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Great report, a little aggressive on the number of wells for H2/13 but I would be pretty happy if there one year target came to fruition.
"Q2 – Entering an Active Period of Drilling
¦ Africa Oil’s Q2 release reaffirmed what we see as an extremely active 2H/13 on the exploration front, with 10 remaining exploration wells and 4 additional tests planned.[/I]"
Agree Sweden1, this whole play could and probable will look a whole lot different by December. We've only drilled three wells since the big equity raise. We've yet to see the results from that capital, yet there is all this concern over the next financing. The next four months will be very interesting and frankly I hope we don't see any movement on finances till year end!!
Four wells spudding by the end of Sept, that's five wells drilling with another spudding in Oct,, Ekales is scheduled for completion in September so that Rig should be able to relocate and spud by Oct as well. Should be quite an active program this next while with lots of sparks flying for year end!!
Africa Oil Second Quarter of 2013 Financial and Operating Results
View News Release in PDF Format
http://africaoilcorp.mwnewsroom.com/Files/d3/d343079d-b5df-4b97-bd86-d3dac979a6ff.pdf
http://africaoilcorp.mwnewsroom.com/press-releases/africa-oil-second-quarter-of-2013-financial-and-operating-results-tsx-venture-aoi-201308280895015001
"UK-based Tullow Oil Plc (TLW) has announced it will begin pumping its first oil in Kenya as soon as next year"
"The partners still have to submit their field development plan to the government, according to Bloomberg."
This storey may make great press and its all very good but this all sounds a bit premature given they have yet to "submit their development plan" and there is little to no infrastructure in place. They would have to build heavy roads and rail lines and requisition engines, tanker cars, trucks and trailers all pretty much from scratch in an area of the world where none of this currently exists. They might have a solid proposal together by 2014. I really think they need more time to drill the Lokichar basin up to see what it is they have, infrastructure in Kenya will take quite a while and it might just as well match the size of the resource, IMHO!!
6.73-0.25 (-3.58%) Many of the resource stocks have been doing better lately but that's not the case here, seems to be lead from Stockholm. Do you think this is still to do with the financing question and will this haunt us till its settled?
"the string of pearls is currently being followed up at Icali which is a well being drilled as we speak between Twiga South and Ngamia and we are very hopeful for that well. It’s ideally placed between two discoveries, and then at Tuco as I say importantly opened the rift flank play with lots of prospects to follow up over there."
They must be referring Ekales Spud date July 22/13, this is the Weatherford 804 rig that just finished testing at Ngamia and the only rig currently drilling.
The catalyst will be a collection of positive events combined with the fact that we haven't moved the share price since Ngamia, look forward to a forth Lokichar discover, a resource update and four more Well Spuds this fall!
Its looking like September is going to be a busy month with possible as many as four spuds,,,surely this will get some attention from the market.
1) Weatherford 804---July 22------Spud Ekales op Tullow
2) Saksin PR-5-------Sept--------Mobilizing for Agete op Tullow
3) Ogec 75-----------Sept---------Mob. for Tultues op Tullow
4) Sakson 501--------AugSept-----Mob. for El Kurin op New Age
5) Great Wall 190----Sept-------Mob. for Bahasi Block 9 op AOC
6) PR Marriot--------Oct/Nov ---Mob. of Twiga 2 updip op Tullow
Kenya From Nowhere Plans East Africa’s First Oil Exports:
Energy By Eduard Gismatullin - Aug 20, 2013 8:56 AM PT
Kenya is headed to become the first oil exporter in East Africa, moving in less than five years from being a have-not nation to the regional leader in cutting reliance on energy suppliers such as Royal Dutch Shell Plc.
After Tullow Oil Plc (TLW) discovered oil last year, Kenya is set to start shipments in 2016, overtaking neighboring Uganda, where Tullow found crude more than seven years ago. The U.K. explorer plans to start pumping in Kenya as soon as next year, Chief Operating Officer Paul McDade said in an interview. Kenya’s deposits may top 10 billion barrels, according to the company, more than three times the U.K.’s remaining reserves.
