VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 14, 2015) - Africa Oil Corp. ("Africa Oil" or the "Company") (TSX:AOI)(OMX:AOI) is pleased to announce its financial and operating results for the three months ended March 31, 2015.
During the first quarter of 2015, seven wells finalized drilling across the South Lokichar Basin and the North Turkana basin in Block 10BA, Kenya. In addition, the Company is continuing its extensive exploration and appraisal program in the South Lokichar Basin in Blocks 10BB and 13T. The extensive appraisal activities in Kenya, including the planned Extended Well Test ("EWT"), along with the development concept studies completed in 2014, will enable a draft Field Development Plan (FDP) to be prepared by end 2015. One drilling rig is currently active in the South Lokichar Basin.
The current ambition of the joint venture partnership is to position the South Lokichar Basin development, and an export pipeline, for possible sanction by the end of 2016, subject to receipt of all necessary permits and approvals. Good progress continues to be made towards development of these oil resources and as part of the ongoing collaboration between the Governments of Kenya and Uganda on the oil export pipeline for the Lake Albert and South Lokichar resources, a joint technical adviser was appointed in late 2014. The independent technical studies being undertaken by the adviser, with extensive support from the Kenya and Uganda upstream partners, are progressing rapidly and should assist in the finalization of the pipeline route.
At March 31, 2015, the Company had cash of $187.4 million and working capital of $53.2 million. During February 2015, the Company completed a brokered private placement issuing an aggregate of 57,020,270 shares at a price of SEK 18.50 per share for gross proceeds of SEK 1,055 million or $125.0 million. A cash commission was paid in the amount of $4.5 million. Subsequent to the first quarter of 2015, the Company entered into an investment agreement relating to a non-brokered private placement wherein 53,623,377 shares will be issued at a price of CAD $2.31 for gross proceeds of CAD $121.6 million (US $100 million). The Company expects the closing to occur by end of May 2015.
The Company has completed the following significant operational activities in, and subsequent to, the first quarter of 2015;
Keith Hill, President and CEO of Africa Oil, commented, "We continue to be highly encouraged by the appraisal program in the South Lokichar Basin which is above our expectations and confirms our belief that this is a world-class asset. We are working closely with our partners and the Kenyan Government to move the development project forward, particularly the export pipeline, which is the key to unlocking the value of this asset. The 3D seismic has been a great help in imaging new drilling targets in the basin and we plan to drill some high impact wells with the potential to add significant resources in the coming months."
2015 First Quarter Financial Results | ||||||||
Results of Operations | ||||||||
(unaudited) | ||||||||
Three months | Three months | |||||||
ended | ended | |||||||
March 31, | March 31, | |||||||
(thousands) | 2015 | 2014 | ||||||
Salaries and benefits | $ | 478 | $ | 458 | ||||
Stock-based compensation | 3,975 | 9,552 | ||||||
Travel | 249 | 309 | ||||||
Office and general | 119 | 184 | ||||||
Donation | - | 750 | ||||||
Depreciation | 11 | 17 | ||||||
Professional fees | 154 | 195 | ||||||
Stock exchange and filing fees | 247 | 189 | ||||||
Share of loss from equity investment | 92 | - | ||||||
Gain on loss of control | (4,155 | ) | - | |||||
Operating expenses | $ | 1,170 | $ | 11,654 | ||||
Operating expense decreased $10.5 million for the three months ended March 31, 2015 compared to the same period in the prior year. The majority of the decrease can be attributed to a reduction in stock -based compensation and a gain on the loss of control by the Company in regards to its investment in Africa Energy. The decrease in stock-based compensation expense can be mainly attributed to a significant reduction in the fair value of each option granted in the first quarter of 2015 compared to the first quarter of 2014. During the three months ended March 31, 2015, 5,194,000 stock options of AOC were issued to directors, officers and employees at an average exercise price of CAD $2.45 per option versus 5,958,500 stock options of AOC issued at an average price of CAD $8.44 per option during the three months ended March 31, 2014. The Company's investment in Africa Energy changed from a position of control to a position of significant influence during the first quarter of 2015, which requires the Company's investment in Africa Energy to be recorded as an equity investment. The accounting for the equity investment resulted in the recognition of a gain for accounting purposes of $4.2 million. In the first quarter of 2014, the Company made a $0.8 million donation to the Lundin Foundation versus nil in the first quarter of 2015.
Financial income and expense is made up of the following items: |
(Thousands of United States Dollars) |
(unaudited) |
Three months | Three months | |||||||
ended | ended | |||||||
March 31, | March 31, | |||||||
2015 | 2014 | |||||||
Fair value adjustment - warrants | $ | - | $ | (4 | ) | |||
Interest and other income | 130 | 436 | ||||||
Bank charges | (5 | ) | (6 | ) | ||||
Foreign exchange loss | (15 | ) | (116 | ) | ||||
Finance income | $ | 130 | $ | 436 | ||||
Finance expense | $ | (20 | ) | $ | (126 | ) |
At March 31, 2015, nil warrants were outstanding in the Company. Interest income decreased due to a reduction in cash held as the Company continued its active exploration activities.
