West Africa Energy Inc.

West Africa Energy Inc.

March 30, 2007 09:30 ET

West Africa Energy Completes C$9,000,000 Private Placement and Binding Agreement on Option to Acquire Strategic Russian Oil and Gas Assets

LONDON, ENGLAND--(CCNMatthews - March 30, 2007) - West Africa Energy Inc. (TSX VENTURE:WAE) -

- WAE completes non-brokered private placement of C$9,000,000

- WAE signs binding interim agreement with all parties to earn an option to acquire a 45% interest in the South Temryuk and the Protoka licenses hydrocarbon exploration licenses located in the Azov-Kuban petroleum province in south-western Russia, an area with established oil infrastructure, within 12 to 20 km of the coast of the Sea of Azov where oil-loading facilities are available.

- The area is considered to be one of the most prolific petroleum-producing regions in Russia with the first well drilled in 1864 and exploration and production continuing today.

- The first well on the South Temryuk license is in the process of being drilled at a current depth of approximately 750 meters, with a planned total depth of 3,920 meters, anticipated to be completed in approximately 90-120 days.

The Board of West Africa Energy Inc. ("WAE") is pleased to announce that it has completed a non-brokered private placement of 20,000,000 units at a price of C$0.45 per unit for gross proceeds of C$9,000,000, which was previously announced on February 8, 2007 and February 12, 2007. In addition WAE has entered into a binding interim agreement as a precursor to completing the corporate structuring required to acquire its option to earn up to a 45% interest in the South Temryuk and Protoka hydrocarbon exploration licenses in the Azov-Kuban petroleum province in south-western Russia, which was previously announced on February 8, 2007.

Private Placement

The non-brokered private placement consisted of the sale of 20,000,000 units at a price of C$0.45 per unit. Each unit consists of one common share of WAE and one common share purchase warrant. Each warrant entitles the holder to acquire one additional common share of WAE at a price of $0.60 until March 29, 2009. The warrants are subject to WAE's right to a forced exercise provision should the closing price of WAE's common share be at or above $1.00 for 20 consecutive trading days.

Certain finders received a cash commission of up to 8% of the gross proceeds and in addition received compensation units equal to up to 10% of number of units sold, each exercisable to acquire one unit on the same terms as the private placement units until March 29, 2009.

In accordance with applicable securities laws and the policies of the TSX Venture Exchange, all securities issued under the private placement will be subject to a "hold period" expiring on July 30, 2007.

WAE plans to use the proceeds of the private placement to earn its option to acquire an indirect interest in up to 45% interest in the South Temryuk and Protoka hydrocarbon exploration licenses in the Azov-Kuban petroleum province in South-western Russia. In addition, a portion of the proceeds will be used to continue exploration work on its oil and gas exploration licenses in the Gao graben of Mali, West Africa and for general working capital.

Interim Agreement

Further to the completion of substantial due diligence, WAE has entered into binding agreements dated March 27, 2007 (the "Agreements") with each of Arax Energy Inc. ("Arax"), Arax Energy Ltd. ("Arax Cayman"), Technoton Limited, Vozrozhdenie Limited, Igor Melanich and Ruslan Fazylov setting forth a revised corporate structure under which WAE will earn an initial right to 9% and up to 45% of the share capital of Technoton Limited which is the 100% owner of two petroleum exploration licenses covering an area of 130 sq kms in the Azov-Kuban petroleum province in south-west Russia, which is considered one of the oldest and most prolific petroleum-producing regions in Russia (the "Transaction"). The South Temryuk property has a drilling rig mobilized on site; casing has been set on the first well and is currently being drilled.

The parties have irrevocably agreed that following the completion of the corporate structuring they will enter into a formal participation, option and purchase agreement to govern the option and rights to revenues from production from the licensed area.

The Properties

The two properties (the "Properties") are located in the Azov-Kuban petroleum province in south-western Russia close to the city of Krasnodar, near the Sea of Azov and the Black Sea. The area is considered to be one of the most prolific petroleum-producing regions in Russia with the first well drilled in 1864 and exploration and production continuing today.

The properties are located in areas with established oil infrastructure, within 12 to 20 km of the coast of the Sea of Azov where oil-loading facilities are available.

The South Temryuk license is surrounded by producing oil and gas fields, including the Kurchanskoye field owned by Rozneft which is contiguous to the east and has produced over 80 million barrels of oil and Bely Kutor owned by Neftebitum that is contiguous to the south and produced over 30 million barrels of oil and the Stralanskoye field owned by Rozneft, to the west which has produced over 20 million barrels. There are multiple potential reserve horizons and management of WAE considers the most interesting zone on the license to be between the depths of between 3,400 meters and 3,920 meters where contiguous to the South Temryuk license to the north, Rosneft has drilled four wells in this interval over the past 12 months with initial production rates between 1200 and 3600 barrels a day of light sweet crude plus gas and condensate. Rosneft is a vertically-integrated Russian oil and gas company with upstream and downstream operations in each of Russia's oil-producing regions. Headquartered in Moscow, it is among the world's largest publicly-traded oil companies in terms of proved oil reserves (14.9 bln bbls) and among the top ten companies globally in crude oil production.

