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Oil producer Afren to be put under administration

(Adds analyst comment, background)

July 31 (Reuters) - Oil producer Afren Plc (LSE: AFR.L - news) said its board had decided to put the company into administration as it failed to secure support for a vital refinancing and restructuring plan.

Afren said earlier this month talks with bondholders, banks and its partners were scuppered after the company cut its production forecast for the year earlier this month. Its shares were suspended on the same day.

"Whilst the overall capacity of the assets to deliver field life production remains broadly unchanged, the near-term deferral of production revenues has undermined the immediate liquidity position of the business," the company said in a statement.

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Afren, which was valued at about 1.64 billion pounds ($2.56 billion) a year ago, has been hit by a slump in oil prices, the dismissal of top executives and the absence of proven or probable reserves at a key field in Iraqi Kurdistan.

The company has since lost nearly all of its market value. The suspended shares closed at 1.785 pence on July 15.

Afren also ended takeover talks with Nigeria's Seplat Petroleum Development Co Plc in February and began defaulting on its debt payments, before agreeing to a $300 million funding lifeline from bondholders.

The deal, which was thought to be too complicated by analysts and investors alike, would have reduced existing shareholders' stake to 11 percent.

As of Jan. 7, Afren's largest shareholder was Nigeria South Atlantic Petroleum (Copenhagen: ATLA-DKK.CO - news) with a 7 percent stake.

Standard Life Investments, another shareholder, cut its more than 8 percent stake in Afren to 1 percent in January.

"The core issue of Afren has been governance and communication," FirstEnergy Capital analyst Stephane Foucaud told Reuters, adding that the company was far too leveraged and had misunderstood the risk profile of its Nigerian assets.

The board has appointed Simon Appell, Daniel Imison and Catherine Williamson of AlixPartners as administrators and said it was working with its partners to continue operations. ($1 = 0.6399 pounds) (Reporting by Abhiram Nandakumar in Bengaluru; Editing by Savio D'Souza and Saumyadeb Chakrabarty)