Year End Update | Africa Oil Corp.

Operations

On the back of the successful exploration activities in Kenya during 2012, the Company, together with its partners, ramped up its exploration program in Kenya and Ethiopia. Entering the year, two Tullow-Africa Oil joint venture rigs were operating in Kenya and one joint venture rig was operating in Ethiopia. Two additional Tullow-Africa Oil joint venture rigs (one of which is a testing and completion unit) were mobilized, the drilling unit commenced operations in November 2013 and the testing and completions unit commenced operations in February 2014. The Company, as operator, and its partner in Block 9 (Kenya) secured a sixth rig, which commenced drilling operations in September 2013. In addition, the Company and its partners in Block 7/8 (Ethiopia) mobilized a seventh rig for a one well commitment, which commenced drilling operations in October 2013. Currently, the Company has seven rigs operating; however, it will shortly release the second drilling unit operating in Ethiopia, and then expects to have five drilling rigs and one testing and completion rig operating in the region through the rest of 2014. During 2013, the Company completed seven exploration wells and two multi-zone well tests across its blocks and exited the year with three wells drilling and one well under test.

All operations in Block 10BB and Block 13T in Northern Kenya were temporarily suspended for approximately 12 days beginning on October 28, 2013 as a precautionary measure following demonstrations by members of local communities. Operations resumed after successful discussions relating to the operating environment with central and regional government and local community leaders. These discussions led to the signing of a Memorandum of Understanding which clearly lays out a plan for the Government of Kenya, county government, local communities in Northern Kenya and the Tullow-Africa Oil joint venture to work together inclusively over the long-term and to ensure operations can continue without disruption in the future.

During the first half of 2013, the Company completed a series of well tests at both Twiga South-1 and Ngamia-1 on Blocks 13T and 10BB in Kenya, respectively. These successful well tests confirmed over 5,000 barrels of oil per day ("bopd") flow potential per well and doubled the previous estimates of net oil pay. Transient Pressure Analysis has been conducted on the Twiga South-1 and Ngamia-1 well tests. No pressure depletion was recorded over the duration of the tests.

In July 2013, the Company announced a new oil discovery at Etuko-1. Etuko-1 is located 14 kilometers east of Twiga South-1 in Block 10BB and was the first test of the Basin Flank Play in the eastern part of the South Lokichar Basin. The well encountered approximately 40 meters of net oil pay in the Auwerwer and Upper Lokhone targets and approximately 50 meters of additional potential net pay in the Lower Lokhone interval based on log analysis. In February 2014, the Company announced the results of five well tests conducted on five Lokhone pay intervals in Etuko-1. Light 36 degree API waxy crude oil was successfully flowed from three zones at a combined average rate of over 550 barrels of oil equivalent per day. In March 2014, the Company announced the results of the Etuko-2 exploration well drilled to test the upper Auwerwer sands overlying the previously announced Etuko discovery. Etuko-2 penetrated a potential significant oil column identified from formation pressure data and oil shows while drilling and in core, with good quality reservoir but flowed only water on drill stem test. The results are considered inconclusive and analysis is underway to consider further options to evaluate this reservoir.

In September 2013, the Company announced a new oil discovery at Ekales-1 located in the Basin Bounding Fault Play between the Ngamia-1 and Twiga South-1 discoveries. Logs indicated a potential pay zone of 60 to 100 meters to be confirmed by flow testing. Well testing was conducted utilizing the recently mobilized Tullow-Africa Oil joint venture testing and completion rig. In March 2014, the company announced the results of testing operations on the Ekales-1 well which confirmed this significant discovery. Two drill stem tests were completed and flowed at a combined rate of over 1,000 bopd from a combined 41 meter net pay interval. The upper zone had a very high productivity index of 4.3 stb/d/psi.

In November 2013, the Company announced a new oil discovery at Agete-1 located seven kilometers north of the Twiga South-1 discovery along the Basin Bounding Fault Play in Block 13T. Logs indicate a significant oil column with an estimated 100 meters of net oil pay in good quality sandstone reservoirs. Well testing will commence imminently and an appraisal well is planned in the first half of 2014.

