Operations

Yearly Exploration/Development Recap

2019 Exploration/Development Recap

Tertiary Rift – Kenya

Exploration and Appraisal (Blocks 10BB and 13T)

The Early Oil Production System (“EOPS”) is suspended due to severe damage to roads caused by adverse weather in the fourth quarter of 2019. Trucking remains on hold until all roads are repaired to a safe standard. EOPS

production levels had reached 2,000 bopd with all the crude oil being trucked from Turkana to Mombasa by road. The first lifting of 240,000 barrels of sweet Kenyan crude oil occurred from Mombasa in August 2019.

Africa Oil Corp. has a 25% working interest in Blocks 10BB and 13T with Tullow Oil plc (50% and Operator) and Total S.A. (25%) holding the remaining interests.

Field Development (Blocks 10BB and 13T)

The Joint Venture Partners and the Government of Kenya have concluded negotiations around key fiscal and commercial principles for Project Oil Kenya with agreements between the parties documented in various Heads of Terms which were signed by the Joint Venture Partners and the Government of Kenya in Nairobi on June 25th. This is a material and encouraging step forward which gives all parties confidence that the development project will be robust at low oil prices. In addition, the completion of the Front End Engineering and Design (“FEED”) studies for both the upstream and midstream, together with recent market soundings provide increased confidence in the project's capital expenditure estimate and construction timetable that is expected to see first oil three years after the Final Investment Decision (“FID”).

Since January 2018, work to deliver on the agreed development plan has continued with strong alignment between the Government of Kenya and the Joint Venture Partners. The initial development is planned to include a 60,000 to 80,000 bopd Central Processing Facility (“CPF”) and an export pipeline, from the South Lokichar basin to Lamu (on the Kenyan coast), some 800 kilometers in length. This approach is expected to bring significant benefits as it enables an earlier FID of the Amosing, Ngamia and Twiga fields, providing the best opportunity to deliver first oil in a timeline that meets the Government of Kenya expectations. The installed infrastructure can then be utilized for the optimization of the remaining and yet to be discovered South Lokichar oil fields, allowing the incremental development of these fields to be completed in an efficient manner post first oil. Additional stages of development are expected to increase plateau production to 100,000 bopd or greater. Upstream FEED has been completed by WorleyParsons and Environmental and Social Impact Assessment (“ESIA”) work on the upstream is expected to be submitted in the first quarter of 2020.

A Joint Development Agreement (“JDA”), setting out a structure for the Government of Kenya and the Kenya Joint Venture Partners to progress the development of the export pipeline, was signed on October 25, 2017. The

associated Midstream FEED, awarded to Wood Group, is now complete and the associated ESIA has been submitted, studies on pipeline financing and ownership, have been initiated and are expected to continue throughout 2020.

The Government of Kenya continues to make good progress, both in acquiring the land for the upstream and pipeline and securing water rights for the upstream.

Exploration Blocks 10BA

During 2017, the Joint Venture Partners entered the Second Additional Exploration Period on Block 10BA. In the second quarter of 2019, the Government of Kenya granted an extension to the 10BA Second Additional Exploration Period. This period will now expire on April 26, 2021.

Tertiary Rift – Ethiopia

The Company has not been successful in attracting joint venture partners to farmin to its 100% interest in the Rift Basin Area (Ethiopia). The exploration period expired in August 2019 and the block has been relinquished. A $4.9 million impairment of previously capitalized intangible exploration assets was recorded in 2018 related to the Company’s operations in Ethiopia. The Company has started the process of exiting Ethiopia.

EQUITY INVESTMENTS

The Company has acquired a portfolio of equity investments in frontier exploration companies (refer to table below) providing the Company with exposure to numerous near-term high-impact exploration drilling prospects.

The Company held the following equity investments:

 December 31, 2019December 31, 2018
Investment in Eco$12,022$10,192
Investment in Africa Energy$17,882$19,518
Investment in Impact$33,659$36,224
Total Investment$63,563$65,934

Eco (Atlantic) Oil and Gas Ltd. (“Eco”)

Eco holds working interests in four exploration blocks offshore Namibia and one exploration block offshore Guyana. During April 2019, the Company announced that it had acquired 4,752,850 common shares of Eco for total

consideration of $5.0 million. The common shares were acquired by AOC on a non-brokered private placement basis. Under the terms of an investment agreement (the “Investment Agreement”), AOC has the right to participate in any future Eco equity issuances, on a pro rata basis, and to appoint one nominee to Eco’s board of directors. Keith Hill, President and CEO of AOC, has joined the Eco board of directors as of November 29, 2017. As part of the Investment Agreement, the parties have also entered into a Strategic Alliance Agreement (the “SAA”), whereby they will jointly pursue new exploration projects. Pursuant to the terms of the SAA, AOC will be entitled to bid jointly on any new assets or ventures proposed to be acquired by Eco, on the same terms as Eco and for an interest at least equal to the Company’s percentage holding of the common shares in Eco from time to time. Additionally, under the terms of the SAA, AOC will also have a right of first offer on the farmout of exploration properties currently held by Eco.

