November 22, 2011 (AOI - TSXV, AOI - NASDAQ OMX) … Africa Oil Corp. (“Africa
Oil”, “the Company” or “AOC”) is pleased to announce its financial and
operating results for the three and nine months ended September 30, 2011.
Highlights and accomplishments during the third quarter of 2011 included:
• The Company continued to actively explore in East Africa:
• In Block 10BB, the Ngamia (Camel) prospect has been selected by the Tullow
operated joint venture as the initial well in Block 10BB. The prospect will
test the oil potential in Miocene age sandstones within a three way dip
closure against the West Lokichar rift fault. Ngamia is directly analogous
to successful oil accumulations drilled by Tullow and partners early in the
exploration efforts in the Lake Albert graben of Uganda. The Ngamia well is
expected to spud in December of 2011.
• In Block 10A, the Paipai-1 prospect has been selected by the Tullow
operated joint venture as the initial well in Block 10A. The prospect will
test the oil potential in Cretaceous age sandstones within a four way dip
closure downthrown to the Lag Bagal fault, the northern bounding fault on
the Anza Trough. Preparations for drilling, including purchase of
materials, execution of drilling related contracts, civil works, and
environmental permits are either completed or underway. The Block 10A well
is expected to spud in the second quarter of 2012 using the same
Weatherford rig as will be used in Block 10BB.
• In Puntland, Horn Petroleum Corp. (“Horn”) is currently in final
preparations to commence a two well drilling campaign in the Dharoor Valley
Block, with the first well (Shabeel-1) planned to spud in December of 2011.
Drilling locations have been selected over two robust prospects targeting
gross best estimated prospective resources of over 300 million barrels
each, based on internal estimates. A contract has been awarded to Sakson
Drilling and Oil Services who will provide a 1500 horse-power, top drive
equipped rig. All drilling related third party service contracts have been
executed. The Company has completed sourcing drilling related materials and
the majority of materials are on site or on route to the drilling site.
Site preparation including the drill site, air strip and ingress route
construction have been completed. Water wells are currently being drilled
to provide source water for drilling operations.
• The Company, in partnership with Tullow, has recently completed an
extensive Full Tensor Gravity (“FTG”) survey over all of the blocks in the
Tertiary Rift basin. This technique has been proven highly successful in
Tullow's Uganda Albert Graben project, delineating structured prospects and
leads.
• Based on the results of the FTG survey, the Company, in partnership with
Tullow, has an extensive 2D seismic program planned on blocks in the
Tertiary Rift basin over the next twelve months.
• The Company closed its previously announced transaction with Horn (formerly
Denovo Capital Corp.) pursuant to which Horn acquired all of the issued and
outstanding shares of Canmex Holdings (Bermuda) I Ltd. ("Canmex"), a wholly
owned subsidiary of the Company. Canmex holds a 60% interest in the
production sharing agreements for the Dharoor Valley Exploration Area and
the Nugaal Valley Exploration Area in Puntland (Somalia).
• AOC transferred to Horn all of the issued and outstanding shares of Canmex.
AOC received, in consideration of the transfer, 27.8 million common shares
of Horn.
• Horn also completed a non-brokered private placement of an aggregate of
45.5 million subscription receipts at a price of CAD$0.90 per subscription
receipt for gross proceeds of $41.3 million. The subscription receipts were
converted into common shares and warrants of Horn on September 20, 2011.
AOC subscribed to 11.1 million subscription receipts All securities issued
pursuant to the Offering are subject to a statutory hold period expiring
December 3, 2011.
• AOC now holds 51.4% of the outstanding shares of Horn, as well, a
management services arrangement has been agreed between Horn and AOC in
which the management of AOC are responsible for the operating decisions of
Horn. As such, AOC is deemed to control Horn.
• Horn has successfully raised the anticipated funds required for its planned
two well exploratory drilling program in Puntland (Somalia). Spudding of
the first well is anticipated before the end of 2011.
• Horn's common shares trade on the TSX Venture Exchange under the symbol
“HRN”.
• Africa Oil ended the quarter in a strong financial position with cash of
$118.0 million and working capital of $110.6 million as compared to cash of
$76.1 million and working capital of $70.6 million at December 31, 2010.
Of the $110.6 million in cash at September 30, 2011, $43.7 million is cash
held by Horn. The Company's liquidity and capital resource position has
remained strong throughout the year.
• Africa Oil has more than sufficient funds to meet its currently planned
work program. During the nine months ended September 30, 2011, the Company
incurred expenditures of $20.4 million of the 2011 Board of Directors
approved $43 million in capital expenditures.
Keith Hill, President and CEO, commented, “Africa Oil and joint venture
partners made significant operational progress with respect to exploration
activities in the first nine months of 2011. The Company is in a very strong
financial position and is extremely excited to commence drilling operations and
plans to drill seven to ten high potential exploration wells in the next
eighteen months.”
