Africa Oil 2011 Financial and Operating Results
VANCOUVER, BRITISH COLUMBIA — Africa Oil Corp. (TSX VENTURE:AOI)(OMX:AOI) (“Africa Oil“, “the Company” or “AOC“) is pleased to announce its financial and operating results for the year ended December 31, 2011.
The Company continued to actively explore in East Africa:
-- In Block 10BB, the Company and its operating partner on the Block,
Tullow, prepared for spud of the partnership's first well, Ngamia-1,
which occurred soon after year end, during January 2012. The Ngamia
prospect will test the oil potential of 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 Company is currently drilling the 12 1/4" section of the
well at a depth of 1040m with the Weatherford 804 rig. The well is
planned to reach total depth of approximately 2700m.
-- In Puntland, the Company's 51% owned subsidiary, Horn Petroleum Corp.
("Horn"), prepared its first well in the Dharoor Valley Block for spud.
The Shabeel-1 exploration well spudded in January of 2012 and is
currently at a depth of 2224 meters. The upper 1600 meters of section
drilled to date includes a thick section of Tertiary limestones and
shales that appear to be a regional seal as no oil or gas shows were
encountered above this depth. The well recently completed drilling a 400
meter section composed of interbedded sandstones and shales believed to
be Upper Cretaceous in age. Most of the sandstone intervals in this
section have exhibited oil and gas shows confirming the existence of a
working petroleum system. Determination of the quality of the reservoir
and prospectivity of any potential oil bearing intervals cannot be
determined until downhole electric logs and formation tests are
concluded. The well has a planned total depth of 3800 meters and has yet
to penetrate the main reservoir targets in the Lower Cretaceous and
Jurassic. It is expected that the next electrical logging run will be
coincident with the running of the 9 5/8" casing at approximately 2400
to 2700 meters. Drilling of the Shabeel-1 well is expected to be
complete during the first quarter of 2012 and testing equipment is
currently being mobilized to the site.
-- In Block 10A, the Company and its operating partner on the Block,
Tullow, have agreed in the location of the first exploratory well in
Block 10A. The prospect to be drilled is the Paipai prospect with a
proposed total depth of 4150m. Paipai is a large four-way closed
structure with Cretaceous-age sandstone targets at multiple depths. The
Weatherford 804 rig, currently at the Ngamia-1 location, will mobilize
to Paipai directly after completion of Ngamia operations. The Paipai
civil works associated with the location have been completed and
sufficient materials have been purchased and mobilized to the location.
-- The Company, in partnership with Tullow, completed an extensive Full
Tensor Gravity ("FTG") survey over all of the blocks in the Tertiary
Rift basin during 2011. This technique has been proven highly successful
in Tullow's Uganda Albert Graben project, delineating structured
prospects and leads. Based on the results of the FTG survey, the Company
has performed an extensive 2D seismic program over the Tertiary Rift
basin blocks. The Company anticipates that it will complete its initial
2D seismic program late in the first half of 2012.
-- Africa Oil ended the quarter in a strong financial position with cash of
$109.6 million and working capital of $90.2 million as compared to cash
of $76.1 million and working capital of $70.6 million at December 31,
2010. Of the $109.6 million in cash at December 31, 2011, $27.6 million
is cash held by Horn. The Company's liquidity and capital resource
position has remained strong throughout the year.
-- The Company's planned exploration activities for 2012 include the
drilling of five exploration wells and the acquisition of over 2,100
kilometers of 2D seismic. In addition to the Shabeel-1 and Ngamia-1
wells, which are currently being drilled, it is anticipated that the
Shabeel North well will be drilled in Puntland (Somalia), the Paipai
well will be drilled on Block 10A in Kenya and an exploration well will
be drilled on the South Omo Block in Ethiopia. It is anticipated that 2D
seismic will be acquired on Blocks 10BA, 10BB, 12A, 13T and South Omo.
Keith Hill, President and CEO, commented, “Africa Oil continues to aggressively explore our East African exploration portfolio with three seismic crews and two drilling rigs active in the region. It is anticipated that results from both the Ngamia-1 and Shabeel-1 wells will be available in the second quarter of 2012. We are pleased to have entered the drilling phase and anticipate two rigs being active on the Company‘s blocks throughout 2012.”