Exports will underpin Kenya’s shilling currency and are being pushed by a government that wants a lead on Uganda and Democratic Republic of Congo, whose East African resources in recent years attracted explorers such as China’s Cnooc Ltd. (883) and France’s Total SA. (FP) Most oil companies traditionally had focused on the African powerhouses of Nigeria and Angola to the west, and Libya and Egypt on the Mediterranean.
Oil will allow Kenya to “diversify export earnings and act as a catalyst for infrastructural spending, especially on the transport network,” Phumulele Mbiyo, regional head of macroeconomic research at Nairobi-based CfC Stanbic Bank Ltd., a unit of Standard Bank Group Ltd., said in an interview. “The shilling is expected to benefit from inflows of foreign exchange and reduced spending on fuel imports.”
Viable Rate
Kenya imports all its fuel, almost 80,000 barrels of oil a day at a daily cost of more than $8 million, according to U.S. government data. It relies on exports such as coffee and tea to support the balance of trade in a $37 billion economy, East Africa’s largest.
Tullow estimates it has found more than 300 million barrels of oil equivalent resources after making three discoveries in Kenya’s South Lokichar Basin. In February, Twiga became the first well in Kenya to produce oil at a commercially viable rate and has the potential to produce 5,000 barrels a day.
“After 50 years of disappointments, Tullow’s results in the Lokichar Basin have been the key breakthrough,” Oswald Clint, an analyst at Sanford C. Bernstein & Co., wrote in an Aug. 16 report. “Of 30 wells between 1960 and 1992, prior to Tullow’s entry, 13 were dry, 12 encountered non-commercial gas shows, and five encountered signs of oil staining or oil shows.”
Vivo Energy, a Shell joint venture with Vitol Group, as well as Total and KenolKobil Ltd. are the biggest suppliers of crude and petroleum products to the nation. Kenya Petroleum Refineries Ltd., the nation’s sole refinery, half-owned by Essar Energy Plc (ESSR), only refined crude from Abu Dhabi last year.
Bullish Idea
The discoveries have been made in the remote and underdeveloped Turkana region in the northwestern part of Kenya’s Rift Valley. Shipments will initially be made by truck or train for refining in Mombasa or exports. Once more fields are discovered and developed a pipeline can be built.
Kenya oil exports are “a very bullish idea, because Turkana is one of the least developed parts of Kenya,” Clare Allenson, an analyst at Eurasia Group, said in a phone interview. “This is definitely worth watching to see how” it will progress.
Tullow and partner Africa Oil Corp. (AOI) plan to spend at least a year exploring for further deposits. They have two drilling rigs in Kenya and expect to secure one more later this year.
The Kenyan government wants things to go faster.
“They are not drilling enough wells,” Kenyan Petroleum Commissioner Martin Heya said in a phone interview from Nairobi. “Uganda drilled a long time ago, but it’s possible that we can produce earlier than anybody else. We shall be happy.”
Local Refinery
Tullow is facing delays in Uganda, where the government and oil companies are negotiating the terms of production after 1.7 billion barrels of oil were discovered. Oil from landlocked Uganda will eventually be exported through Kenya.
Ugandan President Yoweri Museveni’s government has delayed the $10 billion investment planned by Tullow and its partners, Total and Cnooc, to tap the Lake Albert fields. The sides need to agree on the size of a local refinery and an export pipeline, which is likely to cross Kenya in 2018.
“Uganda missed the boat and Kenya will become the oil-sector hub,” John Small, chief executive officer of the Eastern Africa Association, said in an interview. “It only makes real commercial sense to cooperate and have linked pipeline network” in the region.
In Kenya, Tullow and Africa Oil still have to submit their field development plan to the Kenyan government. Eventually, a pipeline will be built from the fields to a terminal on the Indian Ocean coast, McDade said.
“For the Kenyan economy it’s going to be a major step forward,” Africa Oil CEO Keith Hill said in a phone interview. “Once the export pipeline is completed they will have a significant influx of capital coming in from oil export revenues.”
