VANCOUVER, BRITISH COLUMBIA — (Marketwired) — 11/22/13 — 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.
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.”
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:
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.
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).
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.
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 () and are available on the Company–s website ().
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.
Contacts:
Africa Oil Corp
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)