VANCOUVER, BRITISH COLUMBIA — (Marketwire) — 03/23/12 — 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 year ended December 31, 2011.
The Company continued to actively explore in East Africa:
Keith Hill, President and CEO, commented, “Africa Oil continues to aggressively explore our East African exploration portfolio with three seismic crews and two drilling rigs active in the region. It is anticipated that results from both the Ngamia-1 and Shabeel-1 wells will be available in the second quarter of 2012. We are pleased to have entered the drilling phase and anticipate two rigs being active on the Company–s blocks throughout 2012.”
During the third quarter of 2011, Horn was formed as a new Puntland focused exploration company. The Horn Transaction has been accounted for as an acquisition of Horn–s net assets by Canmex (reverse acquisition) as AOC, the sole owner of Canmex prior to the Transaction, controls Horn subsequent to the Horn Transaction. Effectively as a result of the Horn Transaction and Horn private placement, AOC through its wholly owned subsidiary acquired 51.4% of the newly formed entity. While the results of Canmex have historically been consolidated in the Company–s financial statements, effective September 20, 2011, the 48.6% non-controlling interest in Horn will be accounted for in the consolidated results of the Company.
Operating expenses increased $5.0 million for year ended December 31, 2011 compared to the previous year primarily due to a $3.4 million increase in stock-based compensation costs associated with stock option grants in AOC and Horn during the year, a $0.4 million donation to the Lundin Foundation which is included in office and general, and increased salary costs and travel costs associated with increased operational activity.
Expenditures relating to Blocks 2/6 have been written off resulting in the $7.0 million impairment of intangible exploration assets. AOC relinquished Blocks 2/6 and obtained Ministerial approval to waive remaining commitments. The Company paid $1.2 million to the Government of Ethiopia, in lieu of unfulfilled commitments with respect to the Blocks 2/6 PSA.
The gain relating to the acquisition of Lion was the result of the Company acquiring net working capital and intangible exploration assets valued in excess of the consideration issued. The consideration paid was valued at $21.7 million, net of AOC shares acquired. Working capital acquired was $20.1 million and the intangible exploration assets acquired were valued at $5.7 million.
The dilution loss on the sale of subsidiary was recognized on the consolidation of Horn and represents the excess of the fair value of the consideration paid by the Canmex, in the reverse acquisition, over the value of the net assets of Horn acquired.
Financial income and expense for the years ended December 31, 2011 and 2010 is made up of the following items:
The gain on revaluation of marketable securities is the result of an increase in the value of 10 million shares held in Encanto Potash Corp which were acquired on the acquisition of Lion.
The Company recorded gains on the revaluation of warrants in the year ended December 31, 2011 due to a reduction in AOC–s share price from the end of the previous year.
The Company recorded gains on the revaluation of the convertible debt in the year ended December 31, 2011 due to a reduction in AOC–s share price from the end of 2010. The convertible debt was converted to shares in the first and second quarter of 2011.
Interest income was higher in the year ended December 31, 2011 due to a significant increase in the average cash balance versus the year ended December 31, 2010.
The $2.5 million foreign exchange loss in the year ended December 31, 2011 is the result of a decrease in the value of the Canadian dollar at a time when AOC was holding a significant amount of Canadian dollars.
The increase in total assets from January 1, 2010 to December 31, 2010 is attributable to the equity financings, expansion of acreage in East Africa (Blocks 12A and 13T (Kenya) and South Omo (Ethiopia)), drilling of Bogal-1 in Block 9, and the seismic acquisition programs on Block 10BB in Kenya and the Ogaden blocks in Ethiopia.
The increase in total assets from December 31, 2010 to December 31, 2011 is primarily attributable to the funds raised on the Horn private placement and closing of the acquisitions of Centric and Lion which were funded primarily by the issuance of shares.
The increase in cash in 2011 is mainly a result of the Horn private placement, cash acquired through the Lion acquisition, proceeds received on the close of the Tullow farmout, offset partially by intangible exploration expenditures and operating expenses.
The Company–s consolidated financial statements, notes to the financial statements, management–s discussion and analysis and Annual Information Form have been filed on SEDAR () and are available on the Company–s website (). The Annual Information Form includes the Company–s reserves and resource data for the period ended December 31, 2011 and other oil and natural gas information prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
Outlook
The Company enters 2012 in a very strong financial position with cash of $109.6 million and working capital of $90.2 million. The 2012 year will be a pivotal year for the AOC, as the Company expects to drill five exploration wells in the year. The exploration wells anticipated for 2012 include Ngamia (Block 10BB – Kenya) and Shabeel-1 (Dharoor Valley – Puntland) which are currently in progress as well as an additional well in each of Block 10A (Kenya), South Omo (Ethiopia), and Dharoor (Puntland, Somalia). The Company also expects to complete its initial seismic programs covering all existing blocks under PSA with the completion of an additional 2,100 kilometers of 2D seismic covering the remainder of the South Omo Block, as well as Blocks 10BA and 12A. The Company believes that it has sufficient working capital available to fund the entire 2012 work program.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya, Ethiopia, Puntland (Somalia) and Mali. 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 neighbouring Uganda. Similar to the Albert Graben play model, Africa Oil–s concessions have older wells, a legacy database, and host numerous oil seeps indicating a proven petroleum system. Good quality existing seismic 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 First North is 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.
Contacts:
Africa Oil Corp.
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)