Africa Oil Corp (AOIFF)

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And further…


Tullow has reported indications of hydrocarbons in unconsolidated sands with the wildcat Sabisa-1 well in Ethiopia. The well will now be side-tracked to complete logging and analysis. At the Ngamia-1 exploration well in Kenya, a constrained well test produced 281 bopd from the Lower Lokhone sandstones using artificial lift. A further five shallower intervals will now be flow-tested. We view the results from East Africa as an incremental positive in that the Sabisa-1 well demonstrates potential for a working petroleum system in a previous undrilled basin while the Lower Lokhone sands at Ngamia may, contrary to earlier diagnosis, prove commercial. Given the interim nature of the results, we are leaving our risk-weighted group valuation of 1453p per share unchanged for now.
Sabisa-1 demonstrates potential for working petroleum system

The Sabisa-1 well was drilled in the frontier South Omo basin, which is part of the East African Rift system. The well was testing a prospect in a delta depositional setting close to a basin-bounding fault. The high risk exploration well reported indications of hydrocarbons beneath a thick, unstable clay section. Indications of rich gas were registered but this does not preclude an oil discovery at this location (the heaviest hydrocarbon molecule that equipment can and did measure is C4). The Pliocene sands from which hydrocarbon shows were reported are unconsolidated in nature. This can be positive for the reservoir quality in terms of porosity and permeability. The well is now being side-tracked to gather a more comprehensive set of logs for analysis. This operation is expected to complete in late May. While interim results do not suggest a discovery of the scale of last year's Ngamia discovery in Kenya, it is a significant result in the context of a basin that is previously undrilled and therefore without guiding calibration data for seismic interpretation.
Lower Lokhone sands at Ngamia may be commercial

Tullow, the operator of Ngamia-1, had previously assigned zero net pay or commerciality to the Lower Lokhone oil-bearing reservoir sands. A flow-test on an interval in these sands produced light oil at a rate of 281 bopd with the aid of a pump, meaning earlier estimates for contingent resources at Ngamia-1 could be revised upwards. The flow test was constrained at surface with Ngamia-1 drilled as an exploration, rather than development or production, well. Future wells in the Lower Lokhone can be optimised to improve production rates from the oil-bearing zones in this formation.

Tullow and its partners will now flow test five intervals in the Upper Lokhone formation, which proved productive at the Twiga South-1 well in the same Lokichar basin.

The drilling rig from Paipai-1 is being mobilised to the Etuko prospect in the Lokichar basin in Kenya. A well on Etuko is due to spud on schedule in the first half of May.


http://www.davy.ie/davy/article.htm?id=Davy_Morning_Equity_Briefing_15042013_moneBLinkS0016C0001Cmp.htm