Africa Oil Corp (AOIFF)

[Northsun0]

RBC update:

Africa Oil (AOI.V): Share Price Weakness

Africa Oil closed down nearly 13% yesterday, at C$7.50. This share price response is in line with the markets' recent reactions to bad news from other explorers; moreover, it continues the trend of
removing "Exploration Upside" from corporate valuations. However, as with partner Tullow Oil, we see purchases at or around the company's Tangible Value as attractive, with a one- to two-year view
on project delivery. Yesterday's result at Emong-1 does not negatively impact the participants' earlier guidance that the Lokichar Basin holds 600mmbbl+, despite the prospect being labelled initially as 'Ngamia West' and billed as low risk.

We believe little is being priced in for Africa Oil's ongoing high-risk Sala-1 wildcat on Block 9 (+C$3.30/-0.37), which is due to conclude in late April; therefore investors can accumulate stock with a view that appraisal drilling on Twiga, Ngamia and Amosing should de-risk the existing accumulations, and the publication in early May of a third-party's assessment of Africa Oil's reserves and resources would help solidify asset/corporate valuations.

Source: Company reports, RBC Capital Markets estimates