2011 Financial and Operating Highlights
Consolidated Statement of Net Loss and Comprehensive Loss
(United States Dollars)
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For the years ended December 31, December 31,
2011 2010
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Operating expenses
Salaries and benefits $ 1,695,987 $ 1,369,025
Stock-based compensation 4,348,440 933,144
Bank charges 153,548 122,697
Travel 1,132,282 714,179
Management fees 245,258 228,542
Office and general 1,508,359 1,078,274
Depreciation 48,495 76,813
Professional fees 1,475,929 1,252,225
Stock exchange and filing fees 546,137 428,476
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11,154,435 6,203,375
Impairment of intangible exploration assets 6,969,413 -
Gain on acquisition of Lion Energy (4,143,051) -
Dilution loss on sale of subsidiary 4,578,634 -
Finance income (12,079,274) (2,075,089)
Finance expense 2,472,378 15,366,047
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Net loss and comprehensive loss 8,952,535 19,494,333
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Net income and comprehensive income
attributable to non-controlling interest (1,691,149) -
Net loss and comprehensive loss attributable
to common shareholders 10,643,684 19,494,333
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Net loss per share
Basic $ 0.06 $ 0.23
Diluted $ 0.08 $ 0.23
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Weighted average number of shares outstanding
Basic 193,417,492 85,164,170
Diluted 194,030,846 85,164,170
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During the third quarter of 2011, Horn was formed as a new Puntland focused exploration company. The Horn Transaction has been accounted for as an acquisition of Horn’s net assets by Canmex (reverse acquisition) as AOC, the sole owner of Canmex prior to the Transaction, controls Horn subsequent to the Horn Transaction. Effectively as a result of the Horn Transaction and Horn private placement, AOC through its wholly owned subsidiary acquired 51.4% of the newly formed entity. While the results of Canmex have historically been consolidated in the Company‘s financial statements, effective September 20, 2011, the 48.6% non-controlling interest in Horn will be accounted for in the consolidated results of the Company.
Operating expenses increased $5.0 million for year ended December 31, 2011 compared to the previous year primarily due to a $3.4 million increase in stock-based compensation costs associated with stock option grants in AOC and Horn during the year, a $0.4 million donation to the Lundin Foundation which is included in office and general, and increased salary costs and travel costs associated with increased operational activity.
Expenditures relating to Blocks 2/6 have been written off resulting in the $7.0 million impairment of intangible exploration assets. AOC relinquished Blocks 2/6 and obtained Ministerial approval to waive remaining commitments. The Company paid $1.2 million to the Government of Ethiopia, in lieu of unfulfilled commitments with respect to the Blocks 2/6 PSA.
The gain relating to the acquisition of Lion was the result of the Company acquiring net working capital and intangible exploration assets valued in excess of the consideration issued. The consideration paid was valued at $21.7 million, net of AOC shares acquired. Working capital acquired was $20.1 million and the intangible exploration assets acquired were valued at $5.7 million.
The dilution loss on the sale of subsidiary was recognized on the consolidation of Horn and represents the excess of the fair value of the consideration paid by the Canmex, in the reverse acquisition, over the value of the net assets of Horn acquired.
Financial income and expense for the years ended December 31, 2011 and 2010 is made up of the following items:
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For the years ended December 31, December 31,
2011 2010
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Gain on marketable securities 235,830 -
Fair value adjustment - warrants 8,845,456 (2,108,312)
Fair value adjustment - convertible debt 2,031,704 (13,257,735)
Interest and other income 966,284 86,538
Foreign exchange gain/(loss) (2,472,378) 1,988,551
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Financial Income 12,079,274 2,075,089
Financial expense (2,472,378) (15,366,047)
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The gain on revaluation of marketable securities is the result of an increase in the value of 10 million shares held in Encanto Potash Corp which were acquired on the acquisition of Lion.
The Company recorded gains on the revaluation of warrants in the year ended December 31, 2011 due to a reduction in AOC‘s share price from the end of the previous year.
