SHARES in troubled oil firm Afren lost over two thirds of their value yesterday, plummeting by 71.7 per cent after the firm announced that it is reviewing the funding and liquidity requirements of the business.
The company said it was seeking to address how it manages the overall leverage position of the company “in light of the significant dislocation in the industry and related financing markets resulting from the rapid decline in oil prices”.
Afren is currently in negotiations with the lenders of the $300m (£197m) Ebok debt facility with the aim of obtaining a deferral of the $50m amortisation payment due on 31 January 2015. Analysts at First Energy Capital said this was “crunch time” for the company, and added: “In our view the survival of Afren hinges on its ability to secure the refinancing of Ebok to alleviate the current debt amortization payment schedule with very little room to manoeuvre beyond this.”
Analysts at Westhouse Securities pointed out that, assuming its current debt structure remains unchanged, Afren’s equity funding requirement “is likely to be significant and in excess of its current market capitalisation”.
The firm is still in talks with Seplat about a potential takeover. The deadline for bids is Friday.