VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 27, 2012) - Africa Oil Corp. ("Africa Oil", "the Company" or "AOC") (AOI.V)(AOI.ST) is pleased to announce its financial and operating results for the three and six months ended June 30, 2012.
-- In Block 10BB (Kenya), the Company and its partner Tullow Oil plc
("Tullow") completed drilling the Ngamia-1 exploration well to a total
depth of 2,340 meters and reported a significant light oil discovery.
The Ngamia-1 well encountered over 100 meters of net light oil pay in
the Upper Lokhone Sand section and an additional 43 meters of potential
oil pay in the lower Lokhone Sandstone section.
-- The Company and its operating partner on the Block, Tullow, recently
spud the joint ventures second exploration well, Twiga South-1.
Following the Ngamia-1 discovery, the partnership acquired additional
seismic to better delineate prospects along the Ngamia-1 trend. Based
upon the recently acquired 2D seismic data, additional 'Ngamia-style'
prospects were mapped in Blocks 10BB and 13T (Kenya), including Twiga
South-1. The Twiga South-1 well, in Block 13T, is planned to a total
depth of 3,114 meters and targets the same structural trend and
reservoirs as the recent Ngamia-1 oil discovery 23 kilometers to the
south.
-- Exploration activities are accelerating with operational plans to
mobilize two additional drilling rigs into the Company's areas of
operation. One of the rigs will be mobilized into Kenya, commencing
drilling operations in Block 10A on the Paipai-1 exploration well. The
second rig will be utilized in Ethiopia, drilling Sabisa-1 which is our
first exploration well on the South Omo Block.
-- The Company continues to actively acquire, process and interpret 2D
seismic over Blocks 10BA, 10BB, 12A, 13T and South Omo with three
seismic crews currently active.
-- In Puntland (Somalia), the Company, through its 44.7% ownership interest
in Horn Petroleum Corporation ("Horn"), completed drilling the Shabeel-1
exploration well and commenced drilling the Shabeel North-1 exploration
well in June of 2012. The Shabeel North-1 well has reached a total depth
of 3,945 meters and has encountered metamorphic basement at a depth of
3,919 meters. The well penetrated 149 meters of interbedded sands and
shales of the Triassic Adigrat Formation with no oil or gas shows and
only minor porosity exhibited on electric logs. Accordingly, the well is
being plugged. The Upper Cretaceous Jesomma sands did exhibit porosity
and hydrocarbon shows but produced only fresh water on a drill stem
test. These sands are similar to the Jesomma sands encountered in the
previously drilled Shabeel-1 well in respect of log response and oil and
gas shows. As a result, the Company has determined that additional
testing of these zones in the previously drilled Shabeel-1 well is also
not warranted. The Company and its partners plan to enter the next
exploration period in both the Dharoor Valley and Nugaal Valley
Productions Sharing Contracts.
-- Africa Oil ended the quarter in a strong financial position with cash of
$85.0 million and working capital of $56.1 million as compared to cash
of $109.6 million and working capital of $90.2 million at December 31,
2011.
Keith Hill, President and CEO, commented, "Africa Oil is very encouraged with the results of the Ngamia-1 well. Our next well, Twiga South-1, represents the next step in expanding the play northward into the Lockichar basin and proving up the 'string of pearls' concept along the main basin bounding fault. The arrival of the additional two drilling rigs will allow us to evaluate whether the Tertiary trend extends into southern Ethiopia and to test the Cretaceous rift in north-central Kenya. We continue to be highly optimistic that the early success will extend into these other areas. While we were disappointed that we were not able to flow oil from the first two exploration wells in our Puntland (Somalia) drilling campaign, we remain highly encouraged that all of the critical elements exist for oil accumulations, namely a working petroleum system, good quality reservoirs and thick seal rocks. We look forward to working with the Puntland government to move our exploration project to the next phase which will likely require us to focus on prospects in different areas of the basins."
