VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 22, 2011) - Africa Oil Corp. (TSX VENTURE:AOI)(OMX:AOI) ("Africa Oil", "the Company" or "AOC") is pleased to announce its financial and operating results for the three and nine months ended June 30, 2011.
Highlights and accomplishments during the third quarter of 2011 included:
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 |
Consolidated Statement of Net Loss and Comprehensive Loss |
(Unaudited; United States Dollars) |
Three months | Three months | Nine months | Nine months | ||||||||||
ended | ended | ended | ended | ||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||
Operating expenses | |||||||||||||
Salaries and benefits | $ | 309,476 | $ | 305,398 | $ | 1,067,364 | $ | 769,450 | |||||
Stock-based compensation | 908,550 | 158,227 | 2,790,484 | 790,243 | |||||||||
Bank charges | 23,103 | 45,423 | 133,242 | 76,158 | |||||||||
Travel | 470,806 | 219,591 | 853,767 | 517,998 | |||||||||
Management fees | 60,593 | 57,016 | 187,325 | 172,648 | |||||||||
Office and general | 455,579 | 447,771 | 1,011,900 | 965,029 | |||||||||
Depreciation | 8,480 | 13,796 | 41,739 | 62,877 | |||||||||
Professional fees | 462,066 | 114,119 | 859,190 | 362,915 | |||||||||
Stock exchange and filing fees | 158,807 | 26,371 | 432,089 | 71,235 | |||||||||
2,857,460 | 1,387,712 | 7,377,100 | 3,788,553 | ||||||||||
Impairment of intangible exploration assets | - | - | 6,969,413 | - | |||||||||
Gain on acquisition of Lion Energy | - | - | (4,143,051 | ) | - | ||||||||
Dilution loss on sale of subsidiary | 4,578,634 | - | 4,578,634 | - | |||||||||
Finance income | (2,568,551 | ) | (464,081 | ) | (7,607,452 | ) | (431,261 | ) | |||||
Finance expense | 7,187,485 | 17,938,066 | 5,079,824 | 12,433,877 | |||||||||
Net loss and comprehensive loss | (12,055,028 | ) | (18,861,697 | ) | (12,254,468 | ) | (15,791,169 | ) | |||||
Net loss and comprehensive loss attributable to non-controlling interest | (915,207 | ) | - | (915,207 | ) | - | |||||||
Net loss and comprehensive loss attributable to common shareholders | (11,139,821 | ) | (18,861,697 | ) | (11,339,261 | ) | (15,791,169 | ) | |||||
Net loss per share | |||||||||||||
Basic | $ | (0.05 | ) | $ | (0.21 | ) | $ | (0.06 | ) | $ | (0.20 | ) | |
Diluted | $ | (0.05 | ) | $ | (0.21 | ) | $ | (0.09 | ) | $ | (0.20 | ) | |
Weighted average number of shares outstanding | |||||||||||||
Basic | 211,319,720 | 91,366,405 | 187,353,051 | 77,440,607 | |||||||||
Diluted | 212,018,784 | 91,651,243 | 189,283,659 | 77,557,817 |
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:
Three months | Three months | Nine months | Nine months | |||||
ended | ended | ended | ended | |||||
September 30, | September 30, | September 30, | September 30, | |||||
2011 | 2010 | 2011 | 2010 | |||||
Loss on marketable securities | (395,800 | ) | - | (540,475 | ) | - | ||
Fair value adjustment - warrants | 2,292,353 | (8,469,179 | ) | 4,835,461 | (5,863,448 | ) | ||
Fair value adjustment - convertible debt | - | (9,468,887 | ) | 2,031,704 | (6,570,429 | ) | ||
Interest and other income | 276,198 | 23,662 | 740,287 | 32,718 | ||||
Foreign exchange gain/(loss) | (6,791,685 | ) | 440,419 | (4,539,349 | ) | 398,543 | ||
Financial Income | 2,568,551 | 464,081 | 7,607,452 | 431,261 | ||||
Financial expense | (7,187,485 | ) | (17,938,066 | ) | (5,079,824 | ) | (12,433,877 | ) |
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.
