Africa Oil Corp. is pleased to provide third quarter 2014 financial results and an update on its operations in Kenya and Ethiopia.

The Company announced details of an updated independent assessment of the Company’s contingent resources for the discovered basin in Northern Kenya in Blocks 10BB and 13T in September.  The effective date of this assessment was July 31, 2014, and it was carried out in accordance with the standards established by the Canadian Securities Administrators in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.

The assessment confirmed that the discovered basin in Northern Kenya contains gross 2C contingent resources of 616 million barrels of oil, an increase of 67% over the assessment conducted in September 2013 and gross 3C contingent resources of 1.29 billion barrels of oil an increase of 52% over the prior assessment.  Please refer to the Company’s press release dated September 16, 2014 for details of the contingent resources by field.

Entering the year, the Company and its partners had seven drilling rigs operating in the region.  Four Tullow-Africa Oil joint venture rigs are operating in Northern Kenya in Blocks 10BB, 10BA and 13T, one of which is a testing and completions unit.  One of these drilling rigs is demobilizing and is being replaced with a higher specification unit. 

In addition, the Company and its partner had a rig operating in Block 9 in Kenya, but as operations in the block have completed, this rig has been released.  In Ethiopia, the Company and its partners in the South Omo Block and Blocks 7/8 had rigs operating in each block.  Drilling operations in both blocks have been completed and the rigs released.  The Company will have four drilling rigs operating in Kenya through the remainder of 2014.

Two rigs are currently operating in the discovered basin in Northern Kenya.  The Ngamia-5 appraisal well is currently drilling and the completion and test rig is mobilizing to Amosing to commence completion of the Amosing-1 and Amosing-2A wells in preparation for an Extended Well Test (EWT) on the field.  Rigs are also in the process of mobilizing to drill the Epir-1 well in the North Kerio Basin, Block 10BB, and the Engomo-1 prospect in the North Turkana Basin, Block 10BA.

In addition to further exploration and appraisal drilling in the discovered basin in Northern Kenya, the Company and its partners plan to drill six new basin opening wells by mid-2016.  Epir-1 (Block 10BB) will test the North Kerio Basin and Engomo-1 (Block 10BA) will test the North Turkana Basin; both wells will spud shortly.  In addition, wells are being planned at the North Samaki prospect (Block 10BA) in the North Turkana Basin, the Tausi prospect (Block 13T) in the North Lokichar Basin, the Kerio Valley Basin (Block 12A) and the Turkewll Basin (Block 13T).

The Company is nearing the end of a significant exploration and appraisal program in 2014 which will see over 20 wells completed by year end. The program focused on drilling out the remaining prospect inventory in the discovered basin in Northern Kenya, appraising existing discoveries with the aid of the new 3D seismic survey, drilling three new basin opening wells and progressing the development studies towards project sanction in the discovered basin in Northern Kenya.  This significant exploration program in 2014 is fully funded. Africa Oil ended the quarter with cash of $273.6 million and working capital of $149.1 million.

The Company has completed the following significant exploration activities and transactions in, and subsequent to, the third quarter of 2014;

•    In July, the Company completed drilling of the Gardim-1 exploration well on the eastern flank of the Chew Bahir Basin.  The Gardim-1 well intersected lacustrine and volcanic formations, similar to those found in the Shimela-1 well, again minor intervals encountered gas shows.  Drilling operations are being demobilized while these results are integrated into the regional basin model.  Seismic interpretation continues on independent prospectivity elsewhere in the South Omo Block and the next phase of the Ethiopia exploration campaign will target these prospects.

•    In August, the Company announced the results of the Etom-1 exploration well located in Block 13T (Kenya), 7 kilometers north of the Agete oil discovery on the Basin Bounding Fault Play.  The well encountered between 5 and 20 meters of potential net oil pay sands based on wireline logs in the Auwerwer and Upper Lokhone Formations.  Oil was recovered in MDT sample chambers, which appears to be of similar quality as the other discoveries in the basin.  There is an additional 400 meters of porous sands in the Auwerwer and Lokhone Formations, which also confirms the extension of thick reservoir sections into the northern portion of the basin.  Oil and gas shows were noted throughout drilling of the well confirming the extension of the petroleum system to the northern portion of the discovered basin in Northern Kenya.  Based on these positive results, the original 3D seismic survey has been extended to cover the northern portion of this basin where several additional large prospects have been identified by 2D seismic.  The well has been suspended for future drill stem testing.

