Indications have emerged that Nigerian banks risk losing a staggering N36.630 billion if Afren Plc is liquidated.
In a statement released to newsmen, the board of the company publicly announced that the company had gone into administration after a town hall meeting with all the staff in Houston, London, Lagos and Port Harcourt.
Prior to this, Afren had served as a technical contractor in a PSTSA before its misfortune started in July 2014.
In a report on the possible implications for Nigerian banks if the Afren is liquidated, analysts at Renaissance Capital concluded that Zenith Bank Plc is in the most comfortable position, followed by Access Bank Plc, and then Stanbic IBTC Plc.
Renaissance Capital said: “According to Afren documents, Nigerian banks have at least a $185million principal exposure to AfrenPlc. Zenith Bank has $100 million to OML26, $5million to Ebok; AccessBank has $50million to Okwok/OML113 (Aje), $5million to Ebok; and Stanbic has $25million to Ebok.”
“From our discussions with Zenith management and Renaissance Capital’s oil & gas analysts, we believe that of all the banks with credit exposure to Afren, Zenith is in the most comfortable position. The asset is producing, located onshore, and has low operating costs, which implies that its production economics still make some sense at currently low oil prices.
“The February 2014 facility is primarily secured by a charge over Afren’s interest (via FHN 26 – the SPV) in OML26, and its cash flows. According to Zenith management, other Afren creditors do not have claim to OML26. We do not think Afren plans to sell this asset and our oil & gas analysts believe that its cash flows should be sufficient to repay the loan, valuing the asset at $114million.”
Access Bank, they explained, has a first-ranking lien on the Okwok and Aje fields noting that some of the bank’s claims are subject to counterparty consent.