In January 2014, the Company announced a new oil discovery at Amosing-1 located seven kilometers southwest of the Ngamia-1 discovery along the Basin Bounding Fault Play in Block 10BB. Logs indicate 160 to 200 meters of potential net oil pay in good quality sandstone reservoirs. Well testing and an appraisal well are planned for the first half of 2014.

Also in January 2014, the Company announced a new oil discovery at Ewoi-1 located four kilometers to the east of the Etuko-1 discovery in the Basin Flank Play on the eastern side of the South Lokichar Basin in Block 10BB. Logs indicate potential net pay of 20 to 80 meters to be confirmed by well testing.

In March 2014, the Company announced the results of the Emong-1 well located four kilometers northwest of Ngamia-1 field discovery in Block 13T. The well encountered oil and gas shows while drilling, however the Auwerwer sandstones that are the primary reservoirs in the Ngamia field were thin and poorly developed in Emong-1 and the well was plugged and abandoned. It is believed that the reservoir was poorly developed due to its proximity to the basin bounding fault and its location within what appears to be a local isolated slumped fault margin. The results are not expected to impact the thickness and quality of reservoir throughout the main Ngamia field area.

Given the significant volumes discovered and the extensive exploration and appraisal program planned to fully assess the upside potential of the basin, the Tullow-Africa Oil joint venture has agreed with the Government of Kenya to commence development studies. In addition, the partnership is involved in a comprehensive pre-FEED study of the export pipeline. The current ambition of the Government of Kenya and the joint venture partnership is to reach project sanction for development, including an export pipeline, by the end of 2015 or early 2016.

To facilitate these development activities in parallel with exploration and appraisal, an "Area of Interest" (AOI) encompassing the South Lokichar Basin discoveries and further prospects in Blocks 10BB and 13T, was agreed with the Government of Kenya in February 2013. This agreement allows a multiple field approach to development of the resources while permitting the continued focus on exploration to increase the resource base while concurrently appraising discoveries.

In the first quarter of 2013, the Tullow-Africa Oil joint venture tested a Cretaceous play in the Anza Basin with the Paipai-1 commitment well in Block 10A (Kenya), encountering light hydrocarbon shows. Due to concerns over economic viability, the Company and its partners have relinquished Block 10A as the partnership focuses its activities on the main Tertiary Rift Play across Kenya and Ethiopia.

In December 2013, the Company reported that the Bahasi-1 well on Block 9 in Kenya, had only encountered minor shows of gas. The rig then moved to drill Sala-1 on the northeastern flank of the basin to test a large prospect in the Cretaceous Anza rift, which is up-dip of two wells that had significant hydrocarbon shows. The Sala-1 well is currently drilling and is expected to complete in the second quarter of 2014.

In July 2013, the Company reported that the Sabisa-1 well on the South Omo Block in Ethiopia, the most northerly well drilled on the Tertiary rift trend to date, had confirmed a viable hydrocarbon system with oil and heavy gas shows. In December 2013, the Company announced that the potential hydrocarbon bearing sands in Sabisa-1 were not present at the Tultule-1 well location. There were gas shows in the section, which point to a potential hydrocarbon source, and the results of these two wells will be analyzed to determine the future exploration program direction in the North Turkana Basin. Preparations are underway to drill two exploration wells in the Chew Bahir Basin, located to the east of the South Omo Block, in 2014. The first of these wells, Shimela-1, will spud imminently.

The Company and its partners continued to actively acquire, process and interpret an extensive 2D seismic program totaling approximately 3,044 kilometers during 2013 over Blocks 10BA, 10BB, 12A, 13T in Kenya and the South Omo Block in Ethiopia with two onshore and one offshore 2D seismic crews operating through the year. A third onshore 2D seismic crew operating in the South Omo Block was released in May 2013 after completing 1,174 kilometers of 2D seismic. During 2014, the Company is planning to acquire 1,270 km 2D seismic over the North Lokichar and Kerio Basins covering Blocks 10BB, 10BA and 13T. In addition, the Company and its partner in Blocks 10BB and 13T have commenced the acquisition a 550 square kilometer 3D seismic survey over the discoveries and prospects along the western basin bounding fault in the South Lokichar Basin.

