VANCOUVER, BRITISH COLUMBIA — (Marketwire) — 05/28/12 — Africa Oil Corp. (TSX VENTURE: AOI)(OMX: AOI) (“Africa Oil”, “the Company” or “AOC”) is pleased to announce its financial and operating results for the three months ended March 31, 2012.
Keith Hill, President and CEO, commented, “Africa Oil is very encouraged with the results of both the Ngamia-1 and Shabeel-1 wells. The net oil pay encountered to date in the Ngamia-1 well far exceeds pre-drill estimates. We are looking forward to completing the drilling and testing of Ngamia in the coming weeks. In Puntland (Somalia), we are pleased to have confirmed the presence of an active petroleum system in the Dharoor Valley and look forward to drilling the Shabeel-North well to test the sands in the Jesomma Formation. The Company has accumulated exploration acreage of over 300,000 km2 (gross) in this exciting new world-class exploration play fairway and is looking forward to accelerating the pace of exploration drilling with the planned addition of two drilling rigs during the second half of 2012, bringing the number of active rigs to four.”
First Quarter 2012 Financial and Operating Highlights
Operating expenses increased $1.7 million for the three months ended March 31, 2012 compared to the same period in the previous year due to a $3.1 million impairment of intangible exploration assets relating to Blocks 7 and 11 in Mali, offset partially by a $0.8 million decrease in stock-based compensation costs, decreased salary costs associated with a moving allowance paid in the first quarter of 2011, and professional fees associated with the acquisition of Centric and the Tullow farmout in the first quarter of 2011. The Company has written-off $3.1 million of capitalized intangible exploration assets due to security concerns in Mali which has halted operations on the Company–s Mali Blocks.
Financial income and expense is made up of the following items:
The loss on revaluation of marketable securities is the result of a decrease in the value of 10 million shares held in Encanto Potash Corp which were acquired as part of the acquisition of Lion. These shares were sold during the three months ended March 31, 2012.
The Company recorded losses on the revaluation of warrants in the three months ended March 31, 2012 due to an increase in Horn and AOC–s share price from the end of the previous year. Of the $23.7 million loss on revaluation of warrants, $20.7 million results from the consolidation of the Company–s subsidiary Horn Petroleum Corporation (“Horn”), which holds the Company–s oil and gas interests in Puntland (Somalia).
The $1.3 million foreign exchange gain in the three months ended March 31, 2012 is the result of an increase in the value of the Canadian dollar at a time when AOC was holding a significant amount of Canadian dollars.
The increase in total assets from December 31, 2011 to March 31, 2012 is primarily attributable to intangible exploration expenditures incurred during the quarter, a significant portion of which related to drilling of the Ngamia well in Kenya and the Shabeel-1 well in Puntland (Somalia).
The decrease in cash in the first three months of 2012 is mainly the result of intangible exploration expenditures and operating expenses offset partially by funds raised on the exercise of 6.5 million warrants.
The Company–s consolidated financial statements, notes to the financial statements, management–s discussion and analysis for the three months ended March 31, 2012 and 2011 Annual Information Form have been filed on SEDAR () and are available on the Company–s website ().
Outlook
The Company has recently announced the discovery of over 100 meters of net oil pay in the Ngamia-1 exploration well, located in Block 10BB (Kenya). It is anticipated that drilling of the Ngamia well will be completed and test results announced early in the third quarter of 2012. Upon completion of the Ngamia well, it is anticipated that the rig will commence drilling the Twiga-1 exploration well, located on Block 13T (Kenya). The Twiga-1 well is on trend with the Ngamia well, focusing on a geologic structure similar to Ngamia.
In addition, the Company has recently announced that the Shabeel-1 well, located in the Dharoor Block (Puntland (Somalia)), has encountered a significant zone (12 – 20 meters) of potential hydrocarbon pay in the Upper Cretaceous Jesomma Formation. The Shabeel-1 well has been suspended for future testing. The drilling rig is currently being mobilized to the Shabeel-North location. It is anticipated that the Shabeel-North well will be drilled and potentially tested during the third quarter of 2012.
The Company and its joint venture partner Tullow aim to increase the pace of exploration in East Africa by sourcing an additional two drilling rigs before the end of 2012. One rig is intended to be mobilized to Block 10A (Kenya) and to commence drilling the Pai-Pai prospect and an additional rig is intended to be mobilized to the South Omo Block (Ethiopia) to commence drilling an oil exploration well. This will bring the total number of rigs operating on the Company–s East African acreage to four prior to the end of 2012. In addition, the Company plans to continue aggressively acquiring 2D seismic data focused on Blocks 10BA, 10BB, 13T, South Omo and 12A.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya, Ethiopia, Puntland (Somalia) and Mali. Africa Oil–s East African holdings are in within a world-class exploration play fairway with a total gross land package in this prolific region in excess of 300,000 square kilometers. The East African Rift Basin system is one of the last of the great rift basins to be explored. New discoveries have been announced on all sides of Africa Oil–s virtually unexplored land position including the major Albert Graben oil discovery in neighbouring Uganda. Similar to the Albert Graben play model, Africa Oil–s concessions have older wells, a legacy database, and host numerous oil seeps indicating a proven petroleum system. Good quality existing seismic show robust leads and prospects throughout Africa Oil–s project areas. The Company is listed on the TSX Venture Exchange and on First North at NASDAQ OMX-Stockholm under the symbol “AOI”.
FORWARD-LOOKING STATEMENTS
Certain statements made and information contained herein constitute “forward-looking information” (within the meaning of applicable Canadian securities legislation). Such statements and information (together, “forward looking statements”) relate to future events or the Company–s future performance, business prospects or opportunities. Forward-looking statements include, but are not limited to, statements with respect to estimates of reserves and or resources, future production levels, future capital expenditures and their allocation to exploration and development activities, future drilling and other exploration and development activities, ultimate recovery of reserves or resources and dates by which certain areas will be explored, developed or reach expected operating capacity, that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.
All statements other than statements of historical fact may be forward-looking statements. Statements concerning proven and probable reserves and resource estimates may also be deemed to constitute forward-looking statements and reflect conclusions that are based on certain assumptions that the reserves and resources can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions) are not statements of historical fact and may be “forward-looking statements”. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable laws. These forward-looking statements involve risks and uncertainties relating to, among other things, changes in oil prices, results of exploration and development activities, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government or other regulatory approvals, actual performance of facilities, availability of financing on reasonable terms, availability of third party service providers, equipment and processes relative to specifications and expectations and unanticipated environmental impacts on operations. Actual results may differ materially from those expressed or implied by such forward-looking statements.
ON BEHALF OF THE BOARD
Keith C. Hill, President and CEO
Africa Oil–s Certified Advisor on NASDAQ OMX First North is Pareto Ohman AB.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Africa Oil Corp.
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)