Energy Summary for Jan. 16, 2015
2015-01-16 20:22 ET - Market Summary
by Stockwatch Business Reporter
Keith Hill's Africa Oil Corp. (AOI), a Lundin company, added six cents to $2.49 on 487,800 shares. It has had an interesting week. Yesterday, its joint venturer in Kenya, Tullow Oil, announced substantial write-offs and a budget cut, although it did not target Kenya. The day before yesterday, Africa Oil's president and CEO, Mr. Hill, gave a presentation in Stockholm. He said Africa Oil is being beaten up by low oil prices, new Kenyan taxes and a recent spate of dry wells. He then ticked off reasons for optimism. Service costs are expected to go down by as much as 40 per cent; the Kenyan government may rethink the new taxes this summer to spur investment; and, most importantly, Africa Oil's core asset is still the "best in the world." That would be the Lokichar basin asset that it owns with Tullow. The two companies will focus mainly on appraising the basin this year, and hope to submit a field development plan at year-end. Once Lokichar is producing, operating and pipeline costs will be about $12 to $13 a barrel, making it one of the lowest-cost operations in the world, said Mr 11013. Hill. Meanwhile, less money than usual will go toward expensive exploration wells in other basins this year, given the state of the market (and the fact that wells in the last five basins were disappointments). Africa Oil is currently working on two exploration wells, Epir and Engomo, and will soon drill a third, North Samaki. Results from all three will be released this quarter. Financially, said Mr. Hill, Africa Oil has no debt and has enough money to get it to midyear. It will then need either a farm-out or a financing. Mr. Hill is reluctant to do a financing at current prices. If he has to do one, it will be small, perhaps $50-million (U.S.) to $100-million (U.S.). (He did not say this during his presentation but to Swedish newspaper Direkt.) Africa Oil's burn rate is around $50-million (U.S.) to $60-million (U.S.) a quarter, but presumably it is trying to get that down
