VANCOUVER, BRITISH COLUMBIA — (Marketwire) — 08/25/11 — 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 six months ended June 30, 2011.
Highlights and accomplishments during the second quarter of 2011 included:
Keith Hill, President and CEO, commented, “Africa Oil and joint venture partners made significant operational progress with respect to exploration activities in the first half of 2011, including selection of drilling locations and execution of drilling contracts on both Block 10BB in Kenya and the Dharoor Valley exploration area in Puntland. The Company is in a very strong financial position and is extremely excited to commence drilling operations and plans to drill seven to ten high potential exploration wells in the next eighteen months.”
Second Quarter 2011 Financial and Operating Highlights
Operating expenses increased $0.2 million for the three months ended June 30, 2011 compared to the same period in the previous year due increases salary and benefit costs, costs associated with our listing on the NASDAQ OMX, and travel and professional fees associated with increased corporate transactions and operational expansion.
Operating expenses increased $2.1 million for the six months ended June 30, 2011 compared to the same period last year due mainly to a $1.2 million increase in stock based compensation costs in the first quarter of 2011 resulting from options granted in the quarter. The remainder of the increase can be attributed to increased salary and benefit costs, increased costs associated with our listing on the NASDAQ OMX, and an increase in travel and professional fees associated with increased corporate transactions and operational expansion.
Expenditures relating to Blocks 2/6 have been written off due to impairment. AOC relinquished Blocks 2/6 and Ministerial approval to waive remaining commitments is expected shortly. The Company has accrued a liability of $1.2 million with respect to its share of the expected settlement with 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.
Finance income for the three and six months ended June 30, 2011 and 2010 is made up of the following items:
The loss on revaluation of marketable securities is the result of a reduction 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 and convertible debt in the three and six months ended June 30, 2011 due to a reduction in AOC–s share price from the end of the previous periods.
Interest income was higher in both the three and six months ended June 30, 2011 due to a significant increase in the average cash balance versus the first half of 2010.
The $0.7 million and $2.3 million foreign exchange gains in the three and six months ended June 30, 2011 are the result of an increase in the value of the Canadian dollar at a time when AOC was holding a significant amount of Canadian dollars raised through the non-brokered private placement (CAD $25 million gross proceeds) which closed during July 2010, the warrant exercises in the fourth quarter of 2010 (CAD $55.8 million gross proceeds), and Canadian dollar cash and marketable securities acquired on the Lion acquisition.
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 June 30, 2011 is primarily attributable to 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 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, 2010 and other oil and natural gas information prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
Outlook
AOC and its partners have an aggressive exploration program planned for the next two years, which is anticipated to include seismic and drilling across all play types and geographic areas of operation. The Company enters the third quarter 2011 in an extremely strong financial position with working capital in excess of $96 million. Additional financing is not required at this time to meet current operational plans.
New discoveries have been announced on all sides of the Company–s virtually unexplored land position including the major Tullow Oil plc Albert Graben oil discovery in neighboring Uganda. Similar to the Albert Graben play model, the Company–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 the AOC–s project areas.
Africa–s 2011 Third Quarter report will be published on or before November 29, 2011.
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 E. Ohman J:or Fondkommission 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)