AFRICA OIL PROVIDES OPERATIONAL UPDATE AND FIRST QUARTER RESULTS

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| Source: Africa Oil Corp.
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May 14, 2014 (AOI–TSX, AOI–NASDAQ OMX First North) … Africa Oil Corp. (“Africa Oil” or the “Company”) is pleased to provide first quarter 2014 financial results and an update on its operations in Kenya and Ethiopia.

The Company currently has six rigs operating in Kenya and Ethiopia which are focused on three main activities; 1) Drilling new basin opening wells; 2) Drilling new prospects in the discovered basin in Northern Kenya; and 3) appraising and testing existing discoveries.

Two basin opening wells are currently drilling with results expected in the second quarter of 2014. The Sala prospect, on Block 9, is being drilled in the Cretaceous Anza graben and will test a large anticlinal feature along the northern basin bounding fault. This well is operated by Africa Oil which holds a 50% interest and operatorship with partner Marathon Kenya Limited B.V. holding the remaining 50%.  

The other new basin opening well is the Shimela well being drilled in the Chew Bahir basin on the South Omo block in Ethiopia.  This basin is located along the Tertiary rift trend and has many similarities to the recent discoveries in Kenya. The rig will move to the Gardim prospect following the completion of Shimela which is a basin bounded fault prospect located in the southern portion of this basin. The Company holds a 30% working interest in this block along with operator Tullow Oil plc (“Tullow”) (50%) and partner Marathon Ethiopia Limited B.V. (20%).

Plans are also underway to drill prospects in three additional new basins this year.  The Dyepa-1 well will spud in the second quarter and will target the South Kerio basin which is proximal and geologically similar to the discovered basin in Northern Kenya in Block 10BB.  This well is designed to test a basin bounding fault prospect on the western flank of the basin similar to the string of pearls field discoveries such as the initial Ngamia discovery.  A number of additional prospects have been identified in this basin which would be de-risked if Dyepa is a discovery. This rig will then move to test the Aze prospect which is located in the North Kerio basin and is comprised of a large, four-way dip closed anticline on the southern shore of Lake Turkana.

The last basin to be targeted this year is the West Turkana basin in Block 10BA in Kenya and the first well in this program is expected to spud later this year. The first prospect to be drilled will be the Engomo (formerly Kiboko) prospect on the western shore of Lake Turkana. It is also a basin bounding fault prospect and has similar potential to prove a petroleum system that would lead to accelerated drilling on a number of identified prospects. In both of these basins, as in the discovered basin in Northern Kenya, the Company holds a 50% working interest along with Operator Tullow Oil plc (50%).

The only well which is currently being drilled on a new prospect in the discovered basin in Northern Kenya is the Ekunyuk-1 well which is located on the eastern flank play, on trend with recent discoveries at Etuko and Ewoi. The well has now reached a final total depth of 1,802 meters and has encountered some 5 meters of net oil pay, within approximately 150 meters of reservoir quality water-bearing sandstone and an equal thickness of a basin-wide rich oil shale. This rig will now be moved to the Agete-2 location.

Three additional rigs are currently pursuing appraisal and testing activities on the existing discoveries.  The Sakson PR5 rig is continuing drilling operations on the Twiga-2 up-dip appraisal well. The initial wellbore was drilled near the basin bounding fault and encountered some 18 meters of net oil pay within alluvial fan facies, with limited reservoir quality. A decision was made to sidetrack the well away from the fault to explore north of Twiga-1 and some 62 meters of vertical net oil pay has been discovered in the Auwerwer formation, similar in quality to the initial Twiga-1 discovery. The well is currently being deepened to evaluate the Lower Lokhone sand reservoirs and a testing program for this successful well is planned to be conducted later this year. This rig will then move to drill a down-dip appraisal of the Amosing discovery, which appears to have high quality reservoir and may be one of the largest discoveries in the basin to date.

The PR Marriott 46 rig is currently drilling ahead on the Ngamia-2 appraisal well which is expected to be completed by the end of the second quarter.  This rig will then drill the Ngamia-3 appraisal well.

Testing operations are ongoing on the Agete-1 well using the SMP-5 rig and expected to be completed by the end of May. The plan is for this rig to continue testing operations on discovery and appraisal wells in the discovered basin in Northern Kenya.

Additionally in Ethiopia, the Company has recently completed the drilling of the El Kuran-3 appraisal well on Block 8.  El Kuran-3 was an appraisal of a discovery made by Tenneco in the 1970’s, and encountered a significant but tight gas-condensate zone in Jurassic Hammanlei carbonates. The well has been suspended pending a decision on conducting a fracture stimulation, which will be required to assess the long-term productivity of the formation.  Discussions are ongoing with the Government of Ethiopia to secure an extension to the Exploration Period under the PSC to assess the economic viability of the discovery.

Africa Oil CEO Keith Hill stated “We are looking forward to the results of the new basin opening wells which have the potential to unlock significant value in terms of new prospects and resources. The ongoing drilling in the discovered basin in Northern Kenya has been quite helpful in understanding the distribution of the best reservoir facies and will no doubt be enhanced by the ongoing 3D seismic survey.  We remain very bullish in not only the existing discoveries but in the remaining prospects in the discovered basin in Northern Kenya such as Etom, the largest remaining prospect along the Western ‘String of Pearls’ trend, which will be drilled in the third quarter of this year. Our goal is to open up at least one new basin and to move a significant number of barrels from prospective to contingent resources by the end of 2014 as we move the field development program forward.”