The Company recorded gains on the revaluation of the convertible debt in the year ended December 31, 2011 due to a reduction in AOC‘s share price from the end of 2010. The convertible debt was converted to shares in the first and second quarter of 2011.
Interest income was higher in the year ended December 31, 2011 due to a significant increase in the average cash balance versus the year ended December 31, 2010.
The $2.5 million foreign exchange loss in the year ended December 31, 2011 is the result of a decrease in the value of the Canadian dollar at a time when AOC was holding a significant amount of Canadian dollars.
Consolidated Balance Sheets
(United States Dollars)
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December 31, December 31, January 1,
2011 2010 2010
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ASSETS
Current assets
Cash and cash equivalents $ 109,558,445 $ 76,125,834 $ 11,145,486
Marketable securities 2,605,745 - -
Accounts receivable 2,717,024 2,323,208 5,396,253
Prepaid expenses 599,727 595,729 508,344
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115,480,941 79,044,771 17,050,083
Long-term assets
Restricted cash 2,919,000 3,181,500 1,800,000
Property and equipment 39,395 39,621 107,549
Intangible exploration
assets 185,671,962 96,468,816 76,138,940
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188,630,357 99,689,937 78,046,489
Total assets $ 304,111,298 $ 178,734,708 $ 95,096,572
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LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 23,768,545 $ 7,122,007 $ 3,244,871
Current portion of warrants 1,512,811 874,949 -
Current portion of
convertible debenture - 411,220 407,950
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25,281,356 8,408,176 3,652,821
Long-term liabilities
Warrants 2,882,441 5,195,914 21,673,039
Convertible debenture - 54,077,952 40,820,217
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2,882,441 59,273,866 62,493,256
Total liabilities 28,163,797 67,682,042 66,146,077
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Equity attributable to common
shareholders
Share capital 306,509,909 163,231,076 62,712,759
Contributed surplus 8,425,304 4,391,940 3,313,753
Deficit (75,283,481) (56,570,350) (37,076,017)
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239,651,732 111,052,666 28,950,495
Non-controlling interest 36,295,769 - -
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Total equity 275,947,501 111,052,666 28,950,495
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Total liabilities and equity $ 304,111,298 $ 178,734,708 $ 95,096,572
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The increase in total assets from January 1, 2010 to December 31, 2010 is attributable to the equity financings, expansion of acreage in East Africa (Blocks 12A and 13T (Kenya) and South Omo (Ethiopia)), drilling of Bogal-1 in Block 9, and the seismic acquisition programs on Block 10BB in Kenya and the Ogaden blocks in Ethiopia.
The increase in total assets from December 31, 2010 to December 31, 2011 is primarily attributable to the funds raised on the Horn private placement and closing of the acquisitions of Centric and Lion which were funded primarily by the issuance of shares.
Consolidated Statement of Cash Flows
(United States Dollars)
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For the years ended December 31, December 31,
2011 2010
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Cash flows provided by (used in):
Operations:
Net loss and comprehensive loss for the
year $ (8,952,535) $ (19,494,333)
Item not affecting cash:
Stock-based compensation 4,348,440 933,144
Share-based accrual for finder's fee - 94,960
Depreciation 48,495 76,813
Gain on marketable securities (235,830) -
Gain on acquisition of Lion Energy (4,143,051) -
Impairment of intangible exploration
assets 6,969,413 -
Dilution loss on sale of subsidiary 4,578,634 -
Fair value adjustment - warrants (8,845,456) 2,108,312
Fair value adjustment - convertible debt (2,031,704) 13,257,735
Unrealized foreign exchange (gain)/loss 1,901,474 (1,968,176)
Changes in non-cash operating working
capital (621,614) 459,425
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(6,983,734) (4,532,120)
Investing:
Property and equipment expenditures (39,446) (8,885)
Intangible exploration expenditures (41,285,520) (15,424,461)
Farmout proceeds, net 14,900,160 -
Cash received on business acquisitions,
net of cash issued 18,636,869 -
Proceeds on disposal of Canmex, net of
investment in Horn 29,923,128 -
Changes in non-cash investing working
capital 16,612,868 7,558,958
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38,748,059 (7,874,388)
Financing:
Common shares issued, net of issuance
costs 3,019,716 78,387,475
Repayment of liability portion of
convertible debt (411,220) (854,296)
Deposit of cash for bank guarantee (2,175,000) (1,381,500)
Release of bank guarantee 2,887,500 -
Changes in non-cash financing working
capital 168,569 (704,599)
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3,489,565 75,447,080
Effect of exchange rate changes on cash and
cash equivalents denominated in foreign
currency (1,821,279) 1,939,776
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Increase in cash and cash equivalents 33,432,611 64,980,348
Cash and cash equivalents, beginning of year $ 76,125,834 $ 11,145,486
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Cash and cash equivalents, end of year $ 109,558,445 $ 76,125,834
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Supplementary information:
Interest paid 411,220 854,296
Taxes paid Nil Nil
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The increase in cash in 2011 is mainly a result of the Horn private placement, cash acquired through the Lion acquisition, proceeds received on the close of the Tullow farmout, offset partially by intangible exploration expenditures and operating expenses.