In September 2013, the Company announced details of an updated independent assessment of the Company's contingent and prospective resources on its Kenyan and Ethiopian exploration properties. The effective date of this assessment was 31 July 2013 and it was carried out in accordance with the standards established by the Canadian Securities Administrators in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. The assessment confirmed that the discovered South Lokichar Basin in Northern Kenya contains gross contingent resources of 368 million barrels of oil in the first three of seven discoveries in the basin, an increase of 557% over the assessment conducted in mid 2012. In addition, gross risked prospective resources of 1,213 million barrels of oil are estimated for the South Lokichar Basin. Net Contingent Resources for the Company are estimated at 231 million barrels of oil. Net Unrisked Prospective Resources for the Company are estimated at 9,647 million barrels of oil (excluding Puntland) and Net Risked Prospective Resources at 1,294 million barrels of oil (excluding Puntland). Please refer to the Company's press release dated September 3, 2013 for details of the prospective and contingent resources by prospect and lead, including the geologic chance of success. Plans are underway to update this independent resource assessment to include well results since July 2013 for release in the second quarter of 2014.

The Company has a significant exploration and appraisal program set out for 2014 which will see over 20 wells completed. The program is focused on drilling out the remaining prospect inventory in the South Lokichar Basin, appraising existing and future discoveries with the aid of the new 3D Seismic survey, drilling six new basin opening wells and progressing the South Lokichar Basin development studies towards project sanction. This significant program in 2014 is fully funded.

KENYA

The Company and its operating partners in the Kenyan blocks are actively exploring for oil as described below.

Block 10BB

Based on the very positive results at Ngamia-1 on Block 10BB in 2012, the Company and its partner, Tullow, have accelerated the pace of exploration along the Ngamia trend in Block 10BB and Block 13T. The Company currently has three drilling rigs and a testing and completion rig operating in the South Lokichar Basin in Northern Kenya. The Company completed three exploration wells and two multi-zone well tests across Blocks 10BB and 13T during 2013. In addition, on exiting the year the Company had two exploration wells drilling and one well under test.

The Company has completed a series of six well tests at the Ngamia-1 discovery. The cumulative flow rate from the six well tests was over 3,200 bopd constrained by completion techniques and surface equipment. With optimized completion techniques and surface equipment it is estimated that these combined flow rates would increase to a rate of 5,400 bopd. Five of the well tests were completed over the Auwerwer sandstones to verify reservoir quality and fluid content which appears of similar quality to those tested at the Twiga South-1 well in the same basin. High quality waxy sweet crude (25-35 degrees API) was flowed from all five zones in the Auwerwer formation with good quality reservoir sands encountered. One well test was conducted in the Lower Lokhone sandstone proving it to be a productive reservoir with 30 degree API oil. All zones produced dry oil with no water produced and no pressure depletion. As a result of testing several previously indeterminate zones in the well, net oil pay in the Ngamia-1 well has double to over 200 meters over a gross oil column of over 1,100 meters.

In July 2013, the Company announced a new oil discovery at Etuko-1. Etuko-1 is located 14 kilometers east of Twiga South-1 in Block 10BB and is the first test of the Basin Flank Play in the eastern part of the South Lokichar Basin. The well encountered approximately 40 meters of net oil pay in the Auwerwer and Upper Lokhone targets and approximately 50 meters of additional potential net pay in the Lower Lokhone interval. In February 2014, the Company announced the results of five well tests conducted on five Lokhone pay intervals in Etuko-1. Light 36 degree API waxy crude oil was successfully flowed from three zones at a combined average rate of over 550 barrels of oil equivalent per day. In March 2014, the Company announced the results of the Etuko-2 exploration well drilled to test the upper Auwerwer sands overlying the discovered Lokhone pay intervals identified in Etuko-1. Etuko-2 penetrated a potential significant oil column identified from formation pressure data and oil shows while drilling and in core, with good quality reservoir, but flowed only water on drill stem test. The results are considered inconclusive and analysis is underway to consider further options to evaluate this reservoir.

