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 September 30, 2013.
-- Africa Oil ended the quarter with cash of $133.3 million and working
capital of $77.6 million. Subsequent to the end of the quarter, the
Company completed a brokered private placement issuing an aggregate of
56,505,217 common shares at a price of 51.75 Swedish Kronas ("SEK") per
common share for net proceeds of $440 million significantly improving
the Company's liquidity and capital resource position.
-- In September, the Company announced details of an updated independent
assessment of the
Company's contingent and prospective resources on its Kenyan and
Ethiopian exploration properties. The effective date of this assessment
was 31 July 2013 and it was carried out in accordance with the standards
established by the Canadian Securities Administrators in National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
The assessment confirmed that the discovered basin in Northern Kenya
contains gross contingent resources of 368 million barrels of oil, an
increase of 557% over the assessment conducted in mid 2012. In addition,
gross risked prospective resources of 1,213 million barrels of oil are
estimated for the discovered basin in Northern Kenya. Net Contingent
Resources for the Company are estimated at 231 million barrels of oil.
Net Unrisked Prospective Resources for the Company are estimated at
9,647 million barrels of oil (excluding Puntland) and Net Risked
Prospective Resources at 1,294 million barrels of oil (excluding
Puntland).
-- The Company has increased the pace of exploration significantly and
expects to exit the year with five drilling rigs and one testing and
completion rig operating in the region. It is anticipated that eight
exploration wells and two multi-zone well tests will have been completed
during 2013, and the Company will exit the year with four wells drilling
and two wells under test.
-- All operations in Block 10BB and Block 13T in Northern Kenya were
temporarily suspended on October 28, 2013 as a precautionary measure
following demonstrations by members of local communities. Operations
resumed on November 8, 2013 after successful discussions relating to the
operating environment with central and regional government and local
community leaders. These discussions led to the signing of a Memorandum
of Understanding which clearly lays out a plan for the Government of
Kenya, county government, local communities in Northern Kenya and the
Tullow-Africa Oil joint venture to work together inclusively over the
long-term and to ensure operations can continue without disruption in
the future.
-- During the first half of the year, the Company completed a series of
well tests at both Twiga South-1 and Ngamia-1 on Blocks 13T and 10BB in
Kenya, respectively. These successful well tests confirmed over 5,000
barrels of oil per day ("bopd") flow potential per well and a doubling
of our previous estimates of net oil pay. Transient Pressure Analysis
has been conducted on the Twiga South-1 and Ngamia-1 well tests. No
pressure depletion was recorded over the duration of the tests. Flow
periods ranged from 0.5 to 2.5 days and build up periods ranged between
three to twelve days.
-- In July, the Company announced a new major oil discovery at Etuko-1.
Etuko-1 is located 14 kilometers east of Twiga South-1 in Block 10BB and
is the first test of the Basin Flank Play in the eastern part of the
discovered basin in Northern Kenya. The well encountered approximately
40 meters of net oil pay in the Auwerwer and Upper Lokhone targets and
approximately 50 meters of additional potential net pay in the Lower
Lokhone interval. Well testing will commence later in November utilizing
one of the recently mobilized Tullow-Africa Oil joint venture rigs.
Following testing operations, an appraisal well will be drilled from the
same well pad to test a shallow Auwerwer zone that was not able to be
properly evaluated in the Etuko-1 discovery well.
-- In September, the Company announced a new oil discovery at Ekales-1
located in the Basin Bounding Fault Play between the Ngamia-1 and Twiga
South-1 discoveries. Logs indicate a potential pay zone of 60 to 100
meters which will be confirmed by flow testing. Well testing will
commence later in November utilizing the recently mobilized Tullow-
Africa Oil joint venture testing and completion rig.
-- In November, the Company announced a new oil discovery at Agete-1
located seven kilometers north of the Twiga South-1 discovery along the
Basin Bounding Fault Play in Block 13T. The Agete-1 well is the fifth
consecutive oil discovery by the Tullow-Africa Oil joint venture in the
Northern Kenyan basin. Logs indicate a significant oil column with an
estimated 100 meters of net oil pay in good quality sandstone
reservoirs. Well testing will commence early in 2014 utilizing the
recently mobilized Tullow-Africa Oil joint venture testing and
completion rig.
