VANCOUVER, BRITISH COLUMBIA — (Marketwire) — 08/27/12 — Africa Oil Corp. (“Africa Oil”, “the Company” or “AOC”) (TSX VENTURE: AOI)(OMX: AOI) is pleased to announce its financial and operating results for the three and six months ended June 30, 2012.
Keith Hill, President and CEO, commented, “Africa Oil is very encouraged with the results of the Ngamia-1 well. Our next well, Twiga South-1, represents the next step in expanding the play northward into the Lockichar basin and proving up the –string of pearls– concept along the main basin bounding fault. The arrival of the additional two drilling rigs will allow us to evaluate whether the Tertiary trend extends into southern Ethiopia and to test the Cretaceous rift in north-central Kenya. We continue to be highly optimistic that the early success will extend into these other areas. While we were disappointed that we were not able to flow oil from the first two exploration wells in our Puntland (Somalia) drilling campaign, we remain highly encouraged that all of the critical elements exist for oil accumulations, namely a working petroleum system, good quality reservoirs and thick seal rocks. We look forward to working with the Puntland government to move our exploration project to the next phase which will likely require us to focus on prospects in different areas of the basins.”
Second Quarter 2012 Financial and Operating Highlights
Operating expenses decreased $3.8 million for the three months ended June 30, 2012 compared to the same period in the previous year due mainly to a $7.0 million impairment of intangible exploration assets relating to the relinquishment of Blocks 2/6 in Ethiopia in the second quarter of 2011, offset partially by a $3.0 million increase in professional fees associated with previously completed farmout transactions.
Operating expenses decreased $2.1 million for the six months ended June 30, 2012 compared to the same period in the previous year due to a $7.0 million impairment of intangible exploration assets relating to Blocks 2/6 in Ethiopia in the second quarter of 2011, a $0.7 million decrease in stock -based compensation costs due to stock option grants in the first quarter of 2011, and reduced salary costs resulting from moving allowances in the first quarter of 2011. These reductions were offset partially by a $3.1 million impairment of intangible exploration assets relating to Blocks 7 and 11 in Mali in the first quarter of 2012 and an increase in professional fees in the second quarter of 2012 associated with previously completed farmout transactions.
The gain relating to the acquisition of Lion Energy Corp. (“Lion”) in the second quarter of 2011 was a result of the Company acquiring net working capital and intangible exploration assets in excess of the consideration issued. The consideration paid was valued at $21.7 million, net of AOC shares acquired, versus working capital acquired of $20.1 million, excluding the value of AOC shares held by Lion, and the fair market value of intangible assets acquired estimated at $5.7 million.
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.
At June 30, 2012, nil warrants were outstanding in AOC. The Company incurred a $9.9 million gain on the revaluation of Horn warrants from the end of the first quarter of 2012 to the end of the second quarter of 2012 due to a significant decrease in the share price of Horn from March 31, 2012 to June 30, 2012.
The foreign exchange gains and losses are the direct result of changes in the value of the Canadian dollar in comparison to the US dollar. The Company has been holding large Canadian dollar cash balances as the result of Horn–s private placement, cash acquired on the Lion acquisition and warrant exercises at the end of 2010.
The increase in total assets from December 31, 2011 to June 30, 2012 is primarily attributable to intangible exploration expenditures incurred during the quarter, a significant portion of which related to drilling of the Ngamia-1 well in Kenya and the Shabeel-1 and Shabeel North-1 wells in Puntland (Somalia).
The decrease in cash in 2012 is mainly the result of intangible exploration expenditures and operating expenses offset partially by funds raised on the exercise of warrants and the non-brokered private placement completed by Horn.
The Company–s consolidated financial statements, notes to the financial statements, management–s discussion and analysis for the three month and six months ended June 30, 2012 and the 2011 Annual Information Form have been filed on SEDAR () and are available on the Company–s website ().
Outlook
The Ngamia-1 light oil discovery in the Lokichar sub-basin of the tertiary rift on Block 10BB (Kenya) has led to a significant increase in the pace of exploration. 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) to commence drilling the Paipai prospect and an additional rig is intended to be mobilized to the South Omo Block (Ethiopia) to commence drilling the Sabisa-1 prospect. The Weatherford rig will continue with drilling operations in the Lokichar sub-basin of the tertiary rift where the Twiga South-1 prospect has recently been spud, bringing the total number of rigs operating on the Company–s Kenyan and Ethiopian acreage to three 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
Based on the encouragement provided by the Shabeel wells, the Company and its partners plan to enter the next exploration period in both the Dharoor Valley and Nugaal Valley PSAs which carry a commitment to drill one well in each block within an additional three year term. The current operational plan would be to contract a seismic crew to acquire additional data in the Dharoor Valley block and to hold discussions with the Puntland Government regarding drill ready prospects in the Nugaal Valley block. The focus of the Dharoor Valley block seismic program will be to delineate new structural prospects for the upcoming drilling campaign.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya, Ethiopia and Mali as well as Puntland (Somalia) through its 45% equity interest in Horn Petroleum Corporation. 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 neighboring Uganda. Africa Oil–s recent Ngamia-1 discovery extends the Albert Graben play into Kenya where Africa Oil along with partner Tullow hold a dominant acreage position. Newly acquired seismic and gravity data 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)