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Share Name | Share Symbol | Market | Type |
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Africa Oil Corp. | TSXV:AOI | TSX Venture | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0 | - |
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Mar 27, 2014) - Africa Oil Corp. (TSX-VENTURE:AOI)(OMX:AOI) ("Africa Oil" or the "Company") is pleased to provide year-end financial results and an update on its operations in Kenya and Ethiopia.
Seven rigs are currently active on the Company's blocks including four rigs on Blocks 13T and 10BB in the Tertiary Lokichar Basin in Western Kenya, one rig on Block 9 in the Cretaceous Anza rift in Northern Kenya, one rig in the South Omo Block in the Tertiary basin in Southern Ethiopia and one rig in Block 8 in the Jurassic/Triassic basin in the Somali region of Ethiopia.
In the Lokichar Basin, two rigs are drilling exploration/appraisal wells and two rigs are conducting testing operations. Africa Oil Kenya BV holds a 50% working interest in these blocks along with partner Tullow Oil plc who holds the remaining interest and is operator.
The Weatherford 804 rig has completed drilling operations on the Emong prospect. The well was located approximately four kilometres northwest of the Ngamia-1 field discovery and was drilled to a total depth of 1,394 metres. It encountered oil and gas shows while drilling, however the Auwerwer sandstones that are the primary reservoirs in the Ngamia field were thin and poorly developed in Emong-1 and the well was plugged and abandoned. It is believed that the reservoir was poorly developed due to its proximity to the basin bounding fault and its location within what appears to be a local isolated slumped fault margin. The results are not expected to impact the thickness and quality of reservoir throughout the main Ngamia field area. This rig will now move to the Ekunyuk prospect on the eastern flank play which is on trend with recent discoveries at Etuko and Ewoi.
The Sakson PR-5 rig is continuing drilling operations on the Twiga-2 updip appraisal well and is expected to be completed in mid-April. This rig will then move to drill a downdip appraisal of the Amosing discovery, which appears to have high quality reservoir and may be one of the largest discoveries in the basin to date.
Testing operations have been completed on the Ekales-1 well using the SMP-5 rig and have confirmed this significant discovery. Two DST's were completed and flowed a combined rate of over 1,000 barrels of oil per day from a combined 41 metre net pay interval. The upper zone had a very high productivity index of 4.3 stb/d/psi. This rig will next test the Agete discovery.
The Etuko-2 well was drilled by the PR Marriott 46 rig as an exploration well to test the upper Auwerwer sands overlying the previously announced Etuko discovery. The well penetrated a potential significant oil column identified from formation pressure data and oil shows while drilling and in core, with good quality reservoir, but flowed only water on drill stem test. The results are considered inconclusive and analysis is underway to consider further options to evaluate this reservoir. This rig will next drill the Ngamia-2 appraisal well.
The Great Wall 190 rig is drilling ahead on schedule and budget at the Sala prospect in the Cretaceous Anza graben. This well is operated by Africa Oil Kenya B.V. which holds a 50% interest and operatorship with partner Marathon Kenya Limited B.V., a subsidiary of Marathon Oil Corporation holding the remaining 50%. The well is currently at approximately 1500 metres depth and drilling ahead. Results of this well are expected to be announced in the second quarter.
The Shimela prospect in the South Omo Block in Ethiopia is expected to spud before the end of March and will target a new basin in the Tertiary trend, the Chew Bahir Basin. Numerous potential hydrocarbon indicators have been observed on seismic in this basin and if this well is successful in proving up an active petroleum system and thus "opening" the basin, numerous other prospects identified in the basin will be de-risked. This rig will next drill the Gardim prospect in the southern portion of the basin. Both wells are basin bounding fault prospects similar to the Ngamia/Amosing/Twiga discoveries in the Lokichar basin.
