Africa Oil 2018 Second Quarter Financial and Operating Results

Posted On August 15th, 2018 - 8:38 am | by Oil and gas press

Africa Oil Corp. (“Africa Oil” or the “Company”) announced its financial and operating results for the three and six months ended June 30, 2018.

As at June 30, 2018, the Company had cash of $369.6 million and working capital of $380.2 million as compared to cash of $392.3 million and working capital of $436.3 million at December 31, 2017. During the second quarter of 2017, the Company and Maersk (who has subsequently been acquired by TOTAL) agreed to payment terms related to the $75.0 million advance development carry. Africa Oil is due to receive equal quarterly payments of $18.75 million at the end of each calendar quarter during 2018. The first two quarterly payments were received during the first half of 2018. These proceeds were initially recognized in accounts receivable and intangible exploration assets during 2017.

    During the second quarter of 2018, Africa Energy (AFE:TSXV) completed a private placement, in which the Company invested $18.0 million, increasing the Company’s ownership interest in Africa Energy from 28.5% to 34.6%.

Blocks 10BB and 13T (Kenya)
Operational activity is focused in the South Lokichar basin. Work has continued in both the Amosing and Ngamia fields, with water injection testing ongoing at Ngamia-11 and continued 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 set of results from this program is expected 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 first truck arrived at the KPRL Refinery in Mombasa on 7 June 2018, where the oil will be stored for future export.

Initially, the trucks have transported approximately 600 bopd and this is expected to steadily increase to 2,000 bopd once the Early Oil Production System is fully operational and production testing commences from the Amosing production facility. A first lifting of low sulphur Kenyan crude oil from Mombasa is expected in the first quarter of 2019.

At the end of June, trucking and operations were temporarily suspended due to protests by the local community. These issues lead to effective consultations between the local and National Government, and operations safely recommenced in mid-August.

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 remains on track for an 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 and Ngamia 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.

The initial stage is planned to include 210 wells through 18 well pads at Ngamia and 70 wells through seven well pads at Amosing, with a planned plateau rate of 60,000 to 80,000 bopd. Additional stages of development are expected to increase plateau production to 100,000 bopd or greater. Total gross capex associated with the Foundation Stage is expected to be $2.9 billion, of which $1.8 billion is investment in the upstream and $1.1 billion is for the pipeline.

Front End Engineering and Design (“FEED”) and Environmental and Social Impact Assessment (“ESIA”) work on the upstream are now 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 have commenced, with the pipeline FEED contract awarded to Wood Group, as well as studies on pipeline financing and ownership, which are expected to continue throughout 2018.

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.

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.

    2018 Second Quarter Financial Results

Source / More : Africa Oil Corp.

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