Uganda’s Museveni and his Kenyan and Rwandan counterparts, Uhuru Kenyatta and Paul Kagame, in June discussed plans for regional fuel and crude pipelines. Uganda needs more resources than Kenya to make its oil export pipeline viable partly because it’s further away from the Indian Ocean coast.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
http://www.bloomberg.com/news/2013-08-19/kenya-from-nowhere-plans-east-africa-s-first-oil-exports-energy.html
Good point Scarbender, your right, based on those volumes it likely wouldn't be possible make such an accumulation without drastically effecting the share price.
CNOOC obviously has series long term plans for all of East Africa and have to conduct themselves in professional manner. Stock accumulation in secret in one of the play participants might be an option but it could definitely be perceived as a hostile action and could have negative implications on subsequent relations.
Ratings Breakdown: 1 Hold Rating(s), 5 Buy Rating(s)
Consensus Rating: Buy
Consensus Price Target: C$10.90
The only downgrade and $8.00 target comes from Canaccord. I reckon they and a few other Houses still have it in for AOI for not accepting their Private Placement offer last year. This could have to do with the shaky share price since the PP. Prices would be a lot stronger if these guys had "skin in the game",.
Redinvest I checked its actually 10% in Canada. Canada.http://www.canadianinsider.com/node/12#faq1
I realize that it would be counter productive to acquiring a company at fair value but I'm thinking that over a period of months it would be easy enough to quietly acquire a 9.5% interest
in a company in this depressed resource market without adding significantly to the share price. I would imagine that these same companies wouldn't hesitate to take down a PP at anywhere near these prices.
I wonder what prevents these big oil companies like CNOOC and Total from just loading up on these cheep African Oil shares off the open market,,. This stock has been trading in the $6 & $7 range for past eight months,. I know they have to disclose trades after 10% but why do they wait and pay take out prices, it would be easy pickings with the money these guys throw around?
Ekales spud 4 weeks ago today, with a planned total depth of 2500 metres and a expected TD of approx. 2 months to drill and evaluate.
The prospect carries high hopes of success; Keith Hill has commented, "The Ekales prospect is probably one of the lowest risk prospects in our inventory. The proximity and similarity to the existing Ngamia and Twiga discoveries give us a high degree of confidence that we will find oil and continue to build the discovered resources necessary for commercial volume threshold."
No rumours yet but they should be past the upper targets by now? Perhaps word of a forth discovery will bring in some volume and reverse this share price slide?
Seems the TD guy expects some price appreciation will take place prior any capital requirements. Comments on AOI's ability to acquire financing from a couple of recent(3or4 month old)interviews with CEO Keith Hill sound very positive and sometimes it doesn't always go his way but I expect that he is accurately portraying available finance opportunities. There is the Lundin group, but also CNOOC and Total and who knows who else would like to grab a nice block at these bargain basement prices, maybe they will bid it up, if its to cheep the Lundin trusts will take it. These videos have been around before, there is a fair bit more detail in them then this weeks rumours.
"US$220 million (net of costs) at a price of $9.50/share, which is roughly the mid-point between the current share price and our target price."
This $9.50 is just for the purpose of modeling however it is a preferable scenario to some of the numbers that have been going around this week. I was hoping for something closer to the $14.00 projected share price that some of the houses have placed on AOI. K.H. has been publicly upbeat on this financing question the last few interviews indicating that they had lots of options open to them, a very advantageous position that most exploration companies do not share.
Nice find Zavji, a couple of interesting excerpts from the TD report on Valuations and Financing at $9.50.
.Valuation
Exhibit 3 illustrates the breakdown of our NAV estimate for Africa Oil’s assets. Exhibit 4 presents our NAVPS waterfall chart. Our estimate of US$4.48 per barrel for Blocks 10BB/13T (includes South Lokichar) compares to a deal value range of US$2.76–US$3.75 per barrel (including contingent and prospective resources). This is based on two 2010 Tullow Oil asset transactions in Uganda’s Lake Albert. However, we believe that the Kenyan PSC terms are more favourable. Based on this range of metrics, Africa Oil’s EV of US$1,700 million implies the market may be accounting for un-risked resources in the range 453–616 mmbbl with no contribution from the rest of Africa Oil’s vast exploration portfolio.