The El Kuran-3 well, in the Somali region of Ethiopia, has reached a total depth of 3,528 metres and is currently undergoing logging and evaluation prior to taking a decision on the way forward on the well. There have been numerous oil and gas shows in the well which is a follow up to a discovery made by Tenneco in the 1970's. There appears to be a significant amount of oil and gas in several intervals and the primary issues are the quality of the reservoir and potential commerciality given the remote location.
Keith Hill, President and CEO of Africa Oil, commented, "We are very pleased that all wells in the Lokichar Basin continue to find hydrocarbons indicating a very rich prolific source rock. We continue to gather key reservoir data through drilling and testing, with particular emphasis on understanding the distribution of the most productive reservoirs in the basin. This understanding should be enhanced with the addition of the 3D seismic survey which should allow us to develop a comprehensive reservoir model which will be essential for moving the Lokichar basin into development. We are on track to drill six very exciting potential basin-opening wells in 2014 including wildcat wells in the Chew Bahir, West Turkana, and South Kerio Basins, and along the eastern flank of the Anza Basin in addition to at least three additional exploration targets in the Lokichar Basin."
The Company is also actively pursuing pre-development studies in the Block 10BB/13T area including commencement of the front end engineering design (FEED) and environmental and social impact assessment (ESIA) studies for the pipeline, export terminal and field facilities. It is the goal of the partnership to conclude these studies and achieve project sanction by the end of 2015/early 2016.
Significant Events in 2013
2013 Financial and Operating Highlights
Consolidated Statement of Net Income (Loss) and Comprehensive Income (Loss) (Thousands of United States Dollars)
For the years ended | December 31, | December 31, | |
2013 | 2012 | ||
Operating expenses | |||
Salaries and benefits | $ 5,040 | $ 3,665 | |
Stock-based compensation | 12,746 | 4,943 | |
Travel | 1,588 | 1,469 | |
Office and general | 1,160 | 1,012 | |
Donation | 1,151 | 2,313 | |
Depreciation | 55 | 48 | |
Professional fees | 786 | 4,187 | |
Stock exchange and filing fees | 969 | 916 | |
Impairment of intangible exploration assets | 22,874 | 3,127 | |
46,369 | 21,680 | ||
Finance income | (4,141) | (1,727) | |
Finance expense | 9,210 | 164 | |
Net loss and comprehensive loss | 51,438 | 20,117 | |
Net income and comprehensive income attributable to non-controlling interest | (1,222) | (2,676) | |
Net loss and comprehensive loss attributable to common shareholders | 52,660 | 22,793 | |
Net loss attributable to common shareholders per share | |||
Basic | $ 0.20 | $ 0.10 | |
Diluted | $ 0.20 | $ 0.10 | |
Weighted average number of shares outstanding for the purpose of calculating earnings per share | |||
Basic | 263,081,763 | 220,664,278 | |
Diluted | 263,081,763 | 220,664,278 |
Operating expenses increased $24.7 million for the year ended December 31, 2013 compared to the prior year. The Company recorded a $22.9 million impairment of intangible exploration assets relating to Block 10A in Kenya in 2013, while in 2012, the Company recorded a $3.1 million impairment of intangible exploration assets relating to Blocks 7 and 11 in Mali. The increase of $7.8 million in stock -based compensation is attributable to an increase in the number of options granted in 2013 compared to 2012. The $3.4 million decrease in professional fees was mainly the result of 420,000 common shares issued in 2012 as a settlement of claimed professional fees relating to previously completed farmout transactions. The $1.4 million increase in salary and benefits is the result of increased operational activity and increased headcount in 2013. The Company made $1.2 million donation in 2013 and a $2.3 million donation in 2012, both to the Lundin Foundation.
Financial income and expense is made up of the following items:
For the years ended | December 31, | December 31, |
2013 | 2012 | |
Loss on marketable securities | - | (124) |
Fair value adjustment - warrants | 3,115 | 832 |
Interest and other income | 1,026 | 326 |
Bank charges | (24) | (40) |
Foreign exchange gain (loss) | (9,186) | 569 |
Finance income | 4,141 | 1,727 |
Finance expense | (9,210) | (164) |
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 December 31, 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 year ended December 31, 2013 due to a reduction in the number of Horn warrants outstanding, a reduction of the remaining life of the Horn warrants that remain outstanding, and a reduction in the volatility of the Horn's share price. The Company will record fair market value adjustments on the Horn warrants until they are exercised or they expire (all expire in June 2014).
