has said that further announcements will be made in due course. The company’s shareholders will have to wait until then, to see if the company had an ace up its sleeve.

Seplat did not reply to an e-mail seeking comment, sent by Offshore Energy Today

Update: February 13, 2014, 5:11 CET

In a separate statement, Seplat had this to say:

“Seplat had completed extensive due diligence on Afren and made a written proposal to the Board of Afren that provided critical and significant near-term liquidity and value for the stakeholders of Afren.

In light of Afren’s decision, Seplat confirms that it does not intend to make an offer for Afren.”

Offshore Energy Today Staff

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