Afren plc proposes to offer senior secured notes

Afren plc (AFR LN)

Afren plc proposes to offer senior secured notes

London, 26 November 2010 - Afren plc ("Afren" or the "Company"), announces that it proposes to pursue an offering of Senior Secured Notes (the "Notes").

The Notes will be senior secured obligations of Afren plc and will be guaranteed on a senior basis by certain subsidiaries of Afren plc and on a senior subordinated basis by Afren Resources Limited. Interest will be payable semi annually. The interest rate, offering price and other terms will be determined at the time of pricing of the offering, subject to market conditions.

Afren plc intends to use the proceeds of the offering to repay certain indebtedness and for general corporate purposes. The company has prepared an offering memorandum (the "Offering Memorandum") which will be made available to selected prospective purchasers of the Notes. The Offering Memorandum includes the unaudited financial statements of the company for the nine months ended September 30, 2010, which are published below.

This announcement does not constitute an offer to sell or a solicitation of an offer to buy any of the foregoing Notes, nor shall there be any offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state or country.

The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933 (the "Securities Act") or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

This press release may include projections and other "forward-looking" statements within the meaning of applicable securities laws. Any such projections or statements reflect the current views of Afren plc about further events and financial performance. No assurances can be given that such events or performance will occur as projected and actual results may differ materially from these projections.

This press release shall not be considered an "offer of securities to the public" for purposes of the Luxembourg law on prospectus for public offering dated 10 July 2005 or give rise to or require the publication of a prospectus in any EU member state which has implemented the Prospectus Directive.

Within the United Kingdom, this announcement is directed only at persons having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ("relevant persons"). The investment or investment activity to which this announcement relates is only available to and will only be engaged in with relevant persons and person who receive this announcement who are not relevant persons should not rely or act upon it.

All operations were continuing throughout all periods. Comprehensive income/(loss) for each period was equivalent to profit/(loss) after tax for each period presented.

1. Basis of accounting and presentation of financial information

The condensed group interim financial statements comprised of Afren plc (''Afren'') and its subsidiaries (''the group'') have been prepared in accordance with International Accounting Standard (''IAS'') 34, ''Interim Financial Reporting'', as adopted by the International Accounting Standards Board, except that these statements do not include the required disclosures regarding segment information. The condensed group interim financial statements for the nine months ended 30 September 2010 have been prepared solely for the purposes of this Offering Memorandum. The condensed group interim financial statements are unaudited, and do not constitute statutory accounts as defined by the Companies Act.

Changes in accounting policy

The same accounting policies, presentation and methods of computation have been followed in these condensed group interim financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2009, except for the impact of the adoption of the adoption of the standards as described below.

From 1 January 2010, the Group has adopted IFRS 3 "Business Combinations" (revised 2008) and IAS 27 "Consolidated and Separate Financial Statements" (revised 2008).

The most significant changes to the Group's previous accounting policies for business combinations are as follows:

• acquisition related costs which previously would have been included in the cost of a business combination are included in administrative expenses as they are incurred;

• any pre-existing equity interest in the entity acquired is re-measured to fair value at the date of obtaining control, with any resulting gain or loss recognised in profit or loss;

• any changes in the Group's ownership interest subsequent to the date of obtaining control are recognised directly in equity, with no adjustment to goodwill; and

• any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of acquisition are recognised in profit or loss. Previously such changes resulted in an adjustment to goodwill.

The revised standards will be applied to the announced acquisition of Black Marlin Energy Holdings Limited as described in Note 3.

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed group interim financial statements.

2. Profit per share

The calculation of the basic earnings per share is based on the profit for the period after taxation of US$46,282,000 (2009 - US$22,624,000 loss) and a weighted average number of shares in issue of 890,547,983 (2009 - 592,845,794). The fully diluted earnings per share is based on the profit for the period after tax of US$46,282,000 (2009 - US$22,624,000 loss) and a weighted average number of shares of 915,406,076 (2009 - 592,845,794).

3. Subsequent events

On 8 October 2010, Afren completed the acquisition of Black Marlin Energy Holdings Limited (Black Marlin) having received all necessary approvals. The acquisition comprises exploration acreage covering 12 assets in Kenya, Madagascar, Ethiopia and the Seychelles. Afren issued 76,776,096 ordinary shares to holders of Black Marlin shares in return for 100% of the share capital.

Afren will account for the transaction as a business combination under IFRS3 ''Business Combinations'' (revised 2008). Due to the timing of the completion, the accounting for this acquisition is provisional. Thus the disclosures of the fair values of the assets and liabilities and other related disclosures have not been made. US$2.5m incurred during the period relating to the transaction has been charged to the income statement.

4. Contingent liabilities

There has been no change to the contingencies reported in the annual report for the year ended 31 December 2009. In addition, in March 2010 a stand by letter of credit for US$6 million was issued by a bank in respect of the Ebok field's contractual arrangements.

A cash deposit of the same amount was placed by Afren with the bank.