Consolidated Balance Sheets |
(Thousands United States Dollars) |
(unaudited) |
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 187,391 | $ | 161,162 | |||||
Accounts receivable | 3,234 | 1,633 | |||||||
Due from related party | 108 | - | |||||||
Prepaid expenses | 1,176 | 1,276 | |||||||
191,909 | 164,071 | ||||||||
Long-term assets | |||||||||
Restricted cash | 2,525 | 1,250 | |||||||
Equity investment | 6,182 | - | |||||||
Property and equipment | 39 | 50 | |||||||
Intangible exploration assets | 862,477 | 785,177 | |||||||
871,223 | 786,477 | ||||||||
Total assets | $ | 1,063,132 | $ | 950,548 | |||||
LIABILITIES AND EQUITY | |||||||||
Current liabilities | |||||||||
Accounts payable and accrued liabilities | $ | 138,748 | $ | 153,502 | |||||
138,748 | 153,502 | ||||||||
Total liabilities | 138,748 | 153,502 | |||||||
Equity attributable to common shareholders | |||||||||
Share capital | 1,140,647 | 1,014,772 | |||||||
Contributed surplus | 42,221 | 39,947 | |||||||
Deficit | (258,484 | ) | (257,673 | ) | |||||
Total equity attributable to common shareholders | 924,384 | 797,046 | |||||||
Total liabilities and equity attributable to common shareholders | $ | 1,063,132 | $ | 950,548 |
Intangible exploration assets increased during the quarter by $77.3 million as a result of the Company continuing to invest in its oil and gas properties in East Africa. The Company continues to finance its activities primarily through equity and completed a private placement during the quarter in which 57,020,270 shares were issued. The Company is debt free.
Consolidated Statement of Cash Flows | ||||||||||
(Thousands United States Dollars) | ||||||||||
(unaudited) | ||||||||||
For the three months ended | March 31, | March 31, | ||||||||
2015 | 2014 | |||||||||
Cash flow s provided by (used in): | ||||||||||
Operations: | ||||||||||
Net loss and comprehensive loss for the period | $ | (1,060 | ) | $ | (11,344 | ) | ||||
Items not affecting cash: | ||||||||||
Stock-based compensation | 3,975 | 9,552 | ||||||||
Depreciation | 11 | 17 | ||||||||
Gain on loss of control | (4,155 | ) | - | |||||||
Share of loss from equity investment | 92 | - | ||||||||
Fair value adjustment - warrants | - | 4 | ||||||||
Unrealized foreign exchange loss | 15 | 117 | ||||||||
Changes in non-cash operating working capital | (977 | ) | (731 | ) | ||||||
(2,099 | ) | (2,385 | ) | |||||||
Investing: | ||||||||||
Property and equipment expenditures | - | (8 | ) | |||||||
Intangible exploration expenditures | (77,300 | ) | (92,426 | ) | ||||||
Farmout proceeds | - | 13,207 | ||||||||
Equity investment | (1,000 | ) | - | |||||||
Reduction of cash from change of control | (254 | ) | - | |||||||
Changes in non-cash investing working capital | (16,002 | ) | 21,553 | |||||||
(94,556 | ) | (57,674 | ) | |||||||
Financing: | ||||||||||
Common shares issued | 124,174 | 1,750 | ||||||||
Deposit of cash for bank guarantee | (1,275 | ) | (450 | ) | ||||||
122,899 | 1,300 | |||||||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currency | (15 | ) | (117 | ) | ||||||
Increase (decrease) in cash and cash equivalents | 26,229 | (58,876 | ) | |||||||
Cash and cash equivalents, beginning of period | $ | 161,162 | $ | 493,209 | ||||||
Cash and cash equivalents, end of period | $ | 187,391 | $ | 434,333 | ||||||
Supplementary information: | ||||||||||
Interest paid | Nil | Nil | ||||||||
Income taxes paid | Nil | Nil |
Investing activities related to the Company's oil and gas activities in East Africa accounted for majority of the cash consumption of the Company. Cash inflows during the quarter are primarily related to the private placement in which 57,020,270 shares were issued for gross proceeds of $125 million.
