CORRECTION - AFRICA OIL PROVIDES OPERATIONAL UPDATE AND SECOND QUARTER RESULTS
ET | Source:Africa Oil Corp.
August 9, 2014 (AOI–TSX, AOI–OMX) … Africa Oil Corp. (“Africa Oil” or the “Company”) reports a correction to the second quarter 2014 financial results issued on August 8, 2014. The 17th bullet point should have stated “Africa Oil opened the second quarter with cash of $434.3 million and working capital of $360.1 million. Africa Oil ended the second quarter with cash of $350.1 million and working capital of $245.3 million.”
For clarity the entire amended news release is appended. No further corrections were made to the remainder of the news release.
Entering the year, the Company and its partners had seven drilling rigs operating in the region. Four Tullow-Africa Oil joint venture rigs are operating in the discovered basin in Northern Kenya in Blocks 10BB and 13T, one of which is a testing and completions unit. In addition, the Company and its partner have a rig operating in Block 9 in Kenya. In Ethiopia, the Company and its partners in the South Omo Block and Block 7/8 had rigs operating in each block. Drilling operations in Block 7/8 have been completed, and the rig has been released. Additionally, drilling operations in the South Omo Block have been completed and the rig is being de-mobilized whilst future drilling opportunities are being assessed. The Company expects to have five drilling rigs operating in Kenya through the remainder of 2014.
In January, the Company announced further drilling success with its sixth and seventh consecutive discoveries in the discovered basin in Northern Kenya at Amosing-1 and Ewoi-1. Amosing-1 is located 7 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. A down-dip appraisal well with a planned sidetrack is currently being drilled at Amosing-2/2A with an extended well test planned to start towards the end of the year. Ewoi-1 is located 4 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 also in Block 10BB. Logs indicated potential net pay of 20 to 80 meters. Results of Ewoi-1 testing operations are expected to be announced in the coming weeks.
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 (“bopd”).
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 in Block 13T (Kenya), 4 kilometers northwest of the Ngamia-1 field discovery. 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 aimed at establishing 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 March, the Company completed a farmout transaction with Marathon Oil Corporation (“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 and $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 (Africa Global Energy) Limited (“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.
In May, the Company announced the results of the Twiga-2 appraisal well where 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 was discovered in the Auwerwer formation at Twiga-2A, similar in quality to the initial Twiga-1 discovery. Testing at Twiga-2A is expected to commence in August.
In May, the Company announced the results of the Sala-1 exploration well at Block 9 in Kenya, which tested a large prospect on the northeastern flank of the Cretaceous Anza rift, which is up-dip of two wells that had significant hydrocarbon shows. An upper gas bearing interval tested dry gas at a maximum rate of 6 mmcf/d from a 25 meter net pay interval. The interval had net sand of over 125 meters and encountered as gas-water contact so there is potential to drill up-dip on the structure where the entire interval will be above the gas-water contact. A lower interval tested low rates of dry gas from a 50 meter net pay interval which can also be accessed at the up-dip location. Significant oil shows were also encountered while drilling. The Sala-2 appraisal well located on the crest of the discovery spud in early August. The Company believes there is a very strong market for gas in Kenya and have already engaged in discussions with the Government of Kenya around a fast track gas to power development and discussions are also ongoing around securing PSC gas terms.
In May, the Company drilled a new prospect in the discovered basin in Northern Kenya, the Ekunyuk-1 well, located on the Basin Flank Play on trend with the Etuko and Ewoi discoveries. The well encountered 5 meters of net oil pay and found 150 meters of good quality Lokhone sands, although there was a lack of trap at this level within the well. The quality of Lokhone sands indicates that there is further exploration potential in this area of the basin.
In May, the Company completed drilling of the Shimela-1 exploration well at the South Omo Block in Ethiopia to test a new basin in the Tertiary trend, the Chew Bahir Basin, located on the eastern side of the block, but the well encountered water bearing reservoirs and volcanics with trace gas shows.
In June, the Company announced the results of the Ngamia-2 appraisal well which was drilled 1.7 kilometers from the Ngamia-1 discovery well to test the northwest flank of the field. The well encountered up to 39 meters of net oil pay and 11 meters of net gas pay and appeared to have identified a new fault trap, north of the main Ngamia accumulation. Four to six additional appraisal wells are planned in the Ngamia field area, including the Ngamia-3 well which is currently drilling.
In June, the Company drilled the Agete-2 exploratory appraisal well drilled some 2.2 kilometers southeast of Agete-1. The well intersected water bearing reservoirs at this down-dip location and further appraisal drilling is planned. Additionally in June, the Agete-1 well was tested at 500 bopd.
In July, the Company completed drilling of the Gardim-1 exploration well on the eastern flank of the Chew Bahir Basin. The Gardim-1 well intersected lacustrine and volcanic formations, similar to those found in the Shimela-1 well, again minor intervals encountered gas shows. Drilling operations are being demobilized while these results are integrated into the regional basin model. Seismic interpretation continues on independent prospectivity elsewhere in the South Omo Block and the next phase of the Ethiopia exploration campaign will target these prospects.
Additionally in Ethiopia, the Company and its partners completed the drilling of the El Kuran-3 appraisal well on Block 8 in the first half of the year. 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 was suspended pending further evaluation. Options regarding the future of the blocks are being evaluated.
The Company and its partners continue to actively acquire and process seismic data in Blocks 12A, 10BA, 10BB and 13T in Kenya. In Block 12A, a 674 kilometer 2D seismic program was completed in the first quarter and the crew has demobilized. In Block 10BB, a 750 kilometer North Kerio Basin 2D seismic program was completed in the first quarter and the crew is mobilizing to acquire a 600 kilometer 2D program split between Blocks 10BA, 10BB and 13T over the North Lokichar Basin. In Blocks 10BB and 13T, 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 in the fourth quarter. In Ethiopia, the Company, as operator, and its partner are making preparations to acquire a minimum 400 kilometer 2D seismic program over the Rift Basin Area commencing in the fourth quarter. Also in Ethiopia, the Company and its partners continue to acquire a 1,000 kilometer 2D seismic program on the Adigala Block.
Africa Oil opened the second quarter with cash of $434.3 million and working capital of $360.1 million. Africa Oil ended the second quarter with cash of $350.1 million and working capital of $245.3 million.
The Company is currently working with its independent resource evaluator and expects to release an update to the contingent and prospective resources for the discovered basin in Northern Kenya in Blocks 10BB and 13T during the third quarter.
The company has now graduated to the main board of the TSX and to the NASDAQ OMX Stockholm main board.
Mark Dingley has been appointed to the role of Vice President, Operations of the Company, responsible for all of the Company’s operated activities. Mr. Dingley has been with the Company since May, 2013 acting as the President of Africa Oil Ethiopia B.V. and Chief Operating Officer of Horn Petroleum Corporation. Mr. Dingley joined the Company after 12 years with Talisman Energy Inc. where he served as Vice President, Middle East Operations as well as General Manager, Peru; Manager, Corporate Security & Surface Risk; and Manager, Government Affairs & Deputy General Manager, Sudan. David Grellman, formerly Vice President, Operations will retire following the drilling of the Sala-2 appraisal well in Block 9.
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 three new basin opening wells in the second half of the year and progressing the development studies towards project sanction in the discovered basin in Northern Kenya. This significant program in 2014 is fully funded.
Keith Hill, President and CEO of Africa Oil, commented, “We are looking forward to the results of three new basin opening wells to be drilled in the second half of 2014 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. 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."
For further information, please contact: Sophia Shane, Corporate Development (604) 689-7842.
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