In January 2014, the Company announced a new oil discovery at Ewoi-1 located four kilometers to the east of the Etuko-1 discovery in the Basin Flank Play on the eastern side of the South Lokichar Basin. Logs indicate potential net pay of 20 to 80 meters to be confirmed by well testing.

Also in January 2014, the Company announced a new oil discovery at Amosing-1 located seven kilometers southwest of the Ngamia-1 discovery along the Basin Bounding Fault Play. Logs indicate 160 to 200 meters of potential net oil pay in good quality sandstone reservoirs. Well testing and an appraisal well are planned for the first half of 2014.

The 2D seismic crews operating in Block 10BB acquired approximately 1,128 kilometers of 2D seismic during 2013. Much of this program focused on defining prospects in the Kerio Basin, with the aim of defining drilling prospects for the 2014 exploratory drilling program. The plan is to acquire an additional 720 kilometers of 2D seismic over the block during 2014 to define prospects in the Kerio and North Lokichar Basins. Preparations are underway to drill the Dyepa prospect in the Kerio Basin spudding around mid 2014. In addition, the Company and its partner have commenced a 550 square kilometer 3D seismic survey over the Ngamia and Twiga South structures in Block 10BB and Block 13T combined.

The current exploration phase under the Block 10BB PSC, which expires in July 2014, includes a commitment to drill one exploratory well and acquire 300 square kilometers of 3D seismic. The planned work program in Block 10BB will exceed the PSC commitment.

Block 13T

During the first quarter of 2013, the Company and its partner, Tullow, conducted well testing operations at Twiga South-1, which resulted in a cumulative flow rate of 2,812 bopd from three zones, despite being constrained by surface equipment. With optimized production equipment, the cumulative flow rate is anticipated to have increased to a cumulative rate of approximately 5,200 bopd. High quality 37 degree API waxy sweet crude flowed from all three zones in the Auwerwer formation with good quality reservoir sands encountered. The well was suspended as a potential future production well.

In September 2013, the Company announced a new oil discovery at Ekales-1 located in the Basin Bounding Fault Play between the Ngamia-1 and Twiga South-1 discoveries. Logs indicate a potential pay zone of 60 to 100 meters to be confirmed by flow testing. Well testing was conducted utilizing the recently mobilized Tullow-Africa Oil joint venture testing and completion rig. In March 2014, the company announced the results of testing operations on the Ekales-1 well which confirmed this significant discovery. Two drill stem tests were completed and flowed at a combined rate of over 1,000 bopd from a combined 41 meter net pay interval. The upper zone had a very high productivity index of 4.3 stb/d/psi.

In November 2013, the Company announced a new oil discovery at Agete-1 located seven kilometers north of the Twiga South-1 discovery along the Basin Bounding Fault Play in Block 13T. Logs indicated a significant oil column with an estimated 100 meters of net oil pay in good quality sandstone reservoirs. Well testing will commence imminently and an appraisal well is planned in the first half of 2014.

The Company has recently commenced the acquisition a 550 square kilometer 3D seismic survey over the Twiga South and Ngamia structures, in Blocks 13T and 10BB combined. The plan is to acquire an additional 200 kilometers of 2D seismic over the block during 2014 to define prospects in the North Lokichar Basin.

The current exploration phase under the Block 13T PSC, which expires in September 2014, includes a commitment to drill one exploratory well, which was satisfied with the drilling of Twiga South-1, and a commitment to acquire 200 square kilometers of 3D seismic. The planned work program in Block 13T will exceed the PSC commitment.

Block 10BA

The Company and its operating partner on Block 10BA, Tullow, have completed a 1,450 kilometer 2D seismic program, split evenly between onshore and offshore, half of which was acquired in 2013. The plan is to acquire an additional 350 kilometers of onshore 2D seismic over the block during 2014 to define prospects in the Kerio and North Lokichar Basins. Preparations are underway to drill two exploration wells in the West Turkana Basin commencing with the Kiboko prospect in the second half of 2014. The 2D seismic acquired to date exceeds the work obligations of the initial exploration period under the Block 10BA PSC which expires in April 2014.

