Africa Oil First Quarter of 2012 Financial and Operating Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 28, 2012) - 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 months ended March 31, 2012.

• The Company and its operating partner on Block 10BB, Tullow, spudded the partnership's first well, Ngamia-1, on January 24, 2012. The Ngamia-1 exploration well in Kenya has now been deepened to a total depth of approximately 1940 meters. The well has encountered in excess of 100 meters of net oil pay in multiple reservoir zones over a gross interval of 650 meters of the upper Lokhone sandstone (855 meters to 1500 meters). The reservoirs in these sections are composed of good quality Tertiary age sandstones. Moveable oil with an API greater than 30 degrees has been recovered to surface from four representative intervals. This oil has similar properties to the light waxy crude which has been discovered in Uganda by Tullow. Plans are in place for at least two drill stem tests upon completion of drilling operations. The Ngamia-1 well is now being drilled to a depth of approximately 2,700 meters to explore for deeper potential including the lower Lokhone sandstone which was one of the primary objectives of this well. The Ngamia-1 well has encountered additional oil and gas shows over a gross interval of 140 meters from a depth of 1,800 meters to 1,940 meters. The reservoirs are similar to those previously encountered at shallower depths.

• In Puntland (Somalia), the Shabeel-1 well has been successfully drilled, reaching a total depth of 3470 meters. Several oil and gas shows were encountered indicating the existence of a working petroleum system. The well encountered metamorphic basement at a depth of 3430 meters and has been suspended for future testing. The well encountered a 355 meter section of Upper Cretaceous sands and shales of the Jesomma Formation at a depth of approximately 1660 meters. The sands in this interval exhibited both oil and gas shows and petrophysical analysis of downhole electrical logs indicates a potential pay zone of between 12 and 20 meters in the section. Attempts to sample formation fluids using a wireline formation tester were not successful and thus the zone will require cased hole testing in the future to confirm whether they are oil bearing. In addition to potential net pay in the Jesomma Formation, the well has encountered additional potential net pay sands in the Jurassic Adigrat Formation at a depth of 3246 to 3430 meters, several of which exhibited oil and gas shows. Petrophysical analysis of the well log data indicates up to 3 meters of potential hydrocarbon pay in several thin sand units. These sands do not warrant testing at this time, but do further indicate the existence of a working petroleum system.

• It is anticipated that two additional drilling rigs will be secured and mobilized into the Company's areas of operation during the second half of 2012, bringing the total number of rigs in operation to four before the end of the year. It is anticipated that one additional rig will be utilized in Ethiopia and one additional rig will be utilized in Kenya. In addition to the Shabeel-1 and Ngamia-1 wells, which have completed drilling or are in the process of being drilled, four additional wells are currently planned: the Twiga-1well in Block 13T (Kenya), the Paipai-1 well in Block 10A (Kenya), the Shabeel North well in the Dharoor Block (Puntland (Somalia)), and an additional exploration well in the South Omo Block (Ethiopia). The Company will also continue to actively acquire, process and interpret 2D seismic over Blocks 10BA, 10BB, 12A, 13T and South Omo.

• Africa Oil ended the quarter in a strong financial position with cash of $104.1 million and working capital of $82.2 million as compared to cash of $109.6 million and working capital of $90.2 million at December 31, 2011. Of the $104.1 million in cash at December 31, 2011, $21.0 million is cash held by Horn. The Company's liquidity and capital resource position has remained strong throughout the quarter.

Keith Hill, President and CEO, commented, "Africa Oil is very encouraged with the results of both the Ngamia-1 and Shabeel-1 wells. The net oil pay encountered to date in the Ngamia-1 well far exceeds pre-drill estimates. We are looking forward to completing the drilling and testing of Ngamia in the coming weeks. In Puntland (Somalia), we are pleased to have confirmed the presence of an active petroleum system in the Dharoor Valley and look forward to drilling the Shabeel-North well to test the sands in the Jesomma Formation. The Company has accumulated exploration acreage of over 300,000 km2 (gross) in this exciting new world-class exploration play fairway and is looking forward to accelerating the pace of exploration drilling with the planned addition of two drilling rigs during the second half of 2012, bringing the number of active rigs to four."