This leads us to believe that the current price level presents a favourable investment entry and that the current market valuation is supported by the South Lokichar Basin discoveries and follow-on prospectivity. Exploration success and opening another basin, such as South Omo, could potentially cause a major share price re-rating, which we believe is not currently reflected in Africa Oil’s valuation.
Financing
Although the company’s 2013 work program is fully funded, Africa Oil is likely to raise additional funds for its 2014 program, possibly through an equity issuance or mezzanine financing. This, in our view, increases Africa Oil’s financing and liquidity risk profile during 2014.
In our cash flow modelling we have assumed an equity issue raise during 2014 in Q4/13 of close to US$220 million (net of costs) at a price of $9.50/share, which is roughly the mid-point between the current share price and our target price.
Cost per well. From what I understand the costs are not on a per well basis so they continue to mount even when productivity is slow. The success rate has been excellent however these wells have been very expensive, lots of difficulties, sidetracks and slow re-mobilization due to the lack of infrastructure and testing equipment. You also need to add in the costs of the extensive seismic program. The current total exploration budget was 465 million and they are already talking about raising more capital.
I like K.H's drum beating sessions, they are always very informative however they are don't usually have the desired effect on the share price. The program is in place, its all up to the drills now! Hopefully the mid year resource update will be out soon. According to K.H. It "will be big, perhaps the biggest news."
Not likely to be Sabisa they completed it prior to their July 3rd news release, after encountering reservoir quality sands, oil and heavy gas shows indicating an oil prone source rock and a thick shale. Only the lowermost sands appear to be in trapping configuration at Sabisa. Based on the encouragement of the results of this well, the decision had been made to drill the nearby Tultule prospect which appears to be a horst-block structure 4 kilometers to the east. The OGEC 75 rig move has been initiated and a late third quarter spud is expected.
Hi Gimo
Your quite right that we have confirmed(300 million bbls of oil) and that once fully developed our holdings could easily be capable of 250,000 bbls per day;
However the comment I was questioning from Wyatt Research was in reference to just the three wells in the Lokichar;
"Over the last couple of years the companies have drilled five wells in the Lokichar Basin, in the northeast part of the country. Three of these wells hit pay-dirt, and collectively make commercial quantities of oil production possible by surpassing the 250,000 barrels per day threshold."
This is a few more (B,s bbls & 000,000's) then Im used to as well. One thing for sure is the larger the numbers, the higher the share price.
Regards
Ninja
Good to see the considerable higher volume on the Venture exchange that came along with the recent news release.
It doesn't look like AOC plan to add or switch any exchanges in the foreseeable future as per this e-mail from Sophia Shane.
Hi
Could some one tell me if AOC has any plans now or in the
future to move up to the TSX from the Venture exchange?
Any plans to list on any other US exchanges?
Thanks [/I]
[[color=red]i]Good morning!
Thank you for your email. At the moment, we don’t have plans to list on the TSX or any U.S. exchanges. The TSXV and Stockholm exchanges have served us well – we enjoy good volume and visibility.
Best regards,
Sophia[/color]
Im confused over some of the numbers quoted in this article from Wyatt Research.
excerpt from the article
Over the last couple of years the companies have drilled five wells in the Lokichar Basin, in the northeast part of the country. Three of these wells hit pay-dirt, and collectively make commercial quantities of oil production possible by surpassing the 250,000 barrels per day threshold.
Correct me if I'm wrong but how does this guy get to 250,000 barrels per day when all we have discovered is 300,000 Barrels and a flow rate of 5000 per day x three or 15,000 Barrels per day.
