Africa Oil Corp. has announced its financial and operating results for the three months and year ended December 31, 2015, in which it said subsequent to December 31, 2015, the Company completed its previously announced farmout transaction with Maersk Olie og Gas A/S, a Danish oil and gas company owned by the Maersk Group, whereby Maersk acquired 50% of Africa Oil’s interests in Blocks 10BB, 13T and 10BA in Kenya and the Rift Basin, and South Omo Blocks in Ethiopia, in consideration for reimbursement of a portion of Africa Oil’s past costs and a future carry on certain exploration and development costs.
To date, $439.5 million of farmout related proceeds have been received from Maersk: $350 as reimbursement of past costs incurred by the Company prior to the agreed March 31, 2015 effective date and $89.5 million representing Maersk’s share of costs incurred between the effective date and December 31, 2015, including a carry reimbursement of $15MM related to exploration expenditures.
An additional $75 million development carry may be available to Africa Oil upon confirmation of existing resources, the report said, adding that an updated assessment of contingent resources is currently ongoing. Upon Final Investment Decision (“FID”), Maersk will be obligated to carry Africa Oil for an additional amount of up to $405 million depending on meeting certain thresholds of resource growth and timing of first oil.
At December 31, 2015, the Company had cash of $104.2 million and working capital of $49.5 million. During 2015, the Company completed several private placements for gross proceeds of $275 million. During the fourth quarter of 2015, as a result of exploration results to date and current oil industry environment, the Company wrote off $70.7 million of capitalised intangible exploration assets relating to Ethiopia. The remaining carrying value of the intangible exploration assets in Ethiopia is $18.4 million.
The Company said it has completed the following significant operational activities during the fourth quarter and to date in 2015:
• A draft Field Development Plan was submitted to the Government of Kenya in December and will inform discussions as we progress towards potential FID of the South Lokichar development project. Preparation for Front End Engineering and Design (“FEED”) is under way. Scoping studies and terms of reference for the detailed upstream environmental and social impact assessments were submitted to the regulatory authorities.
• In August 2015, a bilateral agreement was reached between the Presidents of Uganda and Kenya adopting the Northern Kenya route for the regional crude oil pipeline, subject to certain conditions. Africa Oil continues to support both countries in moving this project forward as quickly and efficiently as possible taking into account the needs of all stakeholders.
• During the first half of 2015, in preparation for Extended Well Tests (“EWTs”), the Amosing-1 and Amosing-2A wells were successfully completed in five separate zones. Initial rig-less flow testing during clean-up flowed at a cumulative maximum rate of 5,600 and 6,000 bopd, respectively. These results exceeded expectations, and demonstrated high quality reservoir sands which flowed 31 to 38 degree API dry oil under natural conditions. During the test, the wells produced at a cumulative average constrained rate of 4,300 bopd under natural flow conditions. Pressure data from the two wells supports significant connected oil volumes and confirms lateral reservoir continuity, which is positive for the future development. A cumulative volume of 30,000 barrels of oil has been produced into storage.
• During the second half of 2015, the Ngamia EWT production phase was completed with approximately 38,000 barrels of oil produced. Five completed zones of the Ngamia-8 production well were tested individually at a cumulative rate of 2,400 bbl/d and all except the lowest zone produced without artificial lift. Communication between the producer well and an observation well, at a distance of approximately 500 meters, was also demonstrated.
• Multiple appraisal wells were drilled during 2015 in the South Lokichar Basin, concentrated in the Amosing and Ngamia oil fields.
• During the fourth quarter of 2015, the Etom-2 well was drilled in an undrilled fault block adjacent to the Etom oil discovery in Block 13T. The well encountered 102 meters of net oil pay in two columns. The objective of the well was to explore the north flank of the Etom structure in an untested fault block identified by recent 3D seismic. Oil samples, sidewall cores and wire line logging all indicate the presence of high API oil in the best quality reservoir encountered in the South Lokichar Basin to date. Discovering this thick interval of high quality oil reservoirs further underpins the development options and resource base. The result follows careful evaluation of 3D seismic data which was shot after the Etom-1 well and demonstrates how the partnership has improved its understanding of the South Lokichar Basin. This result also suggests significant potential in this underexplored part of the block as it is the most northerly well drilled in South Lokichar and is located close to the axis of the basin away from the basin -bounding fault. Accordingly, Tullow and Africa Oil will review the potential of the greater Etom area and neighbouring prospects to decide on the forward programme.
• Outside of the South Lokichar Basin frontier exploration activity continued in 2015. Three potential basin opening exploration wells were drilled across the Company’s extensive Kenyan acreage in the North Kerio (Epir-1 – Block 10BB), North Turkana (Engomo-1 – Block 10BA) and North Lokichar (Emesek-1 – Block 13T) Basins. While none of the wells were discoveries, they have provided valuable data to assess the wider prospectivity of the basins. There is significant remaining exploration potential in the basins outside of South Lokichar and future basin opening exploration drilling plans are currently being evaluated.
• Following Etom-2, the PR Marriott Rig-46 moved to Block 12A in Kenya where it is currently drilling the Cheptuket-1 exploration well, the first well to be drilled in the Kerio Valley Basin.
• The full fast track processed data set for the 951 square kilometer 3D seismic survey over the series of significant discoveries along the western basin bounding fault in the South Lokichar Basin, is being interpreted. The 3D seismic indicates significantly improved structural and stratigraphic definition and additional prospectivity not evident from the 2D seismic.
• Over 1,100 meters of whole core has been obtained from the wells drilled in the South Lokichar Basin and an extensive program of detailed core analysis is ongoing. A key focus of the core program is to better assess oil saturation and to refine the recovery factors of the main reservoir sands. Core analysis results support the reservoir assumptions used in the contingent resource estimate and support the view of oil saturations in the reservoir.
• In the Rift Basin Area, the Government of Ethiopia has granted a twelve month extension to the initial exploration period, which will now expire in February 2017. A 2D seismic crew program was completed of approximately 600 kilometers of land and lake seismic during 2015. Source rock outcrops and oil slicks on the lakes have been identified in the block where there was previously no existing seismic or wells.