Just a couple of days after a relief rally on news (2 Mar) it had secured some breathing space on its debts, troubled African oil play Afren (AFR) is back in the dog house falling 20.7% to 7.2p (having earlier traded as low as 5p).
The extreme volatility follows the decision not to pay $15 million interest due on its 2016 notes – thereby defaulting on this debt. Perhaps more significantly for shareholders the group indicates says even if a deal to restructure the balance sheet is secured it will likely 'substantially dilute' their interests.
Although it has defaulted on its 2016 notes Afren says there is no immediate obligation to repay these notes or any cross-default on its other debts. Talks are ongoing.
The last 12 months have been a sorry tale for the company taking in boardroom corruption – with former chief executive Osman Shahenshah one of a number of directors ousted following an investigation into illegal payments – tumbling crude oil prices and a troubling reserves downgrade on its assets in Kurdistan. These issues have since been overshadowed by the revelation of the current severe funding crisis.
The unravelling of the group makes it perhaps the most high profile victim of the rapid decline in oil. With a rescue bid (13 Feb) from rival Seplat (SEPL) falling through it now needs to secure an agreement with its lenders, including the providers of its $300 million debt facility tied to the Ebok field in Nigeria, to ensure it can continue as a going concern. As Westhouse, which reiterates its sell recommendation and 2p price target, notes 'there can be no certainty an agreement will be reached'.