Second Quarter 2012 Financial and Operating Highlights
Consolidated Statement of Net Income (Loss) and Comprehensive Income (Loss)
(United States Dollars)
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Three Three Six Six
months months Months Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
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Operating expenses
Salaries and
benefits $ 294,409 $ 321,271 $ 577,097 $ 757,888
Stock-based
compensation 587,198 425,708 1,216,794 1,881,934
Bank charges 8,688 10,751 16,896 110,139
Travel 237,386 246,309 462,159 382,961
Management fees 74,846 62,610 139,012 126,732
Office and
general 225,496 143,262 368,316 556,321
Depreciation 13,596 19,140 25,502 33,259
Professional fees 3,152,222 179,409 3,243,324 397,124
Stock exchange
and filing fees 147,027 121,838 274,333 273,282
Impairment of
intangible
exploration
assets - 6,969,413 3,114,858 6,969,413
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4,740,868 8,499,711 9,438,291 11,489,053
Gain on
acquisition of
Lion Energy - (4,143,051) - (4,143,051)
Finance income (9,979,826) (2,963,663) (1,371,178) (7,291,237)
Finance expense 122,556 144,675 13,887,325 144,675
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Net income (loss)
and comprehensive
income (loss) 5,116,402 (1,537,672) (21,954,438) (199,440)
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Net Income (loss)
and comprehensive
Income (loss)
attributable to
non-controlling
interest 6,084,874 - (7,344,002) -
Net Income (loss)
and comprehensive
income (loss)
attributable to
common
shareholders (968,472) (1,537,672) (14,610,436) (199,440)
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Net income (loss)
attributable to
common
shareholders per
share
Basic $ (0.00) $ (0.01) $ (0.07) $ (0.00)
Diluted $ (0.00) $ (0.02) $ (0.07) $ (0.03)
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Weighted average
number of shares
outstanding for
the purpose of
calculating
earnings per share
Basic 218,664,492 195,974,310 215,859,707 175,171,098
Diluted 225,318,773 198,859,135 215,859,707 181,509,432
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Operating expenses decreased $3.8 million for the three months ended June 30, 2012 compared to the same period in the previous year due mainly to a $7.0 million impairment of intangible exploration assets relating to the relinquishment of Blocks 2/6 in Ethiopia in the second quarter of 2011, offset partially by a $3.0 million increase in professional fees associated with previously completed farmout transactions.
Operating expenses decreased $2.1 million for the six months ended June 30, 2012 compared to the same period in the previous year due to a $7.0 million impairment of intangible exploration assets relating to Blocks 2/6 in Ethiopia in the second quarter of 2011, a $0.7 million decrease in stock -based compensation costs due to stock option grants in the first quarter of 2011, and reduced salary costs resulting from moving allowances in the first quarter of 2011. These reductions were offset partially by a $3.1 million impairment of intangible exploration assets relating to Blocks 7 and 11 in Mali in the first quarter of 2012 and an increase in professional fees in the second quarter of 2012 associated with previously completed farmout transactions.
The gain relating to the acquisition of Lion Energy Corp. ("Lion") in the second quarter of 2011 was a result of the Company acquiring net working capital and intangible exploration assets in excess of the consideration issued. The consideration paid was valued at $21.7 million, net of AOC shares acquired, versus working capital acquired of $20.1 million, excluding the value of AOC shares held by Lion, and the fair market value of intangible assets acquired estimated at $5.7 million.
Financial income and expense is made up of the following items:
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Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
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Loss on marketable
securities - (144,675) (123,982) (144,675)
Fair value adjustment -
warrants 9,905,593 1,763,927 (13,763,343) 2,543,108
Fair value adjustment -
convertible debt - 309,448 - 2,031,704
Interest and other
income 74,233 220,403 236,161 464,089
Foreign exchange gain
(loss) (122,556) 669,885 1,135,017 2,252,336
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Finance income 9,979,826 2,963,663 1,371,178 7,291,237
Finance expense (122,556) (144,675) (13,887,325) (144,675)
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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 three months ended March 31, 2012.
At June 30, 2012, nil warrants were outstanding in AOC. The Company incurred a $9.9 million gain on the revaluation of Horn warrants from the end of the first quarter of 2012 to the end of the second quarter of 2012 due to a significant decrease in the share price of Horn from March 31, 2012 to June 30, 2012.