Consolidated Balance Sheets | ||||||||||
(Unaudited; United States Dollars) | ||||||||||
September 30, | December 31, | January 1, | ||||||||
2011 | 2010 | 2010 | ||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 118,003,034 | $ | 76,125,834 | $ | 11,145,486 | ||||
Marketable securities | 1,780,810 | - | - | |||||||
Accounts receivable | 1,159,803 | 2,323,208 | 5,396,253 | |||||||
Prepaid expenses | 515,857 | 595,729 | 508,344 | |||||||
121,459,504 | 79,044,771 | 17,050,083 | ||||||||
Long-term assets | ||||||||||
Restricted cash | 2,919,000 | 3,181,500 | 1,800,000 | |||||||
Property and equipment | 42,555 | 39,621 | 107,549 | |||||||
Intangible exploration assets | 164,789,163 | 96,468,816 | 76,138,940 | |||||||
167,750,718 | 99,689,937 | 78,046,489 | ||||||||
Total assets | $ | 289,210,222 | $ | 178,734,708 | $ | 95,096,572 | ||||
LIABILITIES AND EQUITY | ||||||||||
Current liabilities | ||||||||||
Accounts payable and accrued liabilities | $ | 9,717,363 | $ | 7,122,007 | $ | 3,244,871 | ||||
Current portion of warrants | 1,189,738 | 874,949 | - | |||||||
Current portion of convertible debenture | - | 411,220 | 407,950 | |||||||
10,907,101 | 8,408,176 | 3,652,821 | ||||||||
Long-term liabilities | ||||||||||
Warrants | 7,215,509 | 5,195,914 | 21,673,039 | |||||||
Convertible debenture | - | 54,077,952 | 40,820,217 | |||||||
7,215,509 | 59,273,866 | 62,493,256 | ||||||||
Total liabilities | 20,636,164 | 67,682,042 | 66,146,077 | |||||||
Equity attributable to common shareholders | ||||||||||
Share capital | 306,509,909 | 163,231,076 | 62,712,759 | |||||||
Contributed surplus | 6,867,348 | 4,391,940 | 3,313,753 | |||||||
Deficit | (75,979,058 | ) | (56,570,350 | ) | (37,076,017 | ) | ||||
237,398,199 | 111,052,666 | 28,950,495 | ||||||||
Non-controlling interest | 33,689,413 | - | - | |||||||
Total equity | 271,087,612 | 111,052,666 | 28,950,495 | |||||||
Total liabilities and equity | $ | 289,210,222 | $ | 178,734,708 | $ | 95,096,572 |
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.
Consolidated Statement of Cash Flows |
(Unaudited; United States Dollars) |
Three months | Three months | Nine months | Nine months | |||||||||||
ended | ended | ended | ended | |||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||
Cash flows provided by (used in): | ||||||||||||||
Operations: | ||||||||||||||
Net loss and comprehensive loss for the period | $ | (12,055,028 | ) | $ | (18,861,697 | ) | $ | (12,254,468 | ) | $ | (15,791,169 | ) | ||
Item not affecting cash: | ||||||||||||||
Stock-based compensation | 908,550 | 158,227 | 2,790,484 | 790,243 | ||||||||||
Depreciation | 8,480 | 13,796 | 41,739 | 62,877 | ||||||||||
Loss on marketable securities | 395,800 | - | 540,475 | - | ||||||||||
Gain on acquisition of Lion Energy | - | - | (4,143,051 | ) | - | |||||||||
Impairment of intangible exploration assets | - | - | 6,969,413 | - | ||||||||||
Dilution loss on sale of subsidiary | 4,578,634 | - | 4,578,634 | - | ||||||||||
Fair value adjustment - warrants | (2,292,353 | ) | 8,469,179 | (4,835,461 | ) | 5,863,448 | ||||||||
Fair value adjustment - convertible debt | - | 9,468,887 | (2,031,704 | ) | 6,570,429 | |||||||||
Unrealized foreign exchange (gain)/loss | 5,208,612 | (240,931 | ) | 2,895,612 | (356,483 | ) | ||||||||
Changes in non-cash operating working capital: | ||||||||||||||
Accounts receivable and prepaid expenses | (474,088 | ) | 14,306 | (230,165 | ) | 16,333 | ||||||||
Accounts payable and accrued liabilities | (150,589 | ) | 87,161 | (162,556 | ) | 794,735 | ||||||||
(3,871,982 | ) | (891,072 | ) | (5,841,048 | ) | (2,049,587 | ) | |||||||
Investing: | ||||||||||||||
Property and equipment expenditures | - | (3,244 | ) | (35,850 | ) | (7,203 | ) | |||||||
Intangible exploration expenditures | (9,391,726 | ) | (8,538,194 | ) | (20,402,721 | ) | (12,871,703 | ) | ||||||
Farmout proceeds, net | - | - | 14,900,160 | - | ||||||||||