The Company is also actively pursuing development studies in the Block 10BB/13T area including commencement of the pre-front end engineering design (pre-FEED) and environmental and social impact assessment (ESIA) studies for the pipeline, export terminal and field facilities. It is the goal the Government of Kenya and the joint venture partnership to achieve project sanction, including the approval of an export pipeline, by the end of 2015/early 2016. 

As was previously announced, the company has now graduated to the main board of the TSX and plans to apply for graduation to the NASDAQ OMX Stockholm main board.

 

Further Significant Events During The First Quarter of 2014:

  • Africa Oil ended the quarter with cash of $434.3 million and working capital of $360.1 million. 
  • In January, the Company announced a new oil discovery at Amosing-1 located seven kilometers southwest of the Ngamia-1 discovery along the Basin Bounding Fault Play in Block 10BB.  Logs indicated 160 to 200 meters of potential net oil pay in good quality sandstone reservoirs. 
  • In January, the Company announced a new oil discovery at Ewoi-1 located four kilometers to the east of the Etuko-1 discovery in the Basin Flank Play on the eastern side of the discovered basin in Northern Kenya in Block 10BB.  Logs indicated potential net pay of 20 to 80 meters to be confirmed by well testing.
  • In February, the Company announced the results of five well tests conducted on five Lokhone pay intervals at Etuko-1 located on the Basin Flank Play in Block 10BB.  Light 36 degree API waxy crude oil was successfully flowed from three zones at a combined average rate of over 550 barrels of oil equivalent per day.  In March, the Company announced the results of the Etuko-2 exploration well drilled to test the upper Auwerwer sands overlying the previously announced Etuko discovery.  Etuko-2 penetrated a potential significant oil column identified from formation pressure data and oil shows while drilling and in core, with good quality reservoir but flowed only water on drill stem test.  The results are considered inconclusive and analysis is underway to consider further options to evaluate this reservoir.
  • In March, the Company announced the results of a well test on the Ekales-1 discovery drilled in 2013 and located on the Basin Bounding Fault Play between the Ngamia-1 and Twiga South-1 discoveries.  Testing operations on the Ekales-1 well confirmed this significant oil discovery.  Two drill stem tests were completed and flowed at a combined rate of over 1,000 bopd from a combined 41 meter net pay interval.  The upper zone had a very high productivity index of 4.3 stb/d/psi.
  • In March, the Company announced the results of the Emong-1 well located four kilometers northwest of Ngamia-1 field discovery in Block 13T (Kenya).  The well encountered oil and gas shows while drilling, however the Auwerwer sandstones that are the primary reservoirs in the Ngamia field were thin and poorly developed in Emong-1 and the well was plugged and abandoned.  It is believed that the reservoir was poorly developed due to its proximity to the basin bounding fault and its location within what appears to be a local isolated slumped fault margin.  This well, which was trying to establish an additional play, has no impact on the potential of the Ngamia oil accumulation or any other prospectivity in the discovered basin in Northern Kenya.
  • In Blocks 10BB and 13T, the acquisition of a 550 square kilometer 3D seismic program over the discoveries and prospects along the Basin Bounding Fault Play in the discovered basin in Northern Kenya is ongoing and is scheduled to complete at the end of the third quarter.
  • In March, the Company completed a farmout transaction with Marathon whereby Marathon acquired a 50% interest in the Rift Basin Area leaving the Company with a 50% working interest. In accordance with the farmout agreement, Marathon was obligated to pay the Company $3.0 million in consideration of past exploration expenditures, and has agreed to fund the Company's working interest share of future joint venture expenditures to a maximum of $15.0 million with an effective date of June 30, 2012. Upon closing of the farmout, Marathon paid the Company $3.0 million in consideration of past exploration expenditures. Subsequent to the quarter end, Marathon paid the Company $10.2 million being Marathon’s and the Company’s share of exploration expenditures from the effective date to the closing date of the farmout.
  • In March, the Company completed a farmout transaction with New Age whereby New Age acquired an additional 40% interest in the Company's Adigala Block leaving AOC with 10% working interest. In accordance with the farmout agreement, New Age is obligated to fund the Company's 10% working interest share of expenditures related to the acquisition of a planned 1,000 kilometer 2D seismic program to a maximum expenditure of $10.0 million on a gross basis, following which the Company would be responsible for its working interest share of expenditures.
  • The Company has a significant exploration and appraisal program set out for 2014 which will see over 20 wells completed.  The program is focused on drilling out the remaining prospect inventory in the discovered basin in Northern Kenya, appraising existing and future discoveries with the aid of the new 3D Seismic survey, drilling six new basin opening wells and progressing development studies towards project sanction in the discovered basin in Northern Kenya.  This significant program in 2014 is fully funded.

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For complete report see attached file.

Africa Oil’s Certified Advisor on NASDAQ OMX First North is Pareto Securities AB.

 

         For further information, please contact: Sophia Shane, Corporate Development (604) 689-7842.