I think Keith Hill said at one of the presentations that an average price by annalists covered AOI was around $14.00 and that he thought they had it about right. He also has said $20.00 in AOI share price for a basin with 2 BBO and they have just announced discovering their first commercial basin. Were it not for the poor resource market we should be $14.00 and going higher however just like every other resource stock were sitting at half the projected value. We need to keep having the success we've been having and we will see better and better valuations in spite of the lousy market. Hopefully we are a whole lot higher before we have to raise more capital.
Nice to start seeing some credit on positive news for a change rather then the typical TSX Venture market sell on news that we have been getting. This program has been running a bit behind schedule but you surely cant complain about the level of success. Good chance we will see a fourth well come in soon with Ekales's proximity and reduced risk, a 500,000 MBO commercial oil basin after just six wells is not bad.
Good to see something actually moving the share price, 6% isn't to bad of a start!
49.80 SEK = 7.80861 CAD
Swedish Krona ? Canadian Dollar
1 SEK = 0.156799 CAD 1 CAD = 6.37758 SEK
I think a move to the TSX brings numerous advantages and may be necessary for AOI to achieve the sustained valuations that it deserves. Five dollars is the minimum level with which many institutional investors will introduce companies to their portfolios however I don't think they are choosing these from the Venture exchange listings. Many annalists have given the Venture the short term Kiss of death lately so it makes it pretty tuff for these companies to maintain a committed following. All we get is a run up of 10% to 15% and then they head for the wings again usually when news is released.
gita,,,,Ill email Sophia next week and see if AOI has any plans to move up to the TSX,,not sure what the process is. Periodically TSX does publish a list of equities that have been transferred?
I don't think AOI is going to get due respect as long as they are on the Venture exchange. The resource and commodities sectors have been soft everywhere but the venture exchange has been abysmal for all its listings this past couple of years. At 1.84B AOI is the largest market cap. on the exchange, perhaps if they announce that they have reached a commercial reserve level and do an independent reserve update this fall they will move up to the TSX board.
Africa Oil Spuds Ekales-1 Well in Kenya
July 24, 2013 17:00 ET
VANCOUVER, BRITISH COLUMBIA--(Marketwired - July 24, 2013) - Africa Oil Corp. (TSX VENTURE:AOI)(OMX:AOI) ("Africa Oil" or the "Company") is pleased to announce the commencement of drilling operations on its Ekales prospect located in Block 13T in the Lokichar Basin in Kenya. The well was spud on July 22, 2013 and has a planned total depth of 2500 metres and is expected to approximately 2 months to drill and evaluate. The primary objectives are the Auwerwer and Lower Lokhone sandstones already established to be highly productive reservoirs at the nearby Ngamia and Twiga discoveries. The prospect is a three way fault closure against the main basin bounding fault and is located directly between, and approximately 15 km northwest of the Ngamia discovery and 7 km south of the Twiga discoveryalong the "string of pearls" trend. The well is being drilled by the Weatherford #804 rig. The Company holds a 50% working interest in this prospect along with operator Tullow Oil Plc. Please see attached map, visit the following link: http://media3.marketwire.com/docs/130724AOIBasinsMap.pdf
Africa Oil CEO Keith Hill commented, "The Ekales prospect is probably one of the lowest risk prospects in our inventory. The proximity and similarity to the existing Ngamia and Twiga discoveries give us a high degree of confidence that we will find oil and continue to build the discovered resources necessary for commercial volume threshold. Our pace of exploration and appraisal continues to accelerate with the anticipated arrival of three additional rigs in Kenya and Ethiopia in the next 60 days for a total of six rigs, four of which will be operated by Tullow Oil." The recently announced Etuko discovery, on the flank of the Lokichar basis has opened a new play fairway and provided further confirmation of the world class potential of the Lokichar Basin."
In the South Omo block in Ethiopia, mobilization of the OGEC 75 rig to the Tultule location is underway. This prospect is located 4 kilometres from the Sabisa-1 well which was recently abandoned after proving the existence of the essential hydrocarbon elements of source, seal and reservoir in this frontier basin. It is being drilled on a well-defined horst block feature which should provide good trapping characteristics. The Company holds a 30% working interest in this prospect along with operator Tullow Oil Plc (50%) and Marathon Oil (20%).