First Quarter 2012 Financial and Operating Highlights

Consolidated Statement of Net Income (Loss) and Comprehensive Income (Loss)
(United States Dollars)
		Three Months			Three Months
		ended			ended
		March 31, 2012			March 31, 2011
Operating expenses
	Salaries and benefits	$	282,688		$	436,617
	Stock-based compensation		629,596			1,456,226
	Bank charges		8,208			99,388
	Travel		224,773			136,652
	Management fees		64,166			64,122
	Office and general		142,820			413,059
	Depreciation		11,906			14,119
	Professional fees		91,102			217,715
	Stock exchange and filing fees		127,306			151,444
	Impairment of intangible exploration assets		3,114,858			-
			4,697,423			2,989,342
Finance expense			(1,419,501	)		(4,327,574	)
Finance expenses			23,792,918			-
Net income (loss) and comprehensive income (loss)			(27,070,840	)		1,338,232
Net loss and comprehensive loss attributable to non-controlling interest			(13,428,876	)		-
Net Income (loss) and comprehensive income (loss) attributable to common shareholders			(13,641,964	)		1,338,232
Net income (loss) per share
	Basic	$	(0.06	)	$	0.01
	Diluted	$	(0.06	)	$	(0.01	)
Weighted average number of shares outstanding for the purpose of calculating earning per share
	Basic		213,064,923			154,450,530
	Diluted		213,064,923			162,549,283

Operating expenses increased $1.7 million for the three months ended March 31, 2012 compared to the same period in the previous year due to a $3.1 million impairment of intangible exploration assets relating to Blocks 7 and 11 in Mali, offset partially by a $0.8 million decrease in stock-based compensation costs, decreased salary costs associated with a moving allowance paid in the first quarter of 2011, and professional fees associated with the acquisition of Centric and the Tullow farmout in the first quarter of 2011. The Company has written-off $3.1 million of capitalized intangible exploration assets due to security concerns in Mali which has halted operations on the Company's Mali Blocks.

Financial income and expense is made up of the following items:

Three months ended	March 31,		March 31,
	2012		2011
Loss on marketable securities	(123,982	)	-
Fair value adjustment - warrants	(23,668,936	)	779,181
Fair value adjustment - convertible debt	-		1,722,256
Interest and other income	161,928		243,686
Foreign exchange gain	1,257,573		1,582,451
Finance income	1,419,501		4,327,574
Finance expense	(23,792,918	)	-

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.

The Company recorded losses on the revaluation of warrants in the three months ended March 31, 2012 due to an increase in Horn and AOC's share price from the end of the previous year. Of the $23.7 million loss on revaluation of warrants, $20.7 million results from the consolidation of the Company's subsidiary Horn Petroleum Corporation ("Horn"), which holds the Company's oil and gas interests in Puntland (Somalia).

The $1.3 million foreign exchange gain in the three months ended March 31, 2012 is 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.

Consolidated Balance Sheets
(United States Dollars)
		March 31,			December 31,
		2012			2011
ASSETS
Current assets
	Cash and cash equivalents	$	104,122,816		$	109,558,445
	Marketable securities		-			2,605,745
	Accounts receivable		3,696,363			2,717,024
	Prepaid expenses		677,306			599,727
			108,496,485			115,480,941
Long-term assets
	Restricted cash		1,644,000			2,919,000
	Property and equipment		91,041			39,395
	Intangible exploration assets		204,452,752			185,671,962
			206,187,793			188,630,357
Total assets		$	314,684,278		$	304,111,298
LIABILITIES AND EQUITY
Current liabilities
	Accounts payable and accrued liabilities	$	26,311,499		$	23,768,545
	Current portion of warrants		-			1,512,811
			26,311,499			25,281,356
Long-term liabilities
	Warrants		23,562,187			2,882,441
			23,562,187			2,882,441
Total liabilities			49,873,686			28,163,797
Equity attributable to common shareholders
	Share capital		322,124,470			306,509,909
	Contributed surplus		8,680,922			8,425,304
	Deficit		(88,925,445	)		(75,283,481	)
			241,879,947			239,651,732
	Non-controlling interest		22,930,645			36,295,769
Total equity			264,810,592			275,947,501
	Total liabilities and equity	$	314,684,278		$	304,111,298

The increase in total assets from December 31, 2011 to March 31, 2012 is primarily attributable to intangible exploration expenditures incurred during the quarter, a significant portion of which related to drilling of the Ngamia well in Kenya and the Shabeel-1 well in Puntland (Somalia).

