Africa Oil Corp Petroleum Exploration Activities in Kenya

Africa Oil Corp Petroleum Exploration Activities in Kenya

Africa Oil wishes to extend congratulations to the people of Kenya on the recent discovery of oil at the Ngamia prospect in Northwestern Kenya. We believe this may be the start of a significant development in the economic future of the country. Following recent speculation in the press, we are today issuing a short synopsis of our history in Kenya over the past 6 years.

Africa Oil Corp. entered the East African oil exploration industry in 2006. Over the course of the intervening years, Africa Oil acquired additional interests in Kenya and Ethiopia, but quickly focused on the East African Rift Valley in the Northern Turkana region.

During 2009, Africa Oil gained an interest in Block 10BB by acquiring Turkana Energy Inc., a private Canadian company, through a corporate transaction. Africa Oil paid for this transaction by issuing 8.3 million shares of Africa Oil to the shareholders of Turkana Energy Inc. No cash was paid in relation to the transaction, nor were any payments made to the Government of Kenya or any Kenyan Government officials or ministers.

The transaction was approved by the Kenyan Government and the TSX Venture Exchange in Canada and publicly disclosed in accordance with the disclosure requirement of the TSX Venture Exchange.

In addition to the acquisition of Block 10BB, Africa Oil has added 5 additional Kenyan properties to the portfolio including a 100% working interest in Block 9, a 30% working interest in Block 1OA and a 50% interest in Blocks 10BA, 13T, 12A.

As is customary in the international oil and gas exploration industry, Africa Oil has been able to attract additional industry participants to form joint venture partnerships in order to draw on enhanced technical and financial capabilities. Most significantly, during 2010 and 2011, Africa Oil was able to attract Tullow Oil a highly successful
Africa-focused oil company, to Kenya. Tullow acquired a 50% working interest and became the Operator of Blocks 10BB, 10BA, 12A, 13T and 10A. Tullow acquired these interests in a competitive farm-out process, which is also customary in the international oil and gas exploration industry.

Tullow agreed to pay a portion of the costs previously incurred on the blocks and to partially fund a portion of Africa Oil's future costs on the blocks. All of the proceeds Africa Oil received from the Tullow farmout have been reinvested in its Kenyan oil and gas exploration efforts.

Since its 2007 entry into the Kenyan upstream oil and gas exploration industry, Africa Oil has arguably been the most active industry participant. The Company has spent over $40 million dollars funding its share of exploration activities which include:
  • the drilling of the CNOOC-operated Bogal-1 well on Block 9, which was a major step in Kenya's renewed search for oil and gas. Prior to drilling the Bogal well, there had not been an exploration well drilled in the country for over 20 years. The Company believes it may have discovered a potentially commercial gas field at Bogal, which remains to be confirmed by further work. Africa Oil elected to enter the next exploration period on the Block, while the past Operator and other partner elected to exit Kenyan exploration altogether. Furthermore, Africa Oil has committed to the drilling of a second exploration well in Block 9 before the end of 2013;
  • the acquisition of Full Tensor Gravity data, a new cutting edge technology which allows exploration companies to accelerate their efforts and locate the most prospective portions of the exploration blocks. These FTG surveys acquired by Africa Oil and Tullow form the largest contiguous FTG survey ever acquired.
  • the acquisition of vast surveys of 2D seismic, a geologic tool used to identify prospective areas for exploratory drilling;
  • the drilling of the Ngamia-1 well on Block 1OBB, which has led to the discovery of oil for Kenya;
  • Africa Oil and its partners maintain robust community development programs in all blocks where we are active. Projects are designed and agreed in conjunction with the communities and typically focus on education, water, and buman/animal health.
As President Kibaki rightly pointed out in his speech on March 26th, 2012, when he announced the first discovery of oil in the northern Turkana region, this discovery is a first crucial step towards the possible production of oil in Kenya and associated revenues for the country.

It is just the first-step, however, and a great deal more work is required before we can confirm the full potential of what we have found. The next phase will be the appraisal of the discovery and the drilling of additional exploration prospects and we and our partners will provide operational updates accordingly.

Africa Oil and its partners are committed to continuing their exploration and potential development activities in Kenya to adequately explore, evaluate and potentially develop the petroleum resources of the country.

Be assured that Africa Oil and its partners will work closely with the Kenyan Government and all stakeholders to ensure that the benefits of this project are enjoyed by all.

Donald Mahaga
General Manager
Africa Oil Kenya B.V.

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