Africa Oil has signed a Farmout Agreement and Joint Venture Agreement with Agriterra (formerly White Nile Ltd.) to acquire an 80% participating interest and operatorship of the South Omo Block in Ethiopia.
South Omo represents a new opportunity for Africa Oil to secure a highly prospective block in the Omo Rift Valley of south-western Ethiopia. The block spans 29,465 square kilometres and is within the Tertiary age East African Rift, just north of Lake Turkana, Kenya and within the same petroleum system as the Company's Kenya Block 10BB and Tullow's Uganda discoveries.
Pursuant to the Farmout Agreement, to earn its 80% participating interest, Africa Oil would pay 80% of past costs incurred by Agriterra, to a maximum of US $2,517,000, and fund 100% of the costs associated with a work program comprised of 500 kilometres of 2D seismic, a field geology program, and a surface geochemistry program. Total cost exposure for this work program is estimated at $6.5 MM with the majority of these costs to be incurred in the first half of 2011.
Africa Oil President and CEO Keith Hill commented, "The addition of the South Omo block brings the total gross acreage on which the Company has signed agreements on to almost 250,000 square kilometres and gives us a dominant land position in the highly prospective East Africa Tertiary Rift trend. We currently have two seismic crews and one drilling rig active and are expecting to test all major play types within the next 12 to 18 months. The increased activity in East Africa will also allow us to attract international partners to reduce the risk capital required to explore these highly prospective rift basins."
Completion under the Farmout Agreement is conditional on the parties obtaining Ministerial consent and all requisite regulatory, third party and Ethiopian Government approvals.
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