Jan 25

Oil and Africa, Worth a Pun–in the Shape of Afren? Natural resources and Africa continue to be the two themes for investors of the new decade for me. Oil, the black gold and Africa, the dark continent are an interesting pun to some.  But for a company called Afren, an African independent oil and gas company, founded in 2004 with £1m from family and friends and currently listed on the Main Board of the LSE, it’s all about its big ambition to be the world premier African oil producer and explorer. Afren is not just living for the present; it’s looking years ahead.

Afren lost $37 million after tax in the first half of 2008, but rich in cash, it repaid $26 million of debt and bought into a few very intriguing oil fields. The company has 16 oil assets in Nigeria, Cabon, Congo, Cote d’Ivoire, and Ghana. They suck out 27,000 barrels of oil a day. Afren’s share price has gone up 6 times since March last year. With shares trading at 103.75p as of 22/1/2010 and 889.07m shares in circulation, the company has a market cap of £922.40m. Its current EPS is -9.68 and P/E ratio -10.71. But analysts predict revenue to be £441m for the coming year.

Afren’s biggest share value is probably in the Gulf of Guinea, the top oil hot spot. But such an investment is not without risks. Also, as Afren has already gone up, is it a bit late to the game for investors? Still, oil will be in big demand, when the recession is a history. And the young Afren could eventually realize its mission as Africa’s top oil company, because of all the untapped bonanza of black gold. Remember, Oil’s Well That Ends Well.

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