Interest income increased in 2013 due to a significant increase in cash late in the fourth quarter of 2012 and in the fourth quarter of 2013 as a result of cash received from the non-brokered private placement in December 2012 and the brokered private placement in October of 2013, respectively.
During October of 2013, the Company entered into an economic hedge in an effort to mitigate exposure to fluctuations in the US dollar versus the Swedish Krona exchange rate between the date the private placement was announced and the date the private placement closed, in which the Company issued shares for Swedish Krona. As a result, the Company incurred foreign exchange losses on the foreign currency instrument of $7.4 million in the fourth quarter of 2013. The remaining foreign exchange gains and losses are primarily related to changes in the value of the Canadian dollar in comparison to the US dollar. Historically, 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)
December 31, | December 31, | ||
2013 | 2012 | ||
ASSETS | |||
Current assets | |||
Cash and cash equivalents | $ 493,209 | $ 272,175 | |
Marketable securities | - | - | |
Accounts receivable | 3,195 | 2,848 | |
Prepaid expenses | 1,379 | 1,124 | |
497,783 | 276,147 | ||
Long-term assets | |||
Restricted cash | 1,250 | 1,119 | |
Property and equipment | 103 | 82 | |
Intangible exploration assets | 488,688 | 282,109 | |
490,041 | 283,310 | ||
Total assets | $ 987,824 | $ 559,457 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Accounts payable and accrued liabilities | $ 57,976 | $ 36,188 | |
Current portion of warrants | 1 | 2,288 | |
57,977 | 38,476 | ||
Long-term liabilities | |||
Warrants | - | 828 | |
- | 828 | ||
Total liabilities | 57,977 | 39,304 | |
Equity attributable to common shareholders | |||
Share capital | 1,007,414 | 558,555 | |
Contributed surplus | 24,396 | 12,123 | |
Deficit | (150,736) | (98,076) | |
881,074 | 472,602 | ||
Non-controlling interest | 48,773 | 47,551 | |
Total equity | 929,847 | 520,153 | |
Total liabilities and equity | $ 987,824 | $ 559,457 |
The increase in total assets from 2012 to 2013 is due to the brokered private placement in October 2013 which raised $440 million net of issuance costs and related foreign exchange.
Consolidated Statement of Cash Flows (Thousands United States Dollars)
December 31, | December 31, | |||
2013 | 2012 | |||
Cash flows provided by (used in): | ||||
Operations: | ||||
Net loss and comprehensive loss for the year | $ (51,438) | $ (20,117) | ||
Items not affecting cash: | ||||
Stock-based compensation | 12,746 | 4,943 | ||
Share-based expense | - | 3,763 | ||
Depreciation | 55 | 48 | ||
Loss on marketable securities | - | 124 | ||
Impairment of intangible exploration assets | 22,874 | 3,127 | ||
Fair value adjustment - warrants | (3,115) | (832) | ||
Foreign exchange loss related to financing | 7,396 | - | ||
Unrealized foreign exchange loss | 25 | 1,055 | ||
Changes in non-cash operating working capital | (756) | (657) | ||
(12,213) | (8,546) | |||
Investing: | ||||
Property and equipment expenditures | (76) | (91) | ||
Intangible exploration expenditures | (229,453) | (133,823) | ||
Farmout proceeds | - | 34,259 | ||
Proceeds from sale of marketable securities | - | 2,442 | ||
Changes in non-cash investing working capital | 21,942 | 12,373 | ||
(207,587) | (84,840) | |||
Financing: | ||||
Common shares issued | 448,386 | 255,169 | ||
Foreign exchange loss related to financing | (7,396) | - | ||
Deposit of cash for bank guarantee | (1,250) | (375) | ||
Release of bank guarantee | 1,119 | 2,175 | ||
440,859 | 256,969 | |||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currency | (25) | (966) | ||
Increase in cash and cash equivalents | 221,034 | 162,617 | ||
Cash and cash equivalents, beginning of year | 272,175 | $ 109,558 | ||
Cash and cash equivalents, end of year | 493,209 | $ 272,175 | ||
Supplementary information: | ||||
Interest paid | Nil | Nil | ||
Income taxes paid | Nil | Nil |
The increase in cash for the year ended December 31, 2013 is mainly the result of the brokered private placement in October 2013 which raised $440 million in cash net of issuance costs and related foreign exchange, offset partially by intangible exploration expenditures and cash-based operating expenditures.