The following table breaks down the material components of intangible exploration expenditures for the three months ended March 31, 2015 and 2014:
For the three months ended | March 31, 2015 | March 31, 2014 | |||||||||||||||||||||||
(thousands) | Kenya | Ethiopia | Puntland | Total | Kenya | Ethiopia | Puntland | Total | |||||||||||||||||
Drilling and completion | $ | 60,602 | $ | (2,177 | ) | $ | - | $ | 58,425 | $ | 59,945 | $ | 11,230 | $ | 76 | $ | 71,251 | ||||||||
Development studies | 2,150 | - | - | 2,150 | - | - | - | - | |||||||||||||||||
Exploration surveys and studies | 4,568 | 18 | - | 4,586 | 8,925 | 939 | 14 | 9,878 | |||||||||||||||||
PSA and G&A related | 11,809 | 330 | - | 12,139 | 8,416 | 2,353 | 528 | 11,297 | |||||||||||||||||
Total | $ | 79,129 | $ | (1,829 | ) | $ | - | $ | 77,300 | $ | 77,286 | $ | 14,522 | $ | 618 | $ | 92,426 |
The Company incurred $79.1 million of intangible exploration expenditures in Kenya for the three months ended March 31, 2015. The majority of drilling expenditures related to the Company's portion of drilling costs regarding an exploration well at Engomo (Block 10BA) and an extensive appraisal program in the South Lokichar Basin. The majority of development study spend relates to progressing towards project sanction for the South Lokichar Basin. A $1.8 million reduction of intangible exploration expenditures in Ethiopia for the three months ended March 31, 2015 was the result of adjustments made to previously accrued drilling expenditures. PSA and G&A related costs include personnel and office running costs, local community development expenditures, land surface fees, annual rental fees and other PSA fees.
Consolidated Statement of Equity | |||||||||
(Thousands United States Dollars) | |||||||||
(unaudited) | |||||||||
For the three months ended | March 31, | March 31, | |||||||
2015 | 2014 | ||||||||
Share capital: | |||||||||
Balance, beginning of period | $ | 1,014,772 | $ | 1,007,414 | |||||
Private placement, net | 120,329 | - | |||||||
Exercise of options | 5,546 | 2,539 | |||||||
Balance, end of period | 1,140,647 | 1,009,953 | |||||||
Contributed surplus: | |||||||||
Balance, beginning of period | $ | 39,947 | $ | 24,396 | |||||
Stock based compensation | 3,975 | 9,552 | |||||||
Exercise of options | (1,701 | ) | (789 | ) | |||||
Balance, end of period | 42,221 | 33,159 | |||||||
Deficit: | |||||||||
Balance, beginning of period | $ | (257,673 | ) | $ | (150,736 | ) | |||
Net loss and comprehensive loss attributable to common shareholders | (811 | ) | (11,138 | ) | |||||
Balance, end of period | (258,484 | ) | (161,874 | ) | |||||
Total equity attributable to common shareholders | 924,384 | 881,238 | |||||||
Non-controlling interest: | |||||||||
Balance, beginning of period | $ | - | $ | 48,773 | |||||
Net loss and comprehensive loss attributable to non-controlling interest | (249 | ) | (206 | ) | |||||
Derecognition of non-controlling interest on loss of control | 249 | - | |||||||
Balance, end of period | - | 48,567 | |||||||
Total equity | $ | 924,384 | $ | 929,805 |
The Company's unaudited consolidated financial statements, notes to the financial statements, management's discussion and analysis for the three months ended March 31, 2015 and 2014, and the 2014 Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.africaoilcorp.com).
Outlook
In light of the current and forecast short term oil price environment, the Company has worked closely with Tullow to focus the 2015 work program and budget on advancing the discovered basin development in Blocks 10BB and 13T (Kenya) by undertaking activities aimed at increasing resource certainty and progressing development studies with the intent of submitting a FDP around the end of 2015. The 2015 work program will include multiple appraisal and exploration wells in the discovered basin, EWT's in the
Amosing and Ngamia fields and reservoir and engineering studies (including extensive core analysis). In addition, the Africa Oil - Tullow joint venture will continue to work closely with the Government of Kenya and the Uganda Upstream partners to advance the regional oil export pipeline.
Outside of the South Lokichar Basin, the Africa Oil - Tullow joint venture new basin opening exploration program potentially includes the Cheptuket well in Block 12A (Kenya), a PSC commitment well that needs to be drilled before September 2016. Outside of the Africa Oil - Tullow joint venture blocks, the 2015 work program is focused on the Rift Basin Area Block in Ethiopia where a 2D seismic program of a minimum 400 kilometer land and lake survey has commenced acquisition.
The Company also announces that the 2015 Annual General and Special Meeting (the "Meeting") of the shareholders of Africa Oil will be held at t he Four Seasons Hotel, 650 Howe Street, Vancouver, British Columbia, on Thursday, June 11, 2015 at the hour of 10:00 a.m. (Pacific Time) for the following purposes:
The record date for the Annual General and Special Meeting is April 24, 2015. The full Meeting notice and accompanying management information circular are available under the Company's profile on SEDAR at www.sedar.com.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya and Ethiopia as well as Puntland (Somalia) through its 41% equity investment in Africa Energy Corp. The Company is listed on the Toronto Stock Exchange and on Nasdaq Stockholm under the symbol "AOI".
FORWARD LOOKING INFORMATION
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
The information in this release is subject to the disclosure requirements of Africa Oil under the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. This information was publicly communicated on May 14, 2015 at 2:00 p.m. Pacific Time.
Contact Information: