Africa Oil Corp.
TSX VENTURE : AOI
OMX : AOI

Africa Oil Corp.

August 03, 2011 16:47 ET

Africa Oil Operations Update

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 3, 2011) - Africa Oil Corp. ("Africa Oil" or "the Company") (TSX VENTURE:AOI)(OMX:AOI) is pleased to provide an update on the Company's ongoing exploration activities. The Company has launched a major exploration initiative throughout its East Africa portfolio which includes at least 10 seismic acquisition programs (totaling over 7,000 kilometres), 6 full tensor gravity surveys, extensive environmental studies, acquisition of high resolution gravity and magnetic data as well as geochemical surveys. Over the next 18 months, a minimum of 7 to 10 wells are planned to test the numerous prospects identified throughout the blocks.

Kenya

The Company and Tullow Oil plc. ("Tullow"), its operating partner in each of the Kenyan Blocks other than Block 9, have completed the work and/or are proposing the work programs, described below.

Block 10BB

The Company and Tullow have integrated and interpreted all newly acquired (610 km) and vintage 2D seismic data. A number of prospects have been identified and are being high graded for the planned drill program. The Ngamia (Camel) prospect (previously named Fise-1) has been selected by the joint venture for the initial well in Block 10BB. The prospect will test the oil potential in Miocene age sandstones within a three way dip closure against the West Lokichar rift fault. Ngamia is directly analogous to successful oil accumulations drilled by Tullow and partners early in the exploration efforts in the Lake Albert graben of Uganda. The contract for the drilling rig has been awarded to Weatherford International and the rig is planned to be mobilized in August to Kenya. Additional preparations for drilling, including purchase of materials, execution of drilling related contracts, civil works, and environmental permits are either completed or underway. Spudding of the Ngamia well is slated for the fourth quarter of 2011. In addition to drilling operations, the Company and its partner are currently acquiring a full tensor gravity survey (FTG) to further define prospective areas of the block that lack 2D seismic data. The survey should be completed in the fourth quarter of 2011.

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Block 10BA

The Company and Tullow have initiated a FTG survey over most of Block 10BA, covering all of Lake Turkana and most of the adjacent onshore areas. Two FTG contractors are working simultaneously to expedite the survey, which is expected to be completed during the fourth quarter of 2011. A seismic acquisition contract has been awarded to the Bureau of Geophysical Prospecting ("BGP") for 1350 km of 2D data to be acquired in both the offshore lake environment and nearshore transitional areas adjacent to Lake Turkana. The offshore data will be acquired using state of the art Ocean Bottom Cable ("OBC"), whereby the recording receivers will be positioned on the bottom of the lakebed. Pre-seismic environmental studies are underway and permits are expected to be in hand by early August 2011 enabling initiation of the seismic survey in the fourth quarter of 2011.

Block 10A

The Company and Tullow have integrated and interpreted all newly acquired (750 km) and vintage 2D seismic data. A number of prospects have been identified and are being high graded for selection of the first drilling location. Preparations for drilling, including purchase of materials, execution of drilling related contracts, civil works, and environmental permits are either completed or underway. The Block 10A well is expected to spud in early 2012 using the same Weatherford rig as will be used in Block 10BB. In addition to the drilling operations, a small swath of full tensor gravity (FTG) is being acquired to test the applicability of the FTG technology in Block 10A. The swath survey should be completed in the third quarter of 2011.

Block 13T

The Company and Tullow have awarded contracts for both a FTG survey and seismic acquisition. The FTG survey is underway and is anticipated to be completed by the third quarter of 2011. The recording of at least 562 km of 2D seismic data by BGP is planned to commence in the fourth quarter of 2011. Environmental impact studies and government permitting will precede the seismic survey. Interpretation of reprocessed vintage seismic data has revealed a string of interesting structures on trend with the Ngamia feature of Block 10BB. The seismic program will focus on further delineation of these leads to mature them to drillable prospect status.

Block 12A

The Company and Tullow have awarded contracts for both an FTG survey and seismic acquisition. The FTG survey is underway and is expected to be completed during the third quarter of 2011. The recording of at least 520 km of 2D seismic data by BGP is planned to commence in January 2012. Environmental impact studies and Government permitting will precede the seismic survey.

Block 9

The Company holds 100% interest in Block 9 and current operations include the acquisition of 750 km of 2D seismic data. The survey is 95% complete and is expected to conclude in mid-August of 2011. The survey has been focused on delineating a drillable prospect in the oil-prone Kaisut sub-basin in the northwestern portion of the block. Newly acquired data is of excellent quality and a number of interesting leads have been identified. One exploration well is expected to be drilled during 2012. Additionally, the Company has completed a study associated with potential commercialization of gas resources in the 2010 Bogal discovery prior to a potential 2012 Bogal re-entry, and testing program. The Company plans to pursue a partner on Block 9 that brings gas development and marketing experience to the joint venture.

