Africa Oil Collects New Block for East African Oil Exploration Portfolio
Africa Oil has signed an agreement to acquire all of the issued and outstanding shares of Turkana Energy Inc. ("Turkana"), a privately held oil and gas exploration company based in Vancouver, Canada. Turkana's principal asset is Block 10BB, a highly prospective oil exploration block in northwestern Kenya.
Pursuant to the agreement, Africa Oil will acquire, by way of a plan of arrangement, all of the issued and outstanding shares of Turkana in consideration for 7.5 million common shares of Africa Oil. The Africa Oil shares will be distributed to the Turkana shareholders pro rata to their interest in Turkana. In addition, existing Turkana convertible loans owing to Turkana shareholders, to a maximum of Cdn $1 million, will be exchanged into common shares of Africa Oil at the higher of Cdn $0.90 per share and the lowest price permitted in accordance with the applicable policies of the TSX Venture Exchange.
A meeting of the Turkana shareholders to approve the transaction will be held in mid July 2009 and the transaction is expected to close before the end of July 2009. The transaction is also subject to TSX Venture Exchange, Kenyan Government and court approvals and to the approval by the Company's shareholders of a resolution to increase the Company's authorized share capital.
About Block 10BB
Turkana has an undivided 100% interest in Block 10BB pursuant to a Production Sharing Contract with the Government of the Republic of Kenya made October 25, 2007, and subject only to a 20% back-in right in favor of the Kenyan government. Block 10BB is a large block encompassing approximately 13,000 square kilometers located in the Rift Valley of northwestern Kenya. The block is within the Tertiary rift trend of East Africa which has recently yielded major oil discoveries by operators such as Heritage and Tullow which are active in the Lake Albert region of Uganda. Block 10BB is located immediately west of Africa Oil's Kenyan Block 10A and Block 9 and further consolidates the Company's holdings in the rich East African rift basin petroleum system (please see attached map). In an independent report (Gaffney, Cline & Associates, September, 2008) prepared for Turkana, an aggregated potential unrisked best estimate of undiscovered prospective light and medium crude oil resources on Block 10BB totals greater than 1.7 billion barrels of oil from 17 leads, 5 prospects and 1 existing discovery.
The rift basins of East Africa are highly under-explored despite being surrounded by billion barrel accumulations on all sides. There are four distinct independent petroleum systems which are proven to exist within the Company's existing acreage. Block 10BB is within the same system as the Lake Albert play. It has similar rifted structures and reservoirs as found in Lake Albert which have proven the existence of the Tertiary source rock that generated the light oil recoveries from the Loperot #1 well drilled by Shell in 1992.
The other three systems within Africa Oil's portfolio, include the Jurassic rift basins of Puntland/Somalia which is on trend and once connected with the highly productive Yemen basins (6 billion barrels discovered), the Lower Cretaceous rifts of the Anza Basin in Kenya, which is directly on trend with the Sudanese Muglad Basin (6 billion barrels of oil discovered) and the Permo-Triassic rift basins of Ethiopia, which was once contiguous with the super giant accumulations of Madagascar (24 billion barrels in place).
An aggressive 2009-10 work program is planned for the Company's East African assets, including the Company's new block in Kenya, which will include both seismic and exploratory drilling.
Africa Oil President, Rick Schmitt, stated, "The addition of Kenyan Block 10BB gives us the prime exploration blocks in all four major petroleum systems of East Africa. The recent discoveries of the Lake Albert region of Uganda are analogous and directly on trend with Turkana's Block 10BB and with one existing discovery already on that block (Loperot), the risk profile is greatly reduced. The highly prolific nature of the on-trend discoveries gives us encouragement that major accumulations could be present in several of our large acreage holdings which exceed 200,000 square kilometers. With the completion of our financing in April 2009, we will be able to evaluate the exciting new Kenyan block, in addition to testing our play concepts over the next two years in the other three highly prospective trends within the Africa Oil portfolio."