-- The Amosing-1 exploration well, located south of the Ngamia discovery
and also along the Basin Bounding Fault Play, is scheduled to commence
later this month.
-- The Ewoi-1 exploration is scheduled to commence before the end of the
year, and will be the second exploration well drilled by the Tullow-
Africa Oil joint venture in the Basin Flank Play in the eastern part of
the discovered basin in Northern Kenya.
-- The excellent results to date onshore Kenya are an important step
towards understanding the overall potential and commerciality of the
discovered basin in Northern Kenya. Resources discovered to date are of
a scale that the Tullow-Africa Oil joint venture will initiate
discussions with the Government of Kenya and other relevant stakeholders
to consider development options. These discussions include consideration
of a "start-up phase" oil production system with potential to deliver
significant production rates with oil export via road or rail in advance
of a full-scale pipeline development. It is understood that discussions
are ongoing between the Governments of Kenya, Uganda and Sudan regarding
a regional crude oil pipeline export system to Lamu in Kenya and the
Government of Kenya has indicated that it will issue an Expression of
Interest within the next few months seeking parties willing to fund,
build and operate the pipeline system.
-- To facilitate development activities in Blocks 13T and 10BB in parallel
with exploration and appraisal, an "Area of Interest" (AOI) encompassing
the Basin discoveries and further prospects in Blocks 13T and 10BB, was
agreed with the Government of Kenya in February 2013. This agreement
allows a multiple field approach to development of the resources while
permitting the continued focus on exploration to increase the resource
base while concurrently appraising discoveries.
-- In the first quarter of 2013, the Company and its operating partners on
Block 10A completed drilling the Paipai-1 exploration well. The Paipai-1
well tested a large four-way closed structure with Cretaceous-age
sandstone targets at multiple depths. Paipai-1 spudded in September 2012
and completed drilling in the first quarter of 2013 to a total depth of
4,255 meters. Light hydrocarbons were encountered while drilling a 55
meter thick gross sandstone interval. Attempts to sample the reservoir
fluid were unsuccessful and the hydrocarbons encountered while drilling
were not recovered to surface. The Company and its partners were unable
to test the well at the time due to the unavailability, in country, of
testing equipment capable of handling the higher reservoir pressures
encountered at this depth. As a result, the well has been temporarily
suspended pending further data evaluation. A well test for Paipai-1 is
being scheduled for 2014.
-- In July, the Company reported that the Sabisa-1 well on the South Omo
Block in Ethiopia, the most northerly well drilled on the Tertiary rift
trend to date, had confirmed a viable hydrocarbon system with oil and
heavy gas shows. Based on the encouragement of the results, the decision
was made to drill Tultule-1 as the next well on the South Omo Block.
This well is currently drilling and results are expected in December.
Preparations are also underway to drill two exploration wells in the
Chew Bahir basin, located to the east of the South Omo Block, in
2014.The Company and its partner are currently drilling the Bahasi-1
exploration well in Block 9, and expect to complete the well in
November. Block 9 is in the Cretaceous rift basin on trend with the
South Sudan oil fields and the play concept was confirmed by the recent
Paipai-1 well drilled in Block 10A.
-- The Company and its joint operating partners on Blocks 7/8 are currently
drilling the El Kuran-3 appraisal well which is expected to complete
around end November. Should the well show encouragement, a multi-zone
acid fracture stimulation well test is planned during 2014.
-- The Company and its partners plan to continue to actively acquire,
process and interpret an extensive 2D seismic program totaling
approximately 2,648 kilometers during 2013 over Blocks 10BA, 10BB, 12A,
13T in Kenya and the South Omo Block in Ethiopia with two onshore and
one offshore 2D seismic crews operating throughout the remainder of the
year. A third onshore 2D seismic crew operating in the South Omo Block
was released in May 2013 after completing 1,174 kilometers of 2D
seismic. In addition, the Company and its partner in Blocks 10BB and 13T
have mobilized a 3D seismic crew to begin a 550 square kilometer 3D
seismic survey over the Ngamia-1 and Twiga South-1 discoveries.