Consolidated Statement of Cash Flows
(United States Dollars)
			Three months			Three months
			ended			ended
			March 31, 2012			March 31, 2011
Cash flows provided by (used in):
Operations:
	Net income (loss) and comprehensive income (loss) for the year		$	(27,070,840	)	$	1,338,232
	Item not affecting cash:
		Stock-based compensation		629,596			1,456,226
		Depreciation		11,906			14,119
		Impairment of intangible exploration assets		3,114,858			-
		Fair value adjustment - warrants		23,668,936			(779,181	)
		Fair value adjustment - convertible debt		-			(1,722,256	)
		Unrealized foreign exchange gain		(1,390,301	)		(1,594,595	)
		Changes in non-cash operating working capital		(187,077	)		47,770
				(1,222,922	)		(1,239,685	)
Investing:
		Property and equipment expenditures		(63,552	)		(1,484	)
		Intangible exploration expenditures		(21,895,648	)		(4,973,882	)
		Farmout proceeds, net		-			14,900,160
		Cash received on business acquisitions, net of cash issued		-			738,960
		Repayment of liability portion of convertible debt		-			(411,220	)
		Proceeds from sale of marketable securities		2,565,660			-
		Changes in non-cash investing working capital		1,673,113			(7,881,874	)
				(17,720,427	)		2,370,660
Financing:
		Common shares issued, net of issuance costs		10,802,334			257,758
		Deposit of cash for bank guarantee		-			(1,451,250	)
		Release of bank guarantee		1,275,000			-
		Changes in non-cash financing working capital		-			168,569
				12,077,334			(1,024,923	)
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currency				1,430,386			1,579,475
Increase (decrease) in cash and cash equivalents				(5,435,629	)		1,685,527
Cash and cash equivalents, beginning of period				109,558,445		$	76,125,834
Cash and cash equivalents, end of period				104,122,816		$	77,811,361

The decrease in cash in the first three months of 2012 is mainly the result of intangible exploration expenditures and operating expenses offset partially by funds raised on the exercise of 6.5 million warrants.

Consolidated Statement of Equity
(United States Dollars)
		March 31,			March 31,
		2012			2011
Share capital:
	Balance, beginning of period	$	306,509,909		$	163,231,076
	Acquisition of Centric Energy		-			60,165,193
	Issued on conversion of convertible debenture		-			28,795,200
	Amended farmout agreement with Lion Energy		-			5,274,675
	Exercise of warrants		14,339,826			61,631
	Farmout ageement finder's fees		-			94,960
	Exercise of options		1,274,735			307,021
	Balance, end of period		322,124,470			257,929,756
Contributed surplus:
	Balance, beginning of period	$	8,425,304		$	4,391,940
	Expiration of warrants		-			3,676
	Stock based compensation		629,596			1,456,226
	Issuance of shares in lieu of finder's fee		-			(94,960	)
	Exercise of options		(373,978	)		(95,505	)
	Balance, end of period		8,680,922			5,661,377
Deficit:
	Balance, beginning of period	$	(75,283,481	)	$	(56,570,350	)
	Net Income (loss) and comprehensive income (loss) attributable to common shareholders		(13,641,964	)		1,338,232
	Balance, end of period		(88,925,445	)		(55,232,118	)
	Total equity attributable to common shareholders	$	241,879,947			208,359,015
Non-controlling interest:
	Balance, beginning of period	$	36,295,769		$	-
	Non-controlling interest on issuance of Horn shares		63,752			-
	Net loss and comprehensive loss attributable to non-controlling interest		(13,428,876	)		-
	Balance, end of period		22,930,645			-
	Total equity	$	264,810,592		$	208,359,015

The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis for the three months ended March 31, 2012 and 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 Company has recently announced the discovery of over 100 meters of net oil pay in the Ngamia-1 exploration well, located in Block 10BB (Kenya). It is anticipated that drilling of the Ngamia well will be completed and test results announced early in the third quarter of 2012. Upon completion of the Ngamia well, it is anticipated that the rig will commence drilling the Twiga-1 exploration well, located on Block 13T (Kenya). The Twiga-1 well is on trend with the Ngamia well, focusing on a geologic structure similar to Ngamia.

In addition, the Company has recently announced that the Shabeel-1 well, located in the Dharoor Block (Puntland (Somalia)), has encountered a significant zone (12 - 20 meters) of potential hydrocarbon pay in the Upper Cretaceous Jesomma Formation. The Shabeel-1 well has been suspended for future testing. The drilling rig is currently being mobilized to the Shabeel-North location. It is anticipated that the Shabeel-North well will be drilled and potentially tested during the third quarter of 2012.

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) and to commence drilling the Pai-Pai prospect and an additional rig is intended to be mobilized to the South Omo Block (Ethiopia) to commence drilling an oil exploration well. This will bring the total number of rigs operating on the Company's East African acreage to four 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.

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 NASDAQ OMX First North is Pareto Öhman AB.