Block 12A

The Company and its partners on Block 12A have completed a 548 kilometer 2D seismic acquisition program in 2013, and committed to an additional 120 kilometer infill program that was completed in February 2014. The 2D seismic program is mainly focused in the Kerio Valley in the southwestern portion of the block. The 2D seismic acquired to date exceeds the work obligations of the initial exploration period under the Block 12A PSC which expires in September 2014.

Block 10A

In the first quarter of 2013, the Company and its operating partners on Block 10A completed drilling the Paipai-1 exploration well. The Paipai-1 well tested a large four-way closed structure with Cretaceous-age sandstone targets at multiple depths. Paipai-1 spudded in September 2012 and completed drilling in the first quarter of 2013 to a total depth of 4,255 meters. Light hydrocarbons were encountered while drilling but attempts to sample the reservoir fluid were unsuccessful. The license has subsequently been relinquished as the Tullow-Africa Oil partnership focuses its activities on the main Tertiary Rift Play across Kenya and Ethiopia. The Paipai-1 well fully satisfied the remaining work obligations under the Block 10A PSC.

Block 9

Block 9 is in the Cretaceous rift basin on trend with the South Sudan oil fields. In December 2013, the Company announced that it had drilled the Bahasi-1 well to a depth of 2,900 meters, encountering basement at 2,850 meters. The well encountered a thick section of Tertiary and Cretaceous inter-bedded sands and shales, but with only minor hydrocarbon shows. The Company is currently drilling the Sala-1 well which has a planned total depth of 3,450 meters and is expected to complete in the second quarter of 2014. The Sala prospect is a large three way dip closed structure against the rift bounding fault in the Cretaceous Anza Basin in a similar structural setting to the Tertiary Ngamia-1 discovery in Block 10BB. The Sala prospect is up-dip of the Bogal-1 and Nduvo-1 wells both of which encountered significant hydrocarbon shows. The Bahasi-1 well satisfied the remaining work commitment in the first additional exploration period under the Block 9 PSC, which expired in December 2013. The Company and its joint venture partner elected to enter the second additional exploration period under the PSC, which will expire in December 2015, and required the relinquishment of 50% of the block area and the commitment to an exploration well, which will be satisfied by the drilling of Sala-1.

ETHIOPIA

South Omo Block

The South Omo Block is located in the northern portion of the Tertiary East African Rift trend where Africa Oil and their partners have made seven significant oil discoveries in Northern Kenya. In January 2013, the Company and its partners on the South Omo Block spudded the Sabisa-1 well which is located in the North Turkana Basin. The Sabisa-1 well was drilled to a preliminary total depth of 1,810 meters. Hydrocarbon indications in sands beneath a thick claystone top seal were recorded while drilling, but hole instability issues required the drilling of a sidetrack to comprehensively log and sample these zones of interest. The sidetrack was drilled to a total depth of 2,082 meters. The well encountered reservoir quality sands, oil shows and heavy gas shows indicating an oil prone source rock and thick shale section which should provide a good seals for the numerous fault bounded traps identified in the basin. Only the lowermost sands appeared to be in trapping configuration at Sabisa-1.

Based on the encouragement of the results of the Sabisa well, the Company decided to drill the nearby Tultule prospect, which was drilled to a total depth of 2,101 meters. The Tultule-1 well encountered a section similar to the nearby Sabisa-1 well in the upper portion of the well but the sands which appeared to be hydrocarbon bearing in the Sabisa-1 well were not present on the Tultule horst block feature with multiple volcanic units and shales in this section. There were gas shows in the section which indicate a potential hydrocarbon source. The results of these two wells will be analyzed to determine the future exploration program direction in the North Turkana Basin.

During 2013, the Company and its partners completed a 1,174 kilometer 2D seismic program in the Chew Bahir Basin on the eastern portion of the South Omo Block, which identified a number of prospects and leads. Shimela-1 has been identified as the first well in the area and is expected to spud imminently. A second well on the Gardim prospect will follow Shimela-1.