Consolidated Statement of Equity (Thousands United States Dollars)
December 31, | December 31, | ||
2013 | 2012 | ||
Share capital: | |||
Balance, beginning of year | $ 558,555 | $ 306,510 | |
Private placement, net | 447,355 | 226,446 | |
Exercise of warrants | - | 14,340 | |
Shares issued in lieu of professional fees | - | 3,763 | |
Exercise of options | 1,504 | 7,496 | |
Balance, end of year | 1,007,414 | 558,555 | |
Contributed surplus: | |||
Balance, beginning of year | $ 12,123 | $ 8,425 | |
Exercise of Horn warrants | - | 1,148 | |
Stock based compensation | 12,746 | 4,943 | |
Exercise of options | (473) | (2,393) | |
Balance, end of year | 24,396 | 12,123 | |
Deficit: | |||
Balance, beginning of year | $ (98,076) | $ (75,283) | |
Dilution loss through equity | - | - | |
Net loss and comprehensive loss attributable to common shareholders | (52,660) | (22,793) | |
Balance, end of year | (150,736) | (98,076) | |
Total equity attributable to common shareholders | $ 881,074 | 472,602 | |
Non-controlling interest: | |||
Balance, beginning of year | $ 47,551 | $ 36,296 | |
Non-controlling interest on issuance of Horn shares | - | 8,579 | |
Net income and comprehensive income attributable to non-controlling interest | 1,222 | 2,676 | |
Balance, end of year | 48,773 | 47,551 | |
Total equity | $ 929,847 | $ 520,153 |
The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis for the year ended December 31, 2013 and the 2013 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 increased the pace of exploration significantly during 2013. Seven rigs are currently operating. Completion of the brokered private placement in October 2013 has increased the Company's liquidity and capital resource position 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 South Lokichar 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 results to date onshore Kenya are an important step towards understanding the potential and commerciality of the South Lokichar Basin. Resources discovered to date are of a scale that the Tullow-Africa Oil joint venture has initiated discussions with the Government of Kenya and other relevant stakeholders regarding development options including an export pipeline. 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.
In 2014, the Company expects to drill six new basin opening wells, drill all key prospects in the South Lokichar Basin, fully appraise the Ngamia and Twiga discoveries, and have a defined understanding of development.
Cautionary Statements regarding Well Test Results
Drill stem tests are commonly based on flow periods of 1 to 5 days and build up periods of 1 to 3 days. Pressure transient analysis has not been carried out on all well tests and the results should therefore be considered as preliminary. Well test results are not necessarily indicative of long-term performance or of ultimate recovery.
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.
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 within a world-class exploration play fairway with a total gross land package in this prolific region in excess of 215,000 square kilometres. The East African Rift Basin system is one of the last of the great rift basins to be explored. Seven new significant discoveries have been announced in the Northern Kenyan basin in 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".
ON BEHALF OF THE BOARD
Keith C. Hill, President and CEO
Africa Oil's Certified Advisor on NASDAQ OMX First North is Pareto Securities 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.Sophia ShaneCorporate Development(604) 689-7842(604) 689-4250africaoilcorp@namdo.comwww.africaoilcorp.com
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