Africa Oil provided an update on the Company's planned 2011 exploration activities and capital budget.
It is anticipated that 2011 will be a pivotal year in the Company's progression with three exploration wells planned to spud during the year, over 4,000km of two dimensional seismic ("2D seismic") to be acquired and an extensive Full Tensor Gravity ("FTG") program planned to aid in assessing the overall prospectivity of the Tertiary and Cretaceous Rifts. The Company's Board of Directors has approved a $43 million (net) capital budget ($163 million gross exploration expenditures). Given the success of the Company's recent farmout efforts and financings, the Company has adequate working capital to fund its entire 2011 work program and anticipates significant excess working capital entering 2012.
Tertiary Rift (South Omo (Ethiopia), Blocks 10BB, 10BA, 12A, 13T (Kenya))
In addition to ongoing continuous geological and geophysical field work and geochemical studies, an aggressive exploration campaign will continue through 2011 focused on three main activities: FTG, 2D seismic and exploratory drilling.
To date, farmout transactions have closed which provide Tullow Oil plc. ("Tullow") with a 50% working interest and operatorship of the South Omo Block and Block 10BB in the Tertiary rift. Africa Oil is expected to complete the acquisition of Centric Energy Corp. before the end of February, 2011, acquiring a 50% interest in Block 10BA, which is also operated by Tullow. The farmout transaction on 12A and 13T, providing Tullow with a 50% working interest and operatorship of these blocks is expected to also close before the end of February, 2011.
FTG surveys will be undertaken on all Tertiary rift blocks, utilizing two FTG crews, to assess the overall prospectivity of the Tertiary rift play. FTG is an airborne, high resolution gravity mapping tool which has been successfully utilized in the Lake Albert area of Uganda by Tullow, where gross discovered resources are over 2 billion barrels of oil. This technology will be utilized to provide basement image faulting, reduce uncertainty surrounding the structural configuration of the Blocks and to delineate structures to narrow the focus for subsequent 2D seismic surveys.
2D seismic operations are planned to commence during Q2 2011 and continue through the year on the Tertiary rift blocks.
Exploratory drilling is expected to commence in Block 10BB during Q3 2011 with one well planned for the year. Current activities are focused on interpreting the 610km of 2D seismic data which was acquired during 2010, integrating this data with the legacy seismic data on the Block and finalizing the prospect and lead inventory. Environmental impact assessments have been completed over four potential drill sites and Government permits have been issued. The prospect and lead inventory which will be generated during 2011 will be carried forward into 2012 where exploratory drilling operations are expected to continue.
The Company signed a definitive agreement with the Government of Ethiopia to jointly study in conjunction with the Ministry of Mines the 42,519 sq km Rift Valley Block in December 2010. The Block is located north of the Company's South Omo Block and encompasses the remainder of the Tertiary age East Africa Rift Trend in Ethiopia. The Company initiated a block-wide airborne high resolution gravity and magnetic survey on February 12, 2011. In addition, the Company has utilized a specialized satellite imagery technique to observe natural oil seepage on several of the rift valley lakes within the new block. A team will be mobilized in early March to ground truth and sample the oil slicks. AOC holds exclusive rights to negotiate a production sharing agreement for all or part of the Rift Valley block after the 18 months expire. The Company holds 100% interest in the Rift Valley Block.
Jurassic Rift (Dharoor and Nugaal Blocks (Puntland, Somalia))
Exploration activities in Puntland are focused on drilling the first exploration well in Somalia in over 20 years. The Company plans to spud the first well in the Dharoor Block during Q3 2011. Activities are currently focused on the identification and contracting of drilling and drilling support contractors willing to operate in Puntland on commercially acceptable terms. A second well in the Dharoor Block is planned to commence following completion of the first exploration well.
Cretaceous Rift (Blocks 10A and 9 (Kenya))
The farmout transaction, providing Tullow with a 50% interest and operatorship of Block 10A, closed in January, 2011. Block 10A exploration activities are focused on the completion and interpretation of the 794km 2D seismic survey (320km net), which commenced during Q4 2010, finalization of the prospect inventory which will lead to the drilling of one exploration well on the Block, scheduled to spud in Q4 2011.
In Block 9, operated by the Company, exploration activities are focused on a planned 750km (gross) (500km net) 2D seismic survey focused on the oil prone Kaisut sub-basin. In addition, the Company plans to investigate gas commercialization alternatives in East Africa, in anticipation of performing extended well tests on the potentially significant gas discovery that resulted from drilling the Bogal 1-1 well in 2010. As of December 31, 2010, the Company has assumed operatorship of Block 9 and increased its working interest to 66.67%.
Permian-Triassic (Ogaden Blocks 2&6 7&8 (Ethiopia))
The Company operates two production sharing agreements, Blocks 2/6 and 7/8 in the Ogaden Basin of southeastern Ethiopia. Seismic operations were completed without any security or significant safety issues in December of 2010. The new data has been integrated with existing seismic to generate a series of new prospect maps. The Company continues to focus efforts on the large El Kuran prospect in the Blocks 7/8 license. The feature was de-risked in 1972 with two wells drilled by Tenneco; both wells recovered small amounts of light oil from Jurassic reservoirs near 5000 feet. The Company plans to drill one well on the El Kuran prospect in late 2011 or early 2012 in an attempt to establish commercial oil reserves. The Company holds 55% interest in both Blocks 2/6 and 7/8 licenses.
Cretaceous - Central Africa Rift Trend (Blocks 7 and 11 (Mali))
Africa Oil is expected to complete the acquisition of Centric Energy Corp. before the end of February, 2011, obtaining a 25% interest in Block 7 and 11, which are operated by Heritage Oil Corporation ("Heritage"). Heritage is currently in advanced discussions with 2D seismic subcontractors with the goal of acquiring reconnaissance seismic during 2011. The Company's share of seismic expenditures and the drilling of one exploration well will be carried by Heritage.
Africa Oil President and CEO Keith Hill commented, "The next 18 months will be pivotal for Africa Oil Corp. as we evaluate our large inventory of high potential prospects in the East Africa Rift trend. The Company is well financed, has a well diversified exploration portfolio and reputable joint venture partners. We are looking forward to the commencement of continuous drilling in 2011."
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