"Afren five" desert sinking ship

Talk about destroying value. Debt-ridden Africa-focused oil explorer Afren's share price has plunged by about 96% in less than six months, and top brass are about to pay with their jobs.

Executive chairman and co-founder of Afren Egbert Imomoh, plus the four non-executive directors - Toby Hayward, Patrick Obath, Sheree Bryant and Iain McLaren - will not stand for re-election at today's AGM and will be gone by lunchtime Thursday.

They're replaced by restructuring lawyer and director of EMI Music David Frauman as non-executive chairman. He's been working with Afren as a restructuring consultant for a while, so knows the business. Recently appointed chief operating officer (COO) David Thomas joins the board as executive director. Others will follow, we're told.

In a classic understatement, Imomoh referred to the past year as an "extremely challenging period for Afren". Remember, this is a period when the company has sacked chief executive Osman Shahenshah, COO Shahid Ullah and two associate directors for receiving unauthorised payments. Production forecasts have been cut and reserve estimates slashed at its Barda Rash field in the Kurdistan region of Iraq, and a massive write-down meant Afren, with a market cap of about £24 million, lost over $1.6 billion in 2014.

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"This has been a deeply touching journey for me personally, having seen Afren grow, and I am leaving the company with a clear plan for its bright future," said former Shell man Imomoh. An interesting choice of words. Shareholders would disagree.

On Imomoh's watch, the company has struggled with a massive debt pile, defaulting on a series of payments over the past few months. Bondholders have agreed to a debt-for-equity swap as part of a major restructuring, which includes a rights issue to raise £49 million, but existing shareholders will suffer substantial dilution as a result, with bondholders owning 91% of the company.

Remember, Afren shares were worth 142p a year ago and 52p at the start of 2015. Now they're changing hands for 2.25p or less. In the unlikely event that the restructuring is blocked, Afren will be saddled with $1.8 billion of expensive debt and "shareholders would be unlikely to see any return of their current investment," warns the company.

Industry expert Malcolm Graham-Wood was scathing of management earlier this month. "Surely one for the business school handbooks of just how quickly a management can destroy a company in such a limited time frame with all the ingredients that one normally comes to expect when looking at organisations like FIFA," he said. Indeed.

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