By Mark Kleinman, City Editor
A crisis-hit London-listed oil company has drafted in restructuring advisers amid growing concern among its lenders about the impact of a prolonged slump in global oil prices.
Sky News understands that a financial restructuring team from Morgan Stanley, the investment bank, is working with Afren, which operates across Africa and in Kurdistan, to assess the company's options if a putative takeover bid falls apart.
Afren, which has seen its share price crash by more than 84% during the last year, leaving it with a market value of just £307m, is in talks to be bought by Seplat, a Nigerian oil producer.
Morgan Stanley is broker to Afren and is working with it on the takeover discussions, and sources said a team from the bank was also now working with it on restructuring options amid City expectations that it could breach its borrowing agreements.
Afren's lenders are understood to have asked PricewaterhouseCoopers, the accountancy firm, to advise them on a possible restructuring.
It has been a torrid 12 months for Afren, which last year sacked its chief executive and chief operating officer over their acceptance of unauthorised payments related to the company's activities in Nigeria.
More than $20m was repaid by the two former executives under a settlement announced earlier this month, but Afren suffered a further setback last week when it said it had overstated its oil reserves in Kurdistan.
Like other oil companies, it is also having to contend with the plunging oil price, which has more than halved since last summer.
Major companies and minnows alike are being forced to slash their cost-base, with BP's decision last week to lay off 300 workers in its North Sea operations only the latest example.
The broader economic consequences of the falling oil price are likely to be a central theme at this week's World Economic Forum in the Swiss resort of Davos.
Earlier this week, Seplat was given an additional two weeks by the Takeover Panel to formalise an offer for Afren, while other prospective bidders are said to be weighing approaches for the company.
Afren and Morgan Stanley both declined to comment on Tuesday.
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