Keith Hill, President and CEO, commented, "Africa Oil is very optimistic
regarding the potential of the discovered basin in Northern Kenya given our
early exploration success. Completion of the recent private placement will
enable Africa Oil to focus on the growth of its existing contingent resource
base in the discovered basin in Northern Kenya, but also to drill potential
basin-opening wells in the Turkana, Chew Bahir, Kerio, and Anza basins within
Kenya and Ethiopia which could generate significant shareholder value."
Third Quarter 2013 Financial and Operating Highlights
Consolidated Statement of Net Income (Loss) and Comprehensive Income (Loss)
(Thousands of United States Dollars)
----------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
----------------------------------------------------------------------------
Operating expenses
Salaries and
benefits $ 472 $ 404 $ 1,512 $ 981
Stock-based
compensation 2,847 2,572 10,632 3,789
Travel 441 347 1,168 810
Office and general 375 212 835 717
Donation - - 100 -
Depreciation 15 11 40 37
Professional fees 130 411 324 3,655
Stock exchange and
filing fees 297 77 659 351
Impairment of
intangible
exploration assets - - - 3,115
----------------------------------------------------------------------------
4,577 4,034 15,270 13,455
Finance income (1,233) (17,895) (3,929) (5,502)
Finance expense 5 10 1,543 151
----------------------------------------------------------------------------
Net income (loss)
and comprehensive
income (loss) (3,349) 13,851 (12,884) (8,104)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss)
and comprehensive
income (loss)
attributable to
non-controlling
interest (98) 12,483 1,504 5,139
Net income (loss)
and comprehensive
income (loss)
attributable to
common shareholders (3,251) 1,368 (14,388) (13,243)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss)
attributable to
common shareholders
per share
Basic $ (0.01) $ 0.01 $ (0.06) $ (0.06)
Diluted $ (0.01) $ 0.01 $ (0.06) $ (0.06)
----------------------------------------------------------------------------
Weighted average
number of shares
outstanding for the
purpose of
calculating
earnings per share
Basic 252,960,247 220,952,010 252,623,459 217,566,174
Diluted 252,960,247 226,664,381 252,623,459 217,566,174
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating expenses increased $0.5 million for the three months ended September
30, 2013 compared to the prior year. The increase occurred for all operating
expense categories, with the exception of professional fees, and can be
attributed to increased headcount and operational activity. Professional fees
decreased in the third quarter of 2013 from the same period in 2012, as
professional fees were incurred the third quarter of 2012 in respect of
previously completed farmout transactions.
Operating expenses increased $1.8 million for the nine months ended September
30, 2013 compared to the prior year due mainly to an increase of $6.8 million in
stock-based compensation relating to the 5,673,500 options granted in the
current period. The increase was offset by a decrease of $3.3 million in
professional fees and $3.1 million in impairment of intangible exploration
assets relating to the abandonment of Blocks 7 and 11 in Mali during the prior
period. Professional fees were high in the nine months ended September 30, 2012
due to shares issued in respect of previously completed farmout transactions.
The remaining $1.4 million increase can be mainly attributed to increased
salary, travel and office related costs associated with increased headcount and
operational activity.
Financial income and expense is made up of the following items:
----------------------------------------------------------------------------
Three Three
months months Nine months Nine months
ended ended ended ended
September September September September
30, 30, 30, 30,
2013 2012 2013 2012
----------------------------------------------------------------------------
Loss on marketable
securities - - - (124)
Fair value adjustment -
warrants 205 17,279 3,087 3,516
Interest and other income 161 66 842 301
Bank charges (5) (10) (18) (27)
Foreign exchange gain
(loss) 867 550 (1,525) 1,685
----------------------------------------------------------------------------
Finance income 1,233 17,895 3,929 5,502
Finance expense (5) (10) (1,543) (151)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The loss on revaluation of marketable securities is the result of a decrease in
the value of 10 million shares held in Encanto Potash Corp which were acquired
as part of the acquisition of Lion. These shares were sold during the first
quarter of 2012.
At September 30, 2013, nil warrants were outstanding in AOC and 9.5 million
warrants were outstanding in Horn. AOC holds 2.2 million of the warrants
outstanding in Horn. The Company recorded a $3.1 million gain on the revaluation
of warrants for the nine months ended September 30, 2013 due to a reduction in
the volatility of the shares of Horn combined with a reduction in the remaining
life of the warrants. The Company will record fair market value adjustments on
the Horn warrants until they are exercised or they expire (9,375,000 expire June
8, 2014, 156,248 expire June 11, 2014, and 15,000 expire June 18, 2014).