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 been holding large Canadian dollar cash balances as the result of Horn's private placement, cash acquired on the Lion acquisition and warrant exercises at the end of 2010.
Consolidated Balance Sheets
(United States Dollars)
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June 30, December 31,
2012 2011
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ASSETS
Current assets
Cash and cash equivalents $ 85,032,966 $ 109,558,445
Marketable securities - 2,605,745
Accounts receivable 1,797,586 2,717,024
Prepaid expenses 929,763 599,727
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87,760,315 115,480,941
Long-term assets
Restricted cash 2,019,000 2,919,000
Property and equipment 77,445 39,395
Intangible exploration assets 242,701,532 185,671,962
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244,797,977 188,630,357
Total assets $ 332,558,292 $ 304,111,298
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LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 31,658,707 $ 23,768,545
Current portion of warrants - 1,512,811
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31,658,707 25,281,356
Long-term liabilities
Warrants 17,711,572 2,882,441
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17,711,572 2,882,441
Total liabilities 49,370,279 28,163,797
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Equity attributable to common shareholders
Share capital 322,121,171 306,509,909
Contributed surplus 13,681,438 8,425,304
Deficit (89,893,917) (75,283,481)
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245,908,692 239,651,732
Non-controlling interest 37,279,321 36,295,769
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Total equity 283,188,013 275,947,501
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Total liabilities and equity $ 332,558,292 $ 304,111,298
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The increase in total assets from December 31, 2011 to June 30, 2012 is primarily attributable to intangible exploration expenditures incurred during the quarter, a significant portion of which related to drilling of the Ngamia-1 well in Kenya and the Shabeel-1 and Shabeel North-1 wells in Puntland (Somalia).
Consolidated Statement of Cash Flows
(United States Dollars)
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Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
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Cash flows
provided by
(used in):
Operations:
Net income
(loss) and
comprehensive
income
(loss) for the
period $ 5,116,402 $ (1,537,672) $ (21,954,438) $ (199,440)
Item not
affecting
cash:
Stock-based
compensation 587,198 425,708 1,216,794 1,881,934
Share-based
expense 3,298,001 - 3,298,001 -
Depreciation 13,596 19,140 25,502 33,259
Loss on
marketable
securities - 144,675 (123,982) 144,675
Gain on
acquisition
of Lion
Energy - (4,143,051) - (4,143,051)
Impairment of
intangible
exploration
assets - 6,969,413 3,114,858 6,969,413
Fair value
adjustment -
warrants (9,905,593) (1,763,927) 13,763,343 (2,543,108)
Fair value
adjustment -
convertible
debt - (309,448) - (2,031,704)
Unrealized
foreign
exchange
(gain) loss 1,477,227 (718,405) 86,926 (2,313,000)
Changes in
non-cash
operating
working
capital (597,606) 184,187 (784,683) 231,956
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(10,775) (729,380) (1,357,679) (1,969,066)
Investing:
Property and
equipment
expenditures - (34,366) (63,552) (35,850)
Intangible
exploration
expenditures (38,248,780) (6,037,113) (60,144,428) (11,010,995)
Farmout
proceeds,
net - - - 14,900,160
Cash received
on business
acquisitions,
net of cash
issued - 17,897,909 - 18,636,869
Proceeds from
sale of
marketable
securities - - 2,689,642 -
Changes in
non-cash
investing
working
capital 7,591,134 15,192,575 9,264,247 7,310,701
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(30,657,646) 27,019,005 (48,254,091) 29,800,885
Financing:
Common shares
issued, net
of issuance
costs 13,430,798 2,502,829 24,233,132 2,760,587
Repayment of
liability
portion of
convertible
debt - - - (411,220)
Deposit of
cash for
bank
guarantee (375,000) - (375,000) (1,451,250)
Release of
bank
guarantee - 1,800,000 1,275,000 1,800,000
Changes in
non-cash
financing
working
capital - - - 168,569
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13,055,798 4,302,829 25,133,132 2,866,686
Effect of
exchange rate
changes on
cash and
cash
equivalents
denominated in
foreign
currency (1,477,227) 690,373 (46,841) 2,269,848
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Increase
(decrease) in
cash and cash
equivalents (19,089,850) 31,282,827 (24,525,479) 32,968,353
Cash and cash
equivalents,
beginning of
period 104,122,816 77,811,360 109,558,445 $ 76,125,834
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Cash and cash
equivalents,
end of period 85,032,966 $ 109,094,187 85,032,966 $ 109,094,187
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The decrease in cash in 2012 is mainly the result of intangible exploration expenditures and operating expenses offset partially by funds raised on the exercise of warrants and the non-brokered private placement completed by Horn.
