Africa Oil Corp.

Africa Oil Corp.

September 02, 2010 02:00 ET

Tullow Oil and Africa Oil to Jointly Explore New East African Rift Trend

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 2, 2010) - Africa Oil Corp. (TSX VENTURE:AOI) ("Africa Oil" or "the Company") is pleased to report that it has signed a definitive farmout agreement with Tullow Oil plc ("Tullow") whereby Tullow will acquire a 50% interest in, and operatorship of, three of Africa Oil's east African exploration blocks, comprised of two exploration blocks in Kenya and one exploration block in Ethiopia. In order to provide the necessary interest to Tullow, Africa Oil has also amended its existing farmout agreement with Lion Energy Corp. ("Lion"). Under the terms of the Tullow farmout agreement, Tullow will acquire a 50% interest in, and operatorship of, Blocks 10BB and 10A in Kenya and of the South Omo Block in Ethiopia. In consideration for the assignment of these interests, Tullow will pay to Africa Oil approximately US$10MM, representing 50% of Africa Oil's past costs in the blocks, subject to a post-closing audit. Tullow will also fund Africa Oil's working interest share of future joint venture expenditures in these blocks until the cap of US$23.75MM is reached. This cap is expected to cover the upcoming seismic program in each of the three blocks as well as the majority of costs for at least 2 wells on these areas. Once the expenditure cap has been met, Africa Oil will be responsible for its working interest share of future costs. 

Additionally, Tullow has also entered into an agreement to acquire 50% of Africa Oil's interest in, and operatorship of, two additional exploration blocks in Kenya, 12A and 13T, recently acquired by Africa Oil. Tullow will be responsible for paying Africa Oil its pro-rata share of back costs, including acquisition costs, and its respective share of future joint venture expenditures.

The amendment of the Lion farmout agreement provides that Lion will reduce its interest in Block 10BB to 10% (originally 20%) and will not retain any interest in Block 10A (originally 25%). As consideration Africa Oil has agreed to pay Lion US$2.5 million in cash and to issue to Lion 2.5 million common shares of Africa Oil. Africa Oil has also agreed to the elimination of future expenditure promotes in Block 10BB and on the Company's projects in Puntland (Somalia). 

The resultant interest in the three blocks upon closing of the Tullow farmout agreement and the Lion amending agreement will be:

Block 10BB (Kenya) Tullow 50% Africa Oil 40% Lion 10%
Block 10A (Kenya) Tullow 50% Africa Oil 30% EAX (Black Marlin) 20%
South Omo (Ethiopia) Tullow 50% Africa Oil 30% Agriterra (formerly White Nile) 20%

Africa Oil President and CEO, Keith Hill, stated, "We are very excited about our partnership with Tullow on the East African Rift Basin. They have arguably been the most successful exploration company in Africa, if not the world, over the past decade and we see great synergies with the use of the technical and operational expertise they have gained in their nearby Uganda Lake Albert Graben project. The transaction also means that any resultant discoveries will be operated by one of the main partners in the proposed pipeline project to export crude from this highly prospective developing region. With our recent $25 million capital raise and the Tullow deal, we have a very strong balance sheet which will allow us to continue to pursue opportunities in the region."

Africa Oil is currently acquiring seismic in Block 10BB in Kenya and will move the crew to Block 10A upon completion. Drilling of the first exploration wells on these blocks is expected to take place during the first half of 2011. The Company is also acquiring seismic on its blocks in the Ogaden Basin in Ethiopia and continues evaluation of a potential gas discovery in Block 9 in Kenya. Drilling plans in Puntland, Somalia continue to progress but it is likely that the first well on these blocks will be delayed until 2011. 

The above transactions are subject to host government approvals, waiver of any preemption rights by Africa Oil's partners and any applicable regulatory requirements. 

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 what is considered a truly world-class exploration play fairway. The Company's total gross land package in this prolific region is approaching 250,000 square kilometers - an area roughly the size of Great Britain. 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 Tullow 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 under the symbol "AOI". 


Keith Hill, President and CEO

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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