Interest income increased in the first quarter of 2013 due to a significant
increase in cash late in the fourth quarter of 2012 as a result of cash received
from the non-brokered private placement in December of 2012. Interest income
decreased since the first quarter of 2013 due to a reduction in cash in cash
held throughout 2013.
The foreign exchange gains and losses are the direct result of changes in the
value of the Canadian dollar in comparison to the US dollar. The Company has
recorded foreign exchange gains when the Canadian dollar has strengthened versus
the US dollar, and has recorded losses when the Canadian dollar has weakened
versus the US dollar.
Consolidated Balance Sheets
(Thousands United States Dollars)
----------------------------------------------------------------------------
September 30, December 31,
2013 2012
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 133,316 $ 272,175
Accounts receivable 1,574 2,848
Prepaid expenses 1,336 1,124
----------------------------------------------------------------------------
136,226 276,147
Long-term assets
Restricted cash 1,625 1,119
Property and equipment 111 82
Intangible exploration assets 439,577 282,109
----------------------------------------------------------------------------
441,313 283,310
Total assets $ 577,539 $ 559,457
----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 58,578 $ 36,188
Current portion of warrants 29 2,288
----------------------------------------------------------------------------
58,607 38,476
Long-term liabilities
Warrants - 828
----------------------------------------------------------------------------
- 828
Total liabilities 58,607 39,304
----------------------------------------------------------------------------
Equity attributable to common
shareholders
Share capital 560,059 558,555
Contributed surplus 22,282 12,123
Deficit (112,464) (98,076)
----------------------------------------------------------------------------
469,877 472,602
Non-controlling interest 49,055 47,551
----------------------------------------------------------------------------
Total equity 518,932 520,153
----------------------------------------------------------------------------
Total liabilities and equity $ 577,539 $ 559,457
----------------------------------------------------------------------------
The increase in total assets from December 31, 2012 to September 30, 2013 is
primarily attributable to intangible asset expenditures incurred during the year
in Kenya, Ethiopia and Puntland (Somalia).
Consolidated Statement of Cash Flows
(Thousands United States Dollars)
----------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
----------------------------------------------------------------------------
Cash flows provided
by (used in):
Operations:
Net income (loss)
and comprehensive
income (loss) for
the period $ (3,349) $ 13,851 $ (12,884) $ (8,104)
Items not affecting
cash:
Stock-based
compensation 2,847 2,572 10,632 3,789
Share-based expense - 465 - 3,763
Depreciation 15 11 40 37
Loss on marketable
securities - - - 124
Impairment of
intangible
exploration assets - - - 3,115
Fair value
adjustment -
warrants (205) (17,279) (3,087) (3,516)
Unrealized foreign
exchange (gain)
loss (2,547) 158 (312) 245
Changes in non-cash
operating working
capital (66) (487) (862) (1,271)
----------------------------------------------------------------------------
(3,305) (709) (6,473) (1,818)
Investing:
Property and
equipment
expenditures (28) (9) (69) (73)
Intangible
exploration
expenditures (62,898) (30,144) (157,468) (90,289)
Farmout proceeds - 1,127 - 1,127
Proceeds from sale
of marketable
securities - - - 2,442
Changes in non-cash
investing working
capital 17,487 (5,040) 24,314 4,225
----------------------------------------------------------------------------
(45,439) (34,066) (133,223) (82,568)
Financing:
Common shares
issued 26 4,366 1,031 28,599
Deposit of cash for
bank guarantee - - (1,250) (375)
Release of bank
guarantee - 900 744 2,175
----------------------------------------------------------------------------
26 5,266 525 30,399
Effect of exchange
rate changes on
cash and cash
equivalents
denominated in
foreign currency 2,547 (108) 312 (155)
----------------------------------------------------------------------------
Decrease in cash and
cash equivalents (46,171) (29,617) (138,859) (54,142)
Cash and cash
equivalents,
beginning of period 179,487 85,033 $ 272,175 $ 109,558
----------------------------------------------------------------------------
Cash and cash
equivalents, end of
period 133,316 $ 55,416 $ 133,316 $ 55,416
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Supplementary
information:
Interest paid Nil Nil Nil Nil
Income taxes paid Nil Nil Nil Nil
----------------------------------------------------------------------------
The decrease in cash for the three and nine months ended September 30, 2013 is
mainly the result of intangible exploration expenditures and cash-based
operating expenses.
