Our vision to be the leading independent upstream exploration andproduction company in each of the areas in which we operate is underpinnedby a clear and consistent strategy – one that is designed to provide a framework for sustainable long-term growth across the full-cycle E&P value chain.

A closer look at our strategic priorities setsthem in the context of Afren’s growth to date. From the outset one of our key prioritieswas to establish a reliable platform of cash generative reserves and production that would lead us ultimately to a self funded forward work programme and creating value across the full-cycle exploration and production value chain.

Production growth
From the outset one of our key priorities was to establish a reliable platform of cash generative reserves and production that would lead us ultimately to a sustainable position of internally generated cashflows funding activities across the full cycle exploration and production value chain. At the same time we recognised early signs of a trend in key markets, notably in Nigeria, towards greater indigenous ownership of assets and participation in the oil sector, and that opportunities would increasingly present themselves for an aligned partner that could provide the necessary technical solutions and access to capital in support of this.

The vast number of discovered but undeveloped assets that exist in Africa, particularly in the shallow water areas of offshore Nigeria, is an opportunity set that lends itself ideally to the early achievement of these objectives and remains a core focus for Afren today. Through forging strong partnerships early on with indigenous companies such as Amni International and Oriental Energy Resources, we have accessed and successfully monetised important reserves and production, firmly establishing a “growth engine” of increasing production and cashflow for the Company and developing a comprehensive technical skill set and operating track record.  It is this track record and skill set that has enabled the Company to uniquely position itself in Nigeria as a partner of choice, and in particular to pursue larger scale opportunities that are starting to arise out of the major IOC’s portfolios alongside indigenous partners such as First Hydrocarbon Nigeria.

This track record has also enabled Afren to leverage its core skill set and progressively target larger scale opportunities in other regions of interest that may exhibit parallel themes; ie. geologically low risk, fast track development opportunities where Afren is strategically and competitively advantaged. The acquisition of an interest in two contiguous PSC’s, Barda Rash and Ain Sifni, located in the Kurdistan region of Iraq is an example of this and an opportunity that lends itself to Afren’s strengths.  With a large volume of oil already discovered and substantial low risk exploration upside, this complementary extension to the portfolio is a unique opportunity for us to deploy the production and development expertise we have developed over the past six years in Nigeria and benefit again from an early mover advantage in one of the worlds most prospective yet relatively immature hydrocarbon regions.

Pursue materially accretive acquisitions
Against a backdrop of increasing global demand for hydrocarbons, and with competition for upstream assets ever intensifying, a core and proven ability of Afren’s is to seek out and access opportunities that offer substantial reserves potential on economically attractive terms at a low unit cost.

The African and Kurdistan region of Iraq (KRI) opportunity sets are attractive to us on many levels. Most fundamentally the resources are there, in abundance, and ongoing exploration continues to yield world class results.  In particular, Nigeria and Iraq are ranked as two of the world’s top 10 proved oil reserves and top 12 oil producers.  Importantly the potential exists for this trend to continue long into the future, with numerous under-explored basins and under-developed/overlooked/misunderstood fields offering an agile independent such as Afren large scale upside over the medium to long term.

Whilst a general industry theme over the past six years has been for acquisition costs to trend increasingly higher, our differentiated approach has allowed Afren to consistently deliver barrels into the portfolio at a cost of under US$4/bbl.  We have been able to achieve this by playing to our strengths, avoiding overly competitive “bidding wars” for assets, focusing our efforts on opportunities where we are strategically advantaged, have a deep understanding of the subsurface, can leverage our track record and forge strong partnerships with key stakeholders.  These are the factors that differentiate Afren today, and mean we are well positioned to continue the trend of adding low cost reserves to the business.

Organic reserves growth
Having sufficiently matured the business through the appraisal, development and production of key assets, the next step was to introduce an exploration portfolio that would offer a balanced exposure to organic upside, leveraging our underlying cashflow to internally fund a carefully selected exploration campaign across some of the world’s highest profile hydrocarbon plays. The acquisition of Black Marlin Energy in 2010 marked the transformation point at which we began to realise our full cycle ambitions, building on our existing acreage position in West Africa and bringing scale and diversity to our exploration portfolio. We have continued to make selective additions to our exploration portfolio that is today focused around four core themes, namely .

• the proven Upper Cretaceous play concepts along the West Africa Transform Margin
• low risk exploration close to existing fields in the prolific Tertiary systems of the Niger Delta
• high impact, potentially play opening targets in the rift and coastal basins of East Africa
• the prolific yet under-explored Zagros Fold Belt in the Kurdistan region of Iraq

Africa and the KRI still have much to offer in terms of exploration potential, and although some basins have been extensively drilled there are many that until now have attracted only limited interest from the international industry or been inaccessible in the past, but hold tremendous potential.  We have carefully constructed an exploration portfolio that provides us with exposure across some of the Africa and the KRI’s highest profile exploration fairways.  From the under explored Upper Cretaceous systems of the West African Transform Margin to the barely drilled rift basins of East Africa and Zagros Fold Belt of the KRI, we have today a high grade prospect inventory encompassing a diverse spread of hydrocarbon play types and structural settings. With net un-risked prospective resources in excess of 3,600 mmboe, a major growth opportunity for Afren is in converting a significant portion of this prospective resource base into proved reserves by undertaking a sustainable internally funded exploration drilling campaign.

Operational efficiency and financial discipline
Underpinning all of our activities is a strict financial discipline and a conservative approach to managing our capital structure. Having established a cash generative platform of production, our first priority is to protect the cashflow requirements to execute our intended work programme in the context of a sustained downturn in oil prices. We aim to do this through ensuring operational efficiency, exerting downward pressure on our cost base at all times and promoting a culture of financial discipline and awareness at all levels throughout the organisation. We also prioritise the maintenance of a conservative balance sheet, and aim to diversify our sources of capital thereby reducing any potential over-reliance in any one area.  
Afren’s prudent approach to planning has resulted in a robust capital structure and firm financial control, which will provide a solid foundation for future growth.

At 31 December 2011, we had US$292 million of cash, augmented by a thriving, cash generative portfolio. Hedges are in place for 2012, providing a minimum floor price of US$80/bbl – US$90/bbl over circa three mmbbls production.

We have a clear debt reduction schedule, with the majority of debt due in 2016. We have also looked to implement a more balanced debt strategy and have become the first E&P company to gain access to the bond market. At year-end 2011, our net debt (excluding finance leases) was US$548 million. Our capital structure was further strengthened by the completion of a second secured Bond issue, with proceeds of US$300 million, in February 2012.

Corporate respnsibility
Corporate responsibility (CR)continues to be a critical focusarea. We are committed toensuring that Afren isrecognised as a responsibleorganisation with highstandards of CR performance.

Maintaining these standardswill ensure that the businessgrows successfully for the
benefit of all stakeholders,whose concerns andaspirations we mustunderstand if we are to
develop long-standing,successful relationships..