Consolidated Statement of Equity
(United States Dollars)
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June 30, June 30,
2012 2011
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Share capital:
Balance, beginning of period $ 306,509,909 $ 163,231,076
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
Exercise of warrants 14,339,826 3,023,756
Farmout ageement finder's fees - 94,960
Exercise of options 1,271,436 508,471
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Balance, end of period 322,121,171 306,074,133
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Contributed surplus:
Balance, beginning of period $ 8,425,304 $ 4,391,940
Expiration of warrants - 3,676
Exercise of Horn warrants 1,147,884 -
Acquisition of Lion Energy - 110,606
Stock based compensation 1,216,794 1,881,934
Issuance of shares in lieu of finder's fee - (94,960)
Exercise of options (406,545) (157,751)
Shares to be issued in lieu of professional
fees 3,298,001 -
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Balance, end of period 13,681,438 6,135,445
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Deficit:
Balance, beginning of period $ (75,283,481) $ (56,570,350)
Net loss and comprehensive loss attributable
to common
shareholders (14,610,436) (199,440)
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Balance, end of period (89,893,917) (56,769,790)
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Total equity attributable to common
shareholders $ 245,908,692 255,439,788
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Non-controlling interest:
Balance, beginning of period $ 36,295,769 $ -
Non-controlling interest on issuance of Horn
shares 8,327,554 -
Net loss and comprehensive loss attributable
to non-controlling interest (7,344,002) -
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Balance, end of period 37,279,321 -
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Total equity $ 283,188,013 $ 255,439,788
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The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis for the three month and six months ended June 30, 2012 and the 2011 Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.africaoilcorp.com).
Outlook
The Ngamia-1 light oil discovery in the Lokichar sub-basin of the tertiary rift on Block 10BB (Kenya) has led to a significant increase in the pace of exploration. The Company and its joint venture partner Tullow aim to increase the pace of exploration in East Africa by sourcing an additional two drilling rigs before the end of 2012. One rig is intended to be mobilized to Block 10A (Kenya) to commence drilling the Paipai prospect and an additional rig is intended to be mobilized to the South Omo Block (Ethiopia) to commence drilling the Sabisa-1 prospect. The Weatherford rig will continue with drilling operations in the Lokichar sub-basin of the tertiary rift where the Twiga South-1 prospect has recently been spud, bringing the total number of rigs operating on the Company's Kenyan and Ethiopian acreage to three prior to the end of 2012. In addition, the Company plans to continue aggressively acquiring 2D seismic data focused on Blocks 10BA, 10BB, 13T, South Omo and 12A
Based on the encouragement provided by the Shabeel wells, the Company and its partners plan to enter the next exploration period in both the Dharoor Valley and Nugaal Valley PSAs which carry a commitment to drill one well in each block within an additional three year term. The current operational plan would be to contract a seismic crew to acquire additional data in the Dharoor Valley block and to hold discussions with the Puntland Government regarding drill ready prospects in the Nugaal Valley block. The focus of the Dharoor Valley block seismic program will be to delineate new structural prospects for the upcoming drilling campaign.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya, Ethiopia and Mali 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 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 neighboring Uganda. Africa Oil's recent Ngamia-1 discovery extends the Albert Graben play into Kenya where Africa Oil along with partner Tullow hold a dominant acreage position. Newly acquired seismic and gravity data 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 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.
Africa Oil Corp.
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)
africaoilcorp@namdo.com
www.africaoilcorp.com