The Etuko well in Block 10BB, where an oil discovery was recently announced in shallower reservoirs, has now reached a total depth 3100 metres and log and MDT evaluation have commenced. The rigs for the Ogaden Basin (Block 7&8) El Kuran-3 prospect in Ethiopia (Africa Oil non-operated working interest: 30%) and the Block 9 Bahasi prospect in Kenya (Africa Oil operated working interest: 50%) are in country and spud of El Kuran-3 is expected in August and Bahasi-1 in September. One additional lightweight rig has been contracted for testing and drilling operations in the Lokichar Basin and should also be operational in September.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya and Ethiopia as well as Puntland (Somalia) through its 45% equity interest in Horn Petroleum Corporation. Africa Oil's East African holdings are in within a world-class exploration play fairway with a total gross land package in this prolific region in excess of 250,000 square kilometers. The East African Rift Basin system is one of the last of the great rift basins to be explored. New discoveries have been announced on all sides of Africa Oil's virtually unexplored land position including the major Albert Graben oil discovery in neighbouring Uganda. Similar to the Albert Graben play model, Africa Oil's concessions have older wells, a legacy database, and host numerous oil seeps indicating a proven petroleum system. Good quality existing seismic show robust leads and prospects throughout Africa Oil's project areas. The Company is listed on the TSX Venture Exchange and on First North at NASDAQ OMX-Stockholm under the symbol "AOI".
ON BEHALF OF THE BOARD
Keith C. Hill, President and CEO
http://www.marketwire.com/press-release/africa-oil-spuds-ekales-1-well-in-kenya-tsx-venture-aoi-1814365.htm
Yes your quite right Swedan1, I've confused my names,,,I meant to say Etuko speculation. Etuko hitting 40 meters of pay was a very big event in the Kenya campaign and yet it hasnt received due credit, Its success will have a major impact on the revised resource estimate.
Looks like recent gains have brought us back above the 50dma after a brief stint below,,. This should serve as support as we move higher on Ekales speculation as well as a steady stream of spudding reports,,.
Looks like we will take a move higher in share price with speculation on further drill results from Etuko. Maybe Ngamia was priced in but we didn't get any thing out of the Etuko success. I would have thought that the third success in what is shaping up to be a multi billion barrel discovery would have put us back near the top of our price range. We should also start hearing about a string of spuds soon,,4 or 5 in the next few months.
In this interview Keith Hill identifies one of the main driver and perhaps the biggest to be the "Mid year Resource up date"
which he says "should have significant increases in both the prospective resources as well as contingent resources" and that "they are starting to get into development volumes."
I think a number in the Billions of Barrels is what we need to get the our due respect from this market.
K.H. is always pretty inspiring and the attached video is well worth a view if any of you haven't heard it before.
There will be a lot of speculation as to if this mid year resource update is going to be in millions or billion's of barrels as these well are coming in!!
There are several news events coming up in the next 3 or 4 weeks that when combined have the potential to could cause a considerable stir in AOI's stock performance. The completion of Etuko's final net pay,,the spud of Ekales and the Mid year resource update should all be coming out at approximately the same time, the market cant keep discounting this kind of news for ever.
We should go higher from here. Only 8300 shares traded in the first 3 hours,,,this has gotta be some kind of a record for AOI. Looks like good support in the 6.60's and we've run out of sellers.
I am from Vancouver and have been a shareholder of African Oil, Horn Petroleum and Lion Energy since 2010, my post conversion average for AOI was and still is $1.20 per share so I'm in it for the long run. My main incentive for getting into AOI was the remarkable land package and the Managements incredible track record with this sort of play. AOI was pretty steady in the $5 & $6 range back in 2007 when they were still putting the land package together so I consider it a real value now that we have discovered not only the first oil in Kenya but a commercial basin and perhaps the first Oil in Ethiopia so I have no intentions of getting out until this plays it self out, probable two more years. I've followed this board for sometime and plan to post when I can contribute.
Good luck to all the longs!!