The Protoka licence is contiguous to the Morozokoye producing oil and gas fields owned by Gazprom, that has a high concentration of condensates and has historically produced over 100 million barrels of oil equivalent ("BOE's"). Additionally, two other smaller fields, being the Sladkovskoye field owned by Gazprom which is 200 meters to the south and the Servro-Tselinoyve owned by Kuban Neft Resources which is 20 kms to the north-east which have together produced over 36 million barrels of condensate and 5.7 billion cubic meters (200 billion cubic feet) of natural gas. The Protoka license is for depths below 1,500 meters and newly acquired 3D seismic data appear to show structures of interest below that depth. Protoka is within 20 kms of the coast, 120 kms from the oil port of Temryuk and one kilometer from the gas infrastructure owned by Gazprom.

To view accompanying map please click on the following link: http://www.ccnmatthews.com/docs/WAEmap.jpg

Technical Information on the Properties

The rich shale source rock that generated the prolific oil resources of the Caspian Sea, extends from the Caspian Sea under the properties and is the source of the oil and gas produced in the Azov-Kuban province. Overlying this source rock multiple sandstone reservoirs of a lenticular nature provide potential structural and structural-stratigraphic traps. New technology now allows the stratigraphic traps to be identified and mapped.

Modern 3D seismic data were acquired by Posik Geoorazvedka, which is affiliated with Krasnodar Geophysics, over both properties during 2006 and 2007, together with induced-polarisation surveys which locate surface indications of hydrocarbon micro-seeps. In the South Temryuk license permit, processing and interpretation of the 3D seismic data show seismic amplitude anomalies in multiple reservoir horizons, indicating the possible presence of stratigraphically-trapped hydrocarbons. The locations of some of these anomalies coincide with anomalies in the induced-polarisation surveys, providing further evidence of the potential for hydrocarbons. In total, five prospects have been identified in the South Temryuk area. Mapping of the Protoka permit is in progress and additional structural anomalies have already been identified.

The first well on the South Temryuk license has been spudded targeting 5 zones of interest between 600 meters and a planned total depth of 3,920 meters. The well is currently drilling ahead at approximately 750 meters. The intermediate, 12.75 inch diameter, casing string is planned to be set at a depth of 1,950 meters, which should be in approximately 20 days.

Revised Transaction Terms

Under the terms of the Agreements, WAE will initially own 20% and will have a right to acquire the remaining 80% of the issued share capital of a foreign joint venture corporation that will through its wholly-owned Russian subsidiary, own 45% of the share capital of Technoton Limited, a Russian private company that is the 100% owner of South Temryuk and Protoka hydrocarbon exploration licenses. As a result, the Share Interest represents up to a 45% indirect ownership in the oil and gas fields represented by these two licenses.

WAE can earn the right to acquire the Share Interest by paying the following work commitment costs:

1. US$4,000,000 to Arax which represents an estimated 50% of the costs of an initial well currently being drilled on the South Temryuk property; and

2. Should WAE choose to continue its participation in the properties, 25% of the costs of a second well to be drilled on the South Temryuk property in 2008.

Upon completion of these commitments, WAE will have earned a 9% indirect share interest in Technoton Limited and a 22.5% revenue participation interest in the first and second wells drilled (subject to dilution in the event that WAE does not contribute to any additional drilling costs). In addition, on completion of these commitments, WAE will earn the right to acquire the balance of the 45% indirect ownership interest in the licenses, by issuing 30,000,000 common shares of WAE to Arax Cayman. If WAE chooses to exercise the option and acquire the Share Interest, WAE will, in addition to issuing to Arax Cayman the 30,000,000 common shares, agree to pay to Arax Cayman bonus payments of US$2m for each 10,000,000 BOE's of proven reserves discovered on each of the properties.

Should WAE decide not to exercise the option to acquire the Share Interest, Arax has the right, for a period of 180 days, to re-purchase WAE's 10% share interest and its 22.5% interest in the two wells by making a cash payment to WAE equal to two times the aggregate work commitment payments that WAE has made.

The transaction is subject to completion of final due diligence and all necessary approvals including the acceptance of the TSX Venture Exchange.

About West Africa Energy

West Africa Energy is focused on acquiring hydrocarbon assets in areas where the application of new technology and concepts can find new hydrocarbon reserves. Our strong acreage holdings in the Mesozoic-age Gao graben in Mali provide very exciting long-term potential. Management of WAE believes this new opportunity in southern Russia will have a high impact on WAE bringing the near-term possibility of a hydrocarbon discovery and production.

The selection process imposed by management involves securing opportunities where the introduction of sophisticated exploration analysis and techniques can achieve results for shareholders. In order to achieve these results WAE will continue to focus its efforts in regions that have historically been under-explored.

Caution to Readers

BOE's may be misleading, particularly if used in isolation. A BOE conversion ratio of 8Mcf: 1 bbl is based on an energy equivalency conversion primary applicable at the burner tip and doe not represent a value equivalency at the wellhead.


Alec E. Robinson, President and CEO

This News Release does not constitute an offer to sell or a solicitation of an offer to sell any securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to a U.S. Person unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Forward-Looking Statements:

Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors identified in West Africa Energy's periodic filings with Canadian Securities Regulators. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. West Africa Energy Inc. does not assume the obligation to update any forward-looking statement except as required by applicable securities laws.

The TSX Venture Exchange does not accept responsibility for the adequacy or the accuracy of this release.

Contact Information

  • West Africa Energy Inc.
    Alec Robinson
    President and CEO
    + 44(1372) 849-864
    Website: www.waecorp.com