The current exploration period under the PSC expires in January 2015 and the work completed on the block to date has exceeded the minimum work obligation.

Rift Basin Area

In first quarter of 2013, the Company executed a PSC for the Rift Basin Area in Ethiopia. Located north of the South Omo Block, the Rift Basin Area covers 42,519 square kilometers. This block is on trend with highly prospective blocks in the Tertiary rift valley including the South Omo Block in Ethiopia, and Kenyan Blocks 10BA, 10BB, 13T, and 12A. The Company completed the acquisition of a 36,500 line kilometer Full Tensor Gradiometry ("FTG") survey in October 2013. The Company has completed an exhaustive environmental and social impact assessment over the block in preparation for a 1,200 kilometer 2D seismic program which is expected to commence in the second half of 2014. The initial exploration period, which expires in February 2016, includes a commitment to acquire an FTG survey and 400 kilometers of 2D seismic.

Ogaden Blocks 7/8

The Company and its partners continue to focus on the El Kuran oil accumulation on Block 8, discovered in the early 1970's. After completing reservoir characterization studies, the Company focused efforts on testing and completion strategies for producing commercial quantities of oil and gas. The Company and its partners have recently announced that drilling of the El Kuran-3 well, in the Somali region of Ethiopia, reached a total depth of 3528 meters and is currently undergoing logging and evaluation prior to taking a decision on the way forward on the well. There have been numerous oil and gas shows in the well which is a follow up to a discovery made by Tenneco in the 1970's. There appears to be a significant amount of oil and gas in several intervals and the primary issues are the quality of the reservoir and potential commerciality give the remote location.

Adigala Block

As part of work obligations for the second exploration period which expired July 2013, the Company and its partner incorporated newly acquired FTG data with seismic data to improve the subsurface interpretation of the block. The Company and its partner also integrated results of recent surface geological studies and reprocessed data acquired in 2009 with the goal of improving the data quality. The parties to the block agreed to enter the final exploration period under the PSC, which expires in July 2015 and carries a 500 kilometer 2D seismic work commitment. The Company and its partner have committed to a 1,000 kilometer 2D seismic program which commenced acquisition recently. The Company has farmed down its interest in the Adigala Block to 10%.

PUNTLAND (SOMALIA)

Dharoor Valley and Nugaal Valley Blocks

The Company continues to evaluate the encouraging results of the two wells drilled in 2012 on the Dharoor Valley block which proved all the critical elements exist for oil accumulations, namely a working petroleum system, good quality reservoirs and thick seal rocks. Based on these encouraging results, the Company, through its ownership interest in Horn, committed to enter the next exploration period, which carries a commitment to drill one exploration well in each block within an additional three year term ending October 2015.

Efforts are now focused on making preparations for a seismic acquisition campaign in the Dharoor Valley area which will include a regional seismic reconnaissance grid in the previously unexplored eastern portion of the basin as well as prospect specific seismic to delineate a drilling candidate in the western portion of the basin where an active petroleum system was confirmed by the drilling at the Shabeel-1 and Shabeel North-1 locations in 2012. The Company continues to pursue efforts to drill an exploration well in the Nugaal Valley block and is working with the Puntland government to move this project forward.

Horn has been in discussion with potential joint venture partners and is reviewing new venture opportunities in the region. Somalia is going through an unprecedented period in its history with a real opportunity for all stakeholders to assist in the rebuilding of the country. The first internationally recognized Federal government took power in 2012 following over 20 years of transitional or no government. The Company actively engages with a range of governments and organizations, domestic and international, around how Somalia can best develop a stable Federal state including the institutions and systems it needs to properly manage its natural resources.

MALI

Blocks 7 and 11

The deteriorating security and political situation in Mali halted operations on the Company's blocks. As a consequence, the Company impaired $3.1 million of capitalized intangible exploration assets during the first quarter of 2012. During the first quarter of 2013, the Company and its operating partner, Heritage, terminated their interest in Block 7 and 11 and have been released from all future PSC obligations in relation to these blocks by the Ministry of Mines in the Republic of Mali.