November 14, 2016 (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, 2016.
At September 30, 2016, the Company had cash of $490.1 million and working capital of $455.5 million. The Company’s liquidity and capital resource position improved dramatically during 2016 with the receipt of $439.4 million (inclusive of deposit received prior to 2015 year-end) upon completion of the farmout transaction with Maersk Olie og Gas A/S (“Maersk”) whereby Maersk acquired 50% of the Company’s interests in Blocks 10BB, 13T and 10BA in Kenya and the Rift Basin and South Omo Blocks in Ethiopia. Proceeds received from Maersk include $350.0 million as reimbursement of past costs incurred by the Company prior to the agreed March 31, 2015 effective date and $89.4 million representing Maersk's share of costs incurred between the effective date and closing, including a carry reimbursement of $15.0 million related to exploration expenditures. An additional $75.0 million development carry may be available to the Company upon confirmation of existing resources. Upon Final Investment Decision ("FID"), Maersk will be obligated to carry Africa Oil for an additional amount of up to $405.0 million depending on meeting certain thresholds of resource growth and timing of first oil.
Tullow Oil, Maersk, and Africa Oil (the “Joint Venture Partners”) plan to recommence drilling activities in the South Lokichar oil basin located in Blocks 10BB and 13T in Kenya in the fourth quarter of 2016 with an initial programme of four wells and the potential to extend this by a further four wells. The first two wells are expected to be the Etete and Erut prospects in the north of South Lokichar basin. Other potential prospects in the programme include further appraisal of the Ngamia and Amosing fields to target un-drilled flanks, with an aim of extending the size of these existing discoveries. In addition, the Joint Venture is planning an extensive water injection test programme in the fourth quarter of 2016 to collect data to optimise the field development plans. Africa Oil holds a 25% interest in Blocks 10BB and 13T.
In addition to progressing the full field development work in Kenya, an Early Oil Pilot Scheme (EOPS) transporting oil from South Lokichar to Mombasa, utilising road, has been approved by the Joint Venture Partners. This will provide technical and non-technical information that will assist in full field development planning. The EOPS would utilise existing upstream wells and oil storage tanks to initially produce 2,000 bopd around mid-2017, subject to agreement with National and County governments.
The Company has completed the following significant operational activities during the third quarter and to date in 2016:
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The Government of Kenya announced that it intends to run a crude oil pipeline from South Lokichar to the port of Lamu. The Joint Venture Partners have signed a Memorandum of Understanding with the Government of Kenya which confirms the intent of the parties to jointly progress the development of a Kenya crude oil pipeline. The pipeline Joint Development Agreement is currently being finalized and is expected to be signed in the fourth quarter of 2016. The Joint Venture Partners continue to progress the technical, environmental and social studies and tenders required to proceed to FEED for both the upstream and pipeline projects. Both FEED studies are expected to start in early 2017. It is expected that any Kenya standalone pipeline plan will take into consideration the potential to accommodate the transportation of additional oil resource from bordering East Africa countries.
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On May 10, 2016, the Company announced details of an updated independent assessment of the Company’s contingent resources in the South Lokichar Basin in Blocks 10BB and 13T (Kenya). The estimated gross 2C unrisked resources in the South Lokichar Basin, Kenya have increased by 150 million barrels (or 24%) since they were previously assessed during 2014 to 766 million barrels of oil (Development Pending: 754 million barrels and Development Unclarified: 12 million barrels).
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Preparation for water injection testing commenced towards the end of the third quarter of 2016 on the Amosing-3 well. The first results of the testing are expected during the fourth quarter of 2016.
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The Joint Venture Partners received a three-year extension to the Second Additional Exploration Period (expiring 18 September 2020) on Blocks 10BB and 13T.
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The Cheptuket-1 well (Block 12A) completed drilling to a depth of 3,083 meters. The well encountered oil shows, seen in cuttings and rotary sidewall cores, across a large interval of over 700 meters and post-well analysis is still in progress. A FTG survey over Block 12A has been completed to gain further data on this prospective area. Further exploration activities in Block 12A and Africa Oil's other remaining unexplored acreage, continue to be evaluated. Africa Oil holds a 20% interest in Block 12A.
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The Joint Venture Partners in the South Lokichar Basin continue to progress work aimed at sanctioning development, including: continuing studies to support reservoir modelling, additional core analysis, petrophysical analysis, and advancement of commercial work related to the development plans.
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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.