Consolidated Statement of Equity
(Thousands United States Dollars)
----------------------------------------------------------------------------
September 30, September 30,
2013 2012
----------------------------------------------------------------------------
Share capital:
Balance, beginning of period $ 558,555 $ 306,510
Exercise of w arrants - 14,340
Shares issued in lieu of professional fees - 3,763
Exercise of options 1,504 7,330
--------------------------------------------------------------------------
Balance, end of period 560,059 331,943
--------------------------------------------------------------------------
Contributed surplus:
Balance, beginning of period $ 12,123 $ 8,425
Exercise of Horn w arrants - 1,148
Stock based compensation 10,632 3,789
Exercise of options (473) (2,351)
--------------------------------------------------------------------------
Balance, end of period 22,282 11,011
--------------------------------------------------------------------------
Deficit:
Balance, beginning of period $ (98,076) $ (75,283)
Net loss and comprehensive loss attributable
to common shareholders (14,388) (13,243)
--------------------------------------------------------------------------
Balance, end of period (112,464) (88,526)
--------------------------------------------------------------------------
Total equity attributable to common
shareholders $ 469,877 254,428
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Non-controlling interest:
Balance, beginning of period $ 47,551 $ 36,296
Non-controlling interest on issuance of Horn
shares - 8,579
Net income and comprehensive income
attributable to non-controlling interest 1,504 5,139
--------------------------------------------------------------------------
Balance, end of period 49,055 50,014
--------------------------------------------------------------------------
Total equity $ 518,932 $ 304,442
--------------------------------------------------------------------------
--------------------------------------------------------------------------
The Company's consolidated financial statements, notes to the financial
statements, management's discussion and analysis for the three and nine months
ended September 30, 2013 and the 2012 Annual Information Form have been filed on
SEDAR (www.sedar.com) and are available on the Company's website
(www.africaoilcorp.com).
Outlook
The Company has recently increased the pace of exploration significantly, and at
a point in the fourth quarter of the year, it will have seven rigs operating.
Completion of the recent brokered private placement has increased the Company's
liquidity and capital resource position by approximately $440 million which is
expected to fund the Company's portion of exploration, appraisal and development
activities until mid 2015.
The near term focus of exploration is to continue drilling and testing wells in
the discovered basin in Northern Kenya improving on recent cost efficiencies
realized while continuing to grow the Company's contingent resource base, and to
drill potential basin-opening wells in the Turkana, Chew Bahir, Kerio, and Anza
basins within Kenya and Ethiopia.
The excellent results to date onshore Kenya are an important step towards
understanding the overall potential and commerciality of the discovered basin in
Northern Kenya. Resources discovered to date are of a scale that the
Tullow-Africa Oil joint venture will initiate discussions with the Government of
Kenya and other relevant stakeholders to consider development options. These
discussions include consideration of a "start-up phase" oil production system
with potential to deliver significant production rates with oil export via road
or rail in advance of a full-scale pipeline development. It is understood that
discussions are ongoing between the Governments of Kenya, Uganda and Sudan
regarding a regional crude oil pipeline export system to Lamu in Kenya and the
Government of Kenya has indicated that it will issue an Expression of Interest
within the next few months seeking parties willing to fund, build and operate
the pipeline system.
By mid 2015, the Company expects to have drilled wells in five new basins,
drilled all key prospects in the discovered basin in Northern Kenya, fully
appraised the Ngamia and Twiga discoveries, and have a defined understanding of
development.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya and
Ethiopia as well as Puntland (Somalia) through its 45% equity interest in Horn
Petroleum Corporation. 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 250,000 square kilometers. The East African Rift
Basin system is one of the last of the great rift basins to be explored. Five
new significant discoveries have been announced in the Northern Kenyan basin
which the Company holds a 50% interest along with operator Tullow Oil plc. 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 Pareto Ohman AB.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Africa Oil Corp
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)
africaoilcorp@namdo.com
www.africaoilcorp.com
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