Consolidated Statement of Equity
(United States Dollars)
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December 31, December 31,
2011 2010
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Share capital:
Balance, beginning of year $ 163,231,076 $ 62,712,759
Acquisition of Centric Energy 60,165,193 -
Acquisition of Lion Energy, net of AOC
shares aquired 21,561,185 -
Issued on conversion of convertible
debenture 52,214,817 -
Amended farmout agreement with Lion Energy 5,274,675 -
Private placement, net - 23,176,474
Exercise of warrants 3,023,756 73,582,210
Assignment of Blocks 12A and 13T in Kenya - 3,243,470
Farmout ageement finder's fees 166,858 422,588
Exercise of options 872,349 93,575
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Balance, end of year 306,509,909 163,231,076
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Contributed surplus:
Balance, beginning of year $ 4,391,940 $ 3,313,753
Expiration of warrants 3,676 79,818
Acquisition of Lion Energy 110,606 -
Stock based compensation 4,348,440 933,144
Issuance of shares in lieu of finder's fee (166,858) 94,960
Exercise of options (262,500) (29,735)
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Balance, end of year 8,425,304 4,391,940
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Deficit:
Balance, beginning of year $ (56,570,350) $ (37,076,017)
Dilution loss through equity (8,069,447) -
Net loss and comprehensive loss
attributable to common shareholders (10,643,684) (19,494,333)
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Balance, end of year (75,283,481) (56,570,350)
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Total equity attributable to common
shareholders $ 239,651,732 $ 111,052,666
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Non-controlling interest:
Balance, beginning of year $ - $ -
Non-controlling interest on disposal of
Canmex 34,604,620 -
Net income and comprehensive income
attributable to non-controlling interest 1,691,149 -
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Balance, end of year 36,295,769 -
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Total equity $ 275,947,501 $ 111,052,666
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The Company‘s consolidated financial statements, notes to the financial statements, management’s discussion and analysis and Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company‘s website (www.africaoilcorp.com). The Annual Information Form includes the Company‘s reserves and resource data for the period ended December 31, 2011 and other oil and natural gas information prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
Outlook
The Company enters 2012 in a very strong financial position with cash of $109.6 million and working capital of $90.2 million. The 2012 year will be a pivotal year for the AOC, as the Company expects to drill five exploration wells in the year. The exploration wells anticipated for 2012 include Ngamia (Block 10BB – Kenya) and Shabeel-1 (Dharoor Valley – Puntland) which are currently in progress as well as an additional well in each of Block 10A (Kenya), South Omo (Ethiopia), and Dharoor (Puntland, Somalia). The Company also expects to complete its initial seismic programs covering all existing blocks under PSA with the completion of an additional 2,100 kilometers of 2D seismic covering the remainder of the South Omo Block, as well as Blocks 10BA and 12A. The Company believes that it has sufficient working capital available to fund the entire 2012 work program.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya, Ethiopia, Puntland (Somalia) and Mali. 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 Africa Oil‘s Certified Advisor on NASDAQ OMX First North is Pareto Ohman 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.
© Marketwire 2012
Culled from here : Africa News
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