On August 12, 2019, the Company announced an oil discovery on the Orinduik Block, offshore Guyana. The Jethro-1 exploration well was drilled by the Stena Forth drillship to a final depth of 14,331 feet (4,400 meters) in approximately 1,350 meters of water. Evaluation of logging data confirms that the Jethro-1 is the first discovery on the Orinduik licence and comprises oil-bearing sandstone reservoir of Lower Tertiary age. It encountered 180.5 feet (55 meters) of net oil pay in the Lower Tertiary sandstone reservoirs. The well has been cased and is now awaiting further evaluation to determine the appropriate appraisal activity.

On September 16, 2019, the Company announced a second oil discovery on the Orinduik block in the Joe-1 exploration well resulting in the opening of a new Upper Tertiary oil play in the Guyana basin. The Joe-1 exploration well was drilled by the Stena Forth drillship to a total depth of 2,175 metres in water depth of 780 metres. Evaluation of MWD, wireline logging and sampling data confirm 16 metres of net oil pay in oil-bearing sandstone reservoirs of Upper Tertiary age. Joe-1 is the first oil discovery to be made in the Upper Tertiary and de-risks the petroleum system of the western area of the Orinduik block, where a number of Tertiary and Cretaceous age prospects have been identified. Additional thinner sands above and below the main pay at Joe-1 are being evaluated for possible incremental pay.

On November 13, 2019, the operator (Tullow) of the Orinduik block announced that: “Following the completion of well operations, oil samples were sent for laboratory analysis and results indicate that the oils recovered from both Jethro1 and Joe-1 are heavy crudes, with high sulphur content. Tullow and the Joint Venture Partners are assessing the commercial viability of these discoveries considering the quality of the oil, alongside the high-quality reservoir sands and strong overpressure”. Partners on the block are: Tullow (operator), 60% Working Interest ("WI"), Total EP Guyana BV (25% WI) and Eco (15% WI). Africa Oil holds an approximately 18.4% equity interest in Eco.

Africa Energy Corp. (“Africa Energy”)

Africa Energy is an international oil and gas exploration company that holds a 90% participating interest in the offshore Exploration Right for Block 2B in the Republic of South Africa (“Block 2B”), an effective 10% participating interest in offshore Petroleum License 37 in the Republic of Namibia (“PEL 37”), and an effective 4.9% participating interest in the Exploration Right for Block 11B/12B offshore the Republic of South Africa (“Block 11B/12B”). On January 28, 2020, Africa Energy completed a private placement, in which the Company participated, investing approximately $5.0 million, acquiring 20,930,000 shares, decreasing the Company’s ownership interest in Africa Energy from approximately 34.5% at the end of the year to approximately 32.6%.

On February 6, 2019, a significant discovery was announced at the Brulpadda-1AX well on Block 11B/12B offshore South Africa. Africa Oil holds an indirect interest in the project as a result of its equity interests in Africa Energy (34.5% ownership interest) and Impact Oil and Gas Limited (29.9% ownership interest, increasing to 32.2% post period end).

The well encountered a total of 57 meters of net gas condensate pay over two Lower Cretaceous high- quality reservoirs. Core samples were taken in the upper reservoir, and a comprehensive logging and sampling program

was performed over both reservoirs. The Brulpadda well was drilled in approximately 1,400 meters of water by the Odfjell Deepsea Stavanger semi-submersible rig. The well targeted two objectives in a deep marine fan sandstone system within combined stratigraphic/structural closure. Following the success of the main objective, the well was deepened to a final depth of 3,633 meters and was successful in the Brulpadda-deep prospect.

In December 2019, Africa Energy announced that Shearwater GeoServices Holding AS ("Shearwater") commenced an initial 2D seismic program of 3,370 linear kilometers using the Multi-Purpose Vessel SW Cook. The goal of the 2D seismic program is to define the lead and prospect inventory of the large under-explored area in Block 11B/12B to the east of the Paddavissie Fairway. The joint venture has increased the scope of the initial program, which will focus on the highly prospective areas of interest identified with onboard fast-track processing and recently reprocessed legacy 2D seismic data.

On December 29, 2019, Petroleum Geo-Services ASA ("PGS") commenced the second phase 3D seismic program of 2,200 square kilometers using the PGS Apollo seismic vessel. In this second phase of 3D seismic work, the joint venture plans to cover the remainder of the Paddavissie Fairway, including a vast extension to the north, to better delineate the prospects and leads identified on the previous 2D and 3D data. Impact Oil and Gas Limited (“Impact”)

Impact is a private UK oil and gas exploration company with assets located offshore South Africa and West Africa. Impact acquired its first asset, the Tugela South Exploration Right, offshore South Africa in 2011 and has

subsequently expanded its asset base across the offshore margins of South and West Africa. It has since partnered with ExxonMobil and Statoil (South Africa), CNOOC (AGC - between Senegal and Guinea Bissau) and Total S.A. (Namibia and South Africa). On February 14, 2020, Impact announced a capital raise, in which the Company participated, investing approximately $12.0 million, acquiring 45,000,000 shares, increasing the Company’s ownership interest in Impact from approximately 29.9% at the end of the year to approximately 32.2%.