Ethiopia

South Omo Block

The Company and its operating partner on the Block, Tullow, have recently completed a FTG survey across most of the southern portion of the South Omo Block. The results of the survey are encouraging and will be used to lay out the upcoming 2D seismic survey. A contract with BGP for the acquisition of at least 1000 km of 2D seismic data has been executed and base camp construction began in July 2011. The seismic recording is estimated to commence during the third quarter of 2011. Environmental impact studies and government permitting will precede the seismic survey.

Ogaden Blocks 7/8

The Company and its partners have integrated and interpreted all newly acquired (430 km) and vintage 2D seismic data over the two blocks. The joint venture is currently focused on developing a better understanding of the large El Kuran oil and gas accumulation in Block 8, discovered in the early 1970's. The Company has completed a reservoir characterization study over the El Kuran structure. A revised analysis of the well data has confirmed the presence of light oil in the Jurassic limestones. The Company is currently analyzing how best to re-drill and test El Kuran in hopes of proving up movable, commercial quantities of oil. Preparations for drilling, including purchase of materials, execution of drilling related contracts, civil works, and environmental permits have commenced. Spud of the El Kuran well is anticipated in the first half of 2012.

Ogaden Blocks 2/6

Ogaden Blocks 2/6 have been relinquished and Ministerial approval to waive remaining commitments is expected shortly.

Adigala Block

The Company and its partner have completed the first exploration period of three years and have exceeded the contractual work obligations. Negotiations with the Ministry of Mines to enter the second period of exploration for the Adigala Block are ongoing. The Company and its partner are proposing additional geologic and geophysical studies to better understand the subsurface configuration of the block. In addition, the partnership is contemplating drilling a stratigraphic test well if a suitable light rig can be secured at reasonable costs.

Rift Valley Joint Study Block

The Company completed the acquisition of high resolution gravity and magnetic data over the Rift Valley Block in April 2011. Final processing and interpretation is anticipated to be completed during the third quarter of 2011. The gravity and magnetic interpretation will enable the Company to decide whether to commit to a further work program under a formal production sharing agreement. The block is on trend with highly prospective blocks in the Tertiary rift valley such as Ethiopian South Omo block, and Kenyan blocks 10BA, 10BB, 13T, and 12A. Additionally, the Company mobilized geochemical specialists to collect fluid samples (potential oil seeps) from the surface and/or margins of the major rift lakes Abaya and Chamo, within the southern portion of the block. A total of 17 samples were collected of which 3 revealed hydrocarbon signatures.

Puntland-Somalia

Dharoor and Nugaal Valley Blocks

The Company and Denovo Capital Corp. ("Denovo") have entered into a letter of intent dated May 11, 2011 for the creation of a new Puntland focused oil exploration company to be named Horn Petroleum Corp. ("Horn Petroleum"). Horn Petroleum will be created as a result of the sale, to Denovo, of the subsidiaries of the Company that hold its oil and gas properties in Puntland Somalia. Certain management and technical services are expected to be provided to Horn Petroleum by the Company under a service contract.

On August 2, 2011 Horn Petroleum completed a $40.98 million private placement financing, with assistance from Africa Oil. These proceeds will be used to fund Horn Petroleum's share of costs associated with the drilling of two exploratory wells in the Dharoor Valley Block. Africa Oil subscribed for $10 million of the private placement and will have an approximately 50% interest in Horn Petroleum when the transaction completes. Completion of the acquisition of Africa Oil's interest in Puntland, Somalia by Horn Petroleum remains subject to, amongst other things, TSX Venture Exchange approval.

The Company is currently in final preparations to commence the two well drilling campaign in the Dharoor Valley Block, with the first well planned to spud in the fourth quarter of 2011. Drilling locations have been selected over two robust prospects targeting gross best estimated prospective resources of over 300 million barrels each based on internal estimates. Contracts for a drilling rig and third party services are in advanced stages of negotiations with contract execution scheduled for early August.

The Puntland Government and Dharoor Valley communities are fully supportive of the drilling project and have ensured they will do all to allow the project to move forward safely and expeditiously. Specific milestone target dates have been adjusted by the Puntland Government allowing the Company and partners to move the drilling start-up to the fourth quarter of 2011. In addition, partial relinquishments in both the Dharoor Valley and Nugaal Valley agreements have been finalized and approved. The Puntland Government has also given its approval for the formation of Horn Petroleum and the impending transaction with the Company.

Mali

Blocks 7 and 11

The Company and its partner, Heritage Oil and Gas Ltd. ("Heritage") have recently completed the acquisition of 848 km of 2D seismic in Block 11 and 243 km in Block 7. Both blocks are located in the Gao Graben which is thought to be analogous to other Cretaceous age, oil productive, central African rift basins. The Company's share of costs for initial seismic and the drilling of the first exploratory well are fully carried by its single partner, Heritage.

Keith Hill, President and CEO, commented, "We are moving into a very exciting period for Africa Oil which is expected to include the drilling of 7 to 10 exploration wells in the next 18 months that will test all the major petroleum systems in our extensive portfolio. Additional exploration activities will continue into the third quarter with FTG, 2D seismic and drilling preparations on multiple blocks to further delineate propsects. The Company remains well financed with reputable joint venture partners."

Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya, Ethiopia and Puntland (Somalia). 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. Öhman 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.

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