Afren Multiples Unsustainably Cheap If No New Issues Arise: UBS
2014-09-12 06:29:31.919 GMT
By James Cone
Sept. 12 (Bloomberg) -- Afren down 36% since CEO, COO were
suspended over alleged receipt of unauthorized payments, appears
mkt pricing in major drop in future cash flows even though co.
sees no negative effect on operational, financial position, UBS
says in note.
* UBS (buy): drop almost equivalent to Afren losing license to
operate in Nigeria, such revocation typically only when work
commitments unsatisfied
* Says Afren is not operator of any of its Nigeria
licenses, no indication partners haven’t met contractual
obligations, can find no examples of revocation linked
to payments to 3rd parties
* OML 113 license due for renewal Feb. 2018; no reason to
believe extension won’t be granted
* Without any new issues, valuation of 2.8x 2015 EV/debt-
adjusted cash flow, 0.37x NAV “unsustainably cheap”
* Co. can rebuild mgmt to restore confidence or assess if
underlying assets might be worth more with other
industry players
* NOTE Aug. 28: Afren Falls After Suspending Two More
Directors in Probe
* Afren is biggest decliner in SXEP oil & gas index YTD, down
44%
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To contact the reporter on this story:
James Cone in London at +44-20-7673-2572 or
jcone@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net
2014-09-12 06:29:31.919 GMT
By James Cone
Sept. 12 (Bloomberg) -- Afren down 36% since CEO, COO were
suspended over alleged receipt of unauthorized payments, appears
mkt pricing in major drop in future cash flows even though co.
sees no negative effect on operational, financial position, UBS
says in note.
* UBS (buy): drop almost equivalent to Afren losing license to
operate in Nigeria, such revocation typically only when work
commitments unsatisfied
* Says Afren is not operator of any of its Nigeria
licenses, no indication partners haven’t met contractual
obligations, can find no examples of revocation linked
to payments to 3rd parties
* OML 113 license due for renewal Feb. 2018; no reason to
believe extension won’t be granted
* Without any new issues, valuation of 2.8x 2015 EV/debt-
adjusted cash flow, 0.37x NAV “unsustainably cheap”
* Co. can rebuild mgmt to restore confidence or assess if
underlying assets might be worth more with other
industry players
* NOTE Aug. 28: Afren Falls After Suspending Two More
Directors in Probe
* Afren is biggest decliner in SXEP oil & gas index YTD, down
44%
For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>
To contact the reporter on this story:
James Cone in London at +44-20-7673-2572 or
jcone@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net