On December 14, 2018, the Company entered into a Subscription Agreement with Impact providing for the exercise of 50,343,961 ordinary share purchase warrants in Impact held by AOC at an exercise price of £0.18 per warrant, and a total expenditure of $11.6 million. Also, in December 2018, Impact lent funds to Arostyle Investments (Proprietary) Limited, who owns 51% of the shares of Main Street 1549 Proprietary Limited ("Main Street"). Main Street were then able to complete a farmin for an aggregate 10% participating interest in Block 11B/12B (offshore South Africa). Africa Energy holds a 49% interest in Main Street. Under the terms of the Subscription Agreement, AOC also subscribed to the acquisition of an additional 19,890,560 Impact shares for an aggregate subscription price of $6.3 million, subject to the satisfaction of certain conditions. These conditions were met, and the subscription closed during January 2019.

  • 2018

    Tertiary Rift — Kenya, 2018

    Exploration and Appraisal (Blocks 10BB and 13T)

    Operational activity has been focused in the South Lokichar basin. Work has been concluded in both the Amosing and Ngamia fields, where water injection testing took place at Ngamia-11 with oil production from the Ngamia-8 well. The Ngamia-3 well also successfully started production in June 2018. The produced oil from testing has been stored in the field. A comprehensive review of results from this program commenced in the third quarter of 2018. To date, the results are positive.

    Following the agreement of the terms of The Petroleum Bill, the transfer of stored crude oil from Turkana to Mombasa by road commenced on 3 June 2018. This milestone was marked by a ceremony attended by President
    H.E. Uhuru Kenyatta, Deputy President H.E. William Ruto, the Turkana County Governor, Turkana MPs as well as many other Government Ministers and officials.

    The transfer of stored crude oil from Turkana to Mombasa by road continues, with trucks continuing to be dispatched, transporting approximately 600 bopd. To date, approximately 60,000 barrels of oil has been transported to Mombasa. The volume of oil transported by truck is expected to increase to 2,000 bopd once the Early Oil Production System is fully operational and production testing commences from the Amosing production facility. The first lifting of sweet Kenyan crude oil stored in Mombasa is expected in the second quarter of 2019.

    Africa Oil Corp. has a 25% working interest in Blocks 10BB and 13T with Tullow Oil plc (50% and Operator) and Total S.A. (25%) holding the remaining interests.

    Field Development (Blocks 10BB and 13T)

    Since January 2018, work to deliver on the agreed development plan has been underway with strong alignment between the Government of Kenya and the Joint Venture Partners. The project continues to target FID in 2019. The initial development is planned to include a 60,000 to 80,000 barrels of oil per day (bopd) Central Processing Facility (CPF) and an export pipeline to Lamu, some 750 kilometers from the South Lokichar basin on the Kenyan coast.

    This approach is expected to bring significant benefits as it enables an early Final Investment Decision (FID) of the Amosing, Ngamia and Twiga fields, taking full advantage of the current low-cost environment for both the field and infrastructure development, as well as providing the best opportunity to deliver first oil in a timeline that meets the Government of Kenya expectations. The installed infrastructure can then be utilized for the optimization of the remaining and yet to be discovered South Lokichar oil fields, allowing the incremental development of these fields to be completed in an efficient and low cost manner post first oil. Additional stages of development are expected to increase plateau production to 100,000 bopd or greater.

    Front End Engineering and Design ("FEED") and Environmental and Social Impact Assessment ("ESIA") work on the upstream are well underway, following the award of the upstream FEED and Integrated Project Management contracts to WorleyParsons in May 2018.

    A Joint Development Agreement ("JDA"), setting out a structure for the Government of Kenya and the Kenya Joint Venture Partners to progress the development of the export pipeline, was signed on 25 October, 2017. The associated FEED and ESIA are nearing completion, with the pipeline FEED contract awarded to Wood Group, as well as studies on pipeline financing and ownership, which are expected to continue throughout 2019.

    The Joint Venture Partners continue to negotiate key commercial Heads of Terms ("HOT's") with the Government of Kenya, related to agreements expected to establish the commercial structure associated with field development.

    Exploration Blocks 10BA

    During 2017, the Joint Venture Partners entered the Second Additional Exploration Period on Block 10BA.

    Cretaceous Anza Rift — Kenya

    During the second quarter of 2018, the Company submitted a notice to the Government of Kenya relinquishing its interest in Block 9 (Kenya) resulting in a $44.7 million impairment of previously capitalized intangible exploration assets.

    Tertiary Rift — Ethiopia

    The Company is continuing to seek joint venture partners to farmin to its 100% interest in the Rift Basin Area (Ethiopia). An application has been made to the Ethiopian government, seeking an extension of the current exploration period until August 2019. A $4.9 million impairment of previously capitalized intangible exploration assets has been recorded related to the Company's operations in Ethiopia.