Third Quarter 2011 Financial and Operating Highlights
(For table, see attached file)
Horn was formed as a new Puntland focused exploration company. The Horn
Transaction has been accounted for as an acquisition of Horn's net assets by
Canmex (reverse acquisition) as AOC, the sole owner of Canmex prior to the
Transaction, controls Horn subsequent to the Horn Transaction. Effectively as a
result of the Horn Transaction and Horn private placement, AOC through its
wholly owned subsidiary acquired 51.4% of the newly formed entity. While the
results of Canmex have historically been consolidated in the Company's
financial statements, effective September 20, 2011, the 48.6% non-controlling
interest in Horn will be accounted for in the consolidated results of the
Company.
Operating expenses increased $1.5 million for the three months ended September
30, 2011 compared to the same period in the previous year due to stock-based
compensation costs associated with stock option grants in Horn, as well as
professional fees and listing fees associated with the Horn Transaction.
Operating expenses increased $3.8 million for the nine months ended September
30, 2011 compared to the same period last year due mainly to a $2.0 million
increase in stock based compensation costs, increased listing fees and
professional fees associated with our multiple acquisitions completed during
the year and the Horn Transaction.
Expenditures relating to Blocks 2/6 have been written off resulting in the $6.7
million impairment of intangible exploration assets. AOC relinquished Blocks 2
/6 and obtained Ministerial approval to waive remaining commitments. The
Company paid $1.2 million to the Government of Ethiopia, in lieu of unfulfilled
commitments with respect to the Blocks 2/6 PSA.
The gain relating to the acquisition of Lion was the result of the Company
acquiring net working capital and intangible exploration assets valued in
excess of the consideration issued. The consideration paid was valued at $21.7
million, net of AOC shares acquired. Working capital acquired was $20.1 million
and the intangible exploration assets acquired were valued at $5.7 million.
The dilution loss on the sale of subsidiary was recognized on the consolidation
of Horn and represents the excess of the fair value of the consideration paid
by the Canmex, in the reverse acquisition, over the value of the net assets of
Horn acquired.
Finance income for the three and nine months ended September 30, 2011 and 2010
is made up of the following items:
(For table, see attached file)
The loss on revaluation of marketable securities is the result of a reduction
in the value of 10 million shares held in Encanto Potash Corp which were
acquired on the acquisition of Lion.
The Company recorded gains on the revaluation of warrants in the three and nine
months ended September 30, 2011 due to a reduction in AOC's share price from
the end of the previous periods.
The Company recorded gains on the revaluation of the convertible debt in the
nine months ended September 30, 2011 due to a reduction in AOC's share price
from the end of 2010. The convertible debt was converted to shares in the
first and second quarter of 2011.
Interest income was higher in both the three and nine months ended September
30, 2011 due to a significant increase in the average cash balance versus the
nine months of 2010.
The $6.8 million and $4.5 million foreign exchange losses in the three and nine
months ended September 30, 2011 are the result of a decrease in the value of
the Canadian dollar at a time when AOC was holding a significant amount of
Canadian dollars.
(For table, see attached file)
The increase in total assets from January 1, 2010 to December 31, 2010 is
attributable to the equity financings, expansion of acreage in East Africa
(Blocks 12A and 13T (Kenya) and South Omo (Ethiopia)), drilling of Bogal-1 in
Block 9, and the seismic acquisition programs on Block 10BB in Kenya and the
Ogaden blocks in Ethiopia.
The increase in total assets from December 31, 2010 to September 30, 2011 is
primarily attributable to the funds raised on the Horn private placement and
closing of the acquisitions of Centric and Lion which were funded primarily by
the issuance of shares.
(For table, see attached file)
The increase in cash in 2011 is mainly a result of the Horn private placement,
cash acquired through the Lion acquisition, proceeds received on the close of
the Tullow farmout, offset partially by intangible exploration expenditures and
operating expenses.
(For table, see attached file)
The Company's consolidated financial statements, notes to the financial
statements, management's discussion and analysis and Annual Information Form
have been filed on SEDAR (www.sedar.com) and are available on the Company's
website (www.africaoilcorp.com). The Annual Information Form includes the
Company's reserves and resource data for the period ended December 31, 2010 and
other oil and natural gas information prepared in accordance with National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
Outlook
AOC and its partners have an aggressive exploration program planned for the
next two years, which is anticipated to include seismic and drilling across a
variety of play types and geographic areas of operation. The Company enters the
third quarter 2011 in an extremely strong financial position with working
capital in excess of $110 million. Additional financing is not required at
this time to meet current operational plans.
New discoveries have been announced on trend with the Company's virtually
unexplored land position including the major Tullow Oil plc Albert Graben oil
discovery in neighboring Uganda. Similar to the Albert Graben play model, the
Company'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 the AOC's project areas.
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
(For full report, see attached file)
For further information, please contact: Sophia Shane, Corporate Development
(604) 689-7842.
Africa Oil's Certified Advisor on NASDAQ OMX First North is E. Öhman J:or
Fondkommission AB (Pareto Ohman), part of the Pareto Securities Group.
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.