Cash received on business acquisitions, net of cash issued | - | - | 18,636,869 | - | ||||||||||
Proceeds on disposal of Canmex, net of investment in Horn | 29,923,128 | - | 29,923,128 | - | ||||||||||
Changes in non-cash investing working capital: | ||||||||||||||
Accounts receivable and prepaid expenses | 1,068,104 | 750,537 | 1,612,468 | 3,721,407 | ||||||||||
Accounts payable and accrued liabilities | (4,404,921 | ) | 3,891,654 | 2,361,416 | 2,753,177 | |||||||||
17,194,585 | (3,899,247 | ) | 46,995,470 | (6,404,322 | ) | |||||||||
Financing: | ||||||||||||||
Common shares issued, net of issuance costs | 259,129 | 23,176,474 | 3,019,716 | 23,196,477 | ||||||||||
Repayment of liability portion of convertible debt | - | (446,347 | ) | (411,220 | ) | (854,296 | ) | |||||||
Deposit of cash for bank guarantee | (723,750 | ) | (1,087,500 | ) | (2,175,000 | ) | (1,087,500 | ) | ||||||
Release of bank guarantee | 1,087,500 | - | 2,887,500 | - | ||||||||||
Changes in non-cash financing working capital: | ||||||||||||||
Accounts payable and accrued liabilities | - | - | 168,569 | - | ||||||||||
622,879 | 21,642,627 | 3,489,565 | 21,254,681 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currency | (5,036,635 | ) | 240,931 | (2,766,787 | ) | 356,483 | ||||||||
Increase in cash and cash equivalents | 8,908,847 | 17,093,239 | 41,877,200 | 13,157,255 | ||||||||||
Cash and cash equivalents, beginning of period | $ | 109,094,187 | $ | 7,209,502 | $ | 76,125,834 | $ | 11,145,486 | ||||||
Cash and cash equivalents, end of period | $ | 118,003,034 | $ | 24,302,741 | $ | 118,003,034 | $ | 24,302,741 | ||||||
Supplementary information: | ||||||||||||||
Interest paid | Nil | 446,347 | 411,220 | 854,296 | ||||||||||
Taxes paid | Nil | Nil | Nil | Nil |
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.
Consolidated Statement of Equity Attributable to Commonshareholders |
(Unaudited; United States Dollars) |
September 30, | September 30, | ||||||
2011 | 2010 | ||||||
Share capital: | |||||||
Balance, beginning of period | $ | 163,231,076 | $ | 62,712,759 | |||
Acquisition of Centric Energy | 60,165,193 | - | |||||
Acquisition of Lion Energy, net of AOC shares aquired | 21,561,185 | - | |||||
Issued on conversion of convertible debenture | 52,214,817 | - | |||||
Amended farmout agreement with Lion Energy | 5,274,675 | - | |||||
Private placement, net | - | 23,176,474 | |||||
Exercise of warrants | 3,023,756 | - | |||||
Assignment of Blocks 12A and 13T in Kenya | - | 3,243,470 | |||||
Farmout ageement finder's fees | 166,858 | 422,588 | |||||
Exercise of options | 872,349 | 29,549 | |||||
Balance, end of period | 306,509,909 | 89,584,840 | |||||
Contributed surplus: | |||||||
Balance, beginning of period | $ | 4,391,940 | $ | 3,313,753 | |||
Expiration of warrants | 3,676 | - | |||||
Acquisition of Lion Energy | 110,606 | - | |||||
Stock based compensation | 2,790,484 | 790,243 | |||||
Issuance of shares in lieu of finder's fee | (166,858 | ) | - | ||||
Exercise of options | (262,500 | ) | (9,546 | ) | |||
Balance, end of period | 6,867,348 | 4,094,450 | |||||
Deficit: | |||||||
Balance, beginning of period | $ | (56,570,350 | ) | $ | (37,076,017 | ) | |
Dilution loss through equity | (8,069,447 | ) | |||||
Net loss and comprehensive loss attributable to common shareholders | (11,339,261 | ) | (15,791,169 | ) | |||
Balance, end of period | (75,979,058 | ) | (52,867,186 | ) | |||
Total equity attributable to common shareholders | 237,398,199 | 40,812,104 | |||||
Non-controlling interest: | |||||||
Balance, beginning of period | $ | - | $ | - | |||
Non-controlling interest on disposal of Canmex | 34,604,620 | - | |||||
Net loss and comprehensive loss attributable to non-controlling interest | (915,207 | ) | - | ||||
Balance, end of period | 33,689,413 | - | |||||
Total equity | $ | 271,087,612 | $ | 40,812,104 |
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
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.
Contact Information: