AFRICA OIL 2015 THIRD QUARTER FINANCIAL AND OPERATING RESULTS


November 16, 2015 (AOI–TSX, AOI–Nasdaq-Stockholm) … Africa Oil Corp. (“Africa Oil” or the “Company”) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2015.

Subsequent to the third quarter, the Company announced that it had entered into a definitive farmout agreement with Maersk Oil & Gas A/S, a Danish oil and gas company owned by the Maersk Group (“Maersk”) whereby Maersk will acquire 50% of Africa Oil’s interests in Blocks 10BB, 13T and 10BA in Kenya and the Rift Basin and South Omo Blocks in Ethiopia in consideration for reimbursement of a portion of Africa Oil’s past costs and a future carry on certain exploration and development costs.

Under the terms of the farmout agreement, upon closing of the transaction Maersk will pay Africa Oil US$350 million as reimbursement of past costs incurred by Africa Oil prior to the agreed March 31, 2015 effective date.  Maersk will also reimburse Africa Oil for its acquired working interest share of costs incurred between the effective date and the closing date.  Commencing on the effective date, Maersk will also carry up to US$75 million of the Company’s share of development expenditures upon confirmation of resources and US$15 million of the Company’s share of exploration expenditures.  In addition, upon Final Investment Decision (“FID”), Maersk will also carry up to US$405 million of Africa Oil’s working interest share of development expenditures for the Lokichar Development Project. The total carry amount is contingent upon the Lokichar Development Project meeting certain thresholds of resource growth, and the timing of first oil.  The transaction is subject to host government and applicable regulatory approvals.

Additionally, subsequent to the third quarter, the Emesek-1 exploration well in Block 13T in the North Lokichar basin reached a total depth of 3,000 metres without encountering commercial hydrocarbons. The well will now be plugged and abandoned. Following completion of operations, the rig will move to the South Lokichar basin to drill the Etom-2 well in an undrilled fault block adjacent to the Etom oil discovery.

During the third quarter of 2015, three wells finalized drilling in the South Lokichar Basin in Blocks 10BB and 13T, Kenya. In addition, an extensive appraisal program of the Ngamia and Amosing fields in the South Lokichar Basin in Kenya Block 10BB continued. These oil fields are expected to form the foundation for a phased development of the South Lokichar Basin. One drilling rig is currently active in the South Lokichar Basin.

During the third quarter of 2015, the Company continued to focus its efforts on appraisal in the South Lokichar Basin, Extended Well Tests (EWTs) in the Amosing and Ngamia fields, and reservoir and engineering studies. The 2015 work program in the South Lokichar Basin has the following objectives; confirming reservoir quality and deliverability, resource size and definition, and advancement of development plans, including the export pipeline.  Discussions with the Government regarding the draft field development plan for the discoveries in the South Lokichar Basin continue positively, with targeted submission by year-end 2015.

In August 2015, a bilateral agreement was reached between the Presidents of Uganda and Kenya adopting the Northern Kenya route for the regional crude oil pipeline, subject to certain conditions. Africa Oil continues to support both countries in moving this project forward as quickly and efficiently as possible taking into account the needs of all stakeholders.

At September 30, 2015, the Company had cash of $154.7 million and working capital of $80.3 million. During the first nine months of 2015, the Company closed several private placements for gross proceeds of $275 million.

The Company has completed the following significant operational activities during the third quarter and to date in 2015:

  • A number of Extended Well Tests (EWTs) have been completed at the Amosing field (Block 10BB – Kenya). The Amosing-1 and Amosing-2 wells were completed in five separate zones and initial rig-less flow testing during clean-up flowed at a cumulative maximum rate of 5,600 and 6,000 bopd respectively. These results exceeded expectations, and demonstrated high quality reservoir sands which flowed 31 to 38 degree API dry oil under natural conditions. During the test, the wells produced at a cumulative average constrained rate of 4,300 bopd under natural flow conditions. Pressure data from the two wells supports significant connected oil volumes and confirms lateral reservoir continuity, which is positive for the future development. A cumulative volume of 30,000 barrels of oil has been produced into storage. Water injection tests are still to be completed to further validate the viability of water flood reservoir management and the oil recovery assumptions.
  • In the third quarter of 2015, the Amosing-5A exploratory appraisal well was drilled as a test of an undrilled fault block. The well encountered an estimated 15 to 28 metres of net oil pay in a downflank position and successfully proved a northern extension to the Amosing field. Prior to the third quarter of 2015, the Amosing-3 and Amosing-4 wells were drilled, extending the limits of the Amosing field.
  • In preparation for the EWT activities in the Ngamia field (Block 10BB – Kenya), multi zone completions were installed in the Ngamia-8, Ngamia-3 and Ngamia-6 wells.  The Ngamia-8 well is the main production well for the Ngamia EWT. Flow testing of the Ngamia EWT wells is underway. Results to date indicate well productivity in line with expectations and proven communication in one zone to date. Following the flow testing water injection tests will be undertaken to further validate the viability of water flood reservoir management and the oil recovery assumptions. Prior to the third quarter of 2015, the successful results of the Ngamia-5, Ngamia-6 and Ngamia-7 wells were released.
  • In the third quarter of 2015, Twiga-3 exploratory appraisal well (Block 13T – Kenya) was drilled and encountered sands within the Lokone Shale sequence that are interpreted as good quality oil bearing reservoir over a gross interval of 120 metres. This result will be assessed in future exploration and appraisal activities, stepping out into the South Lokichar basin to further define this encouraging additional oil potential.
  • The Marriot 46 drilling rig moved to the Emesek-1 basin opening well, which tested the undrilled North Lokichar basin. The well reached a total depth of 3,000 metres without encountering commercial hydrocarbons and will now be plugged and abandoned. Following completion of operations, the rig will move to the South Lokichar basin to drill the Etom-2 well in an undrilled fault block adjacent to the Etom oil discovery. The rig will then move to drill the Cheptuket-1 exploration well in Block 12A and will test a basin bounding structural closure in the undrilled Kerio Valley Basin, in a similar structural setting to the successful Ngamia and Amosing discoveries.
  • The full fast track processed data set for the 951 square kilometer 3D seismic survey over the series of significant discoveries along the western basin bounding fault in the South Lokichar Basin, is being interpreted. The 3D seismic indicates significantly improved structural and stratigraphic definition and additional prospectivity not evident from the 2D seismic.
  • The partnership has acquired over 1,100 meters of whole core from the wells drilled in the South Lokichar Basin, and an extensive program of detailed core analysis is ongoing that will provide results throughout the year.  A key focus of the core program is to better assess oil saturation and to refine the recovery factors of the main reservoir sands. Early core analysis results support the reservoir assumptions used in the contingent resource estimate and support the view of oil saturations in the reservoir.
  • In the third quarter of 2015 in the Rift Basin Area Block, a 2D seismic crew program was completed of approximately 600 kilometers of land and lake seismic.  Source rock outcrops and oil slicks on the lakes have been identified in the block where there was previously no existing seismic or wells.

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For the complete news release and report see attached file.

 

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


Attachments

aoi_3q15.pdf