Africa Oil has received Ministerial consent in connection with the previously announced Farmout Agreement with Agriterra (formerly White Nile Ltd.) and the deal has now closed. Under the Farmout Agreement, Africa Oil Ethiopia B.V. ("AOEBV"), a wholly-owned subsidiary of Africa Oil, has acquired an 80% participating interest in, 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 AOEBV will pay 80% of past costs incurred by Agriterra, to a maximum of US $2,517,000, to earn its 80% participating interest. The payment of these past costs will be set-off against future cash calls made to Agriterra by AOEBV in respect of Agriterra's 20% Participating Interest. AOEBV will also fund 100% of the costs associated with a work program comprised of 500 kilometers 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 USD with the majority of these costs to be incurred in the first half of 2011.
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