•    In August, the Company drilled the Ngamia-3 and Amosing-2/2A appraisal wells in the discovered basin in Northern Kenya in Block 10BB.  The results of these wells appear to confirm the thickness and lateral extent of the Auwerwer sands at both locations and also has extended the known oil column significantly downdip which will extend the proven field areas.  The range of thickness of the Auwerwer reservoir quality sands in all six penetrations of these two structures is between 146 and 200 meters, and the sands appear to be consistent over the field areas.  The upcoming Extended Well Test (“EWT”) programs on both of these fields will be designed to evaluate reservoir connectivity and help constrain estimates of flow rates and recovery factors for field development planning purposes.

•    In October, the Company announced the results of the Kodos-1 basin opening exploration well drilled in the Kerio Basin in Block 10BB (Kenya).  The well encountered hydrocarbon shows, which indicates the presence of an active petroleum system.  This is the first well in the Kerio basin, northeast of the discovered basin in Kenya, and it appears to have been drilled in an area of unfavorable reservoir development, near the basin bounding fault.  Due to the encouraging hydrocarbon shows, consideration is being given to drilling an additional exploration well in the basin during 2015.

• In October, the Company announced the results of the Ekosowan-1 exploration well located in Block 10BB, 12 kilometers southeast and updip of the Amosing oil discovery.  The well encountered a 900 meter column of near continuous oil shows throughout an interval of tight sands which also appear to be as a result of drilling too close to the basin bounding fault.  A downdip appraisal well between the Amosing field and this potential updip sealing location is being planned for 2015.

• In October, the Company drilled the Ngamia-4 appraisal well located 1.1 kilometers west of the Ngamia-1 discovery.  The well encountered up to 120 meters of hydrocarbon pay, of which up to 80 meters was oil.  This well has been suspended for use in future appraisal and development activities.  Four additional appraisal wells are planned in the Ngamia field area, including the Ngamia-5 well, which is currently drilling.

• In October, the Company announced the results of the Sala-2 appraisal well, which was drilled updip from the Sala-1 well.  Sala-2 failed to find significant hydrocarbons as there appears to be a stratigraphic or structural separation between the two wells.  The Company is reviewing additional potential appraisal targets as well as on trend prospects in the block which has proven oil and gas generation.

•The Company and its partners completed the drilling of the El Kuran-3 appraisal well on Block 8.  Although the El Kuran-3 well demonstrated some oil and gas potential, the Company did not consider it warranted further evaluation due to concerns over reservoir quality and commerciality.  Consequently, the Company has informed the Ethiopian Government and its partners that it intends to withdraw from Blocks 7 and 8.

•The Company, as operator, and its partner are currently mobilizing a seismic crew to acquire a minimum 400 kilometer 2D seismic program over the Rift Basin Area commencing in the fourth quarter. The Rift Basin Area is located north of the South Omo Block and is on trend with highly prospective blocks in the Tertiary rift valley including the South Omo Block in Ethiopia, and Kenyan Blocks 10BA, 10BB, 13T, and 12A.

•The Company and its partners continue to actively acquire and process seismic data in Blocks 12A, 10BA, 10BB and 13T in Kenya.  In Block 12A, a 674 kilometer 2D seismic program was completed in the first quarter and the crew has demobilized.  In Block 10BB, a 750 kilometer North Kerio Basin 2D seismic program was completed in the first quarter.  In Blocks 10BA, 10BB and 13T a 600 kilometer 2D seismic program over the North Lokichar and Turkwell basins is ongoing and will complete in the fourth quarter.   In Blocks 10BB and 13T, the acquisition of a 704 square kilometer 3D seismic program over the discoveries and prospects along the Basin Bounding Fault Play in the discovered basin in Northern Kenya has completed.  Following the positive results from the Etom-1 well, this 3D seismic program was expanded by a further 274 square kilometers to include Etom and the surrounding structures. This expanded survey is expected to complete during the fourth quarter.

•Due to the delays in acquiring the 3D seismic survey in Blocks 10BB and 13T the Government of Kenya has approved a one year extension to the PSC exploration terms for both blocks, and as a result, the final exploration periods will expire in July 2017 and September 2017, respectively.

 
Keith Hill, President and CEO of Africa Oil, commented, “We are looking forward to the results of three new basin opening wells to be drilled in late 2014 and early 2015 which have the potential to unlock significant value in terms of new prospects and resources. The ongoing drilling in the discovered basin in Northern Kenya has been quite helpful in understanding the distribution of the best reservoir facies and will no doubt be enhanced by the ongoing 3D seismic survey which is to be completed by the end of 2014. We remain very bullish in not only the existing discoveries but in the remaining prospects in the discovered basin in Northern Kenya. Our goal is to open up at least one new basin and to move a significant number of barrels from prospective to contingent resources by the end of 2014 and into 2015 as we move the field development program forward.”

Source: Africa Oil Corp

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