Africa Oil in $100m Equity Raise to fund exploration, appraisal plans in South Lokichar onshore Kenya

Africa Oil has announced plans to raise US$100m in new equity through a private placement to fund the ongoing appraisal and pre-development activities in the core South Lokichar Basin onshore Kenya which falls on block 10BB and block 13T.

The placement which is expected to close by 23rd February according to Africa Oil should be sufficient to complete the work required ahead of a field development plan submission for the South Lokichar Basin at the end of 2015.

The funds will be utilitilsed to drill at least four appraisal/exploration wells, extended well tests in the Amosing and Ngamia fields and reservoir and engineering studies (including extensive core analysis).

Africa Oil and Tullow Oil also plan to test deeper exploration upside (Basin Axis Play) with two high risk appraisal wells that are currently being drilled on the Ngamia and Ekales structures which are hoped to add material resource to the existing discoveries.

The two partners are also plan on drilling two basin openers including the Engomo-1 well currently drilling in the West Turkana Basin and which is expected to complete in March 2015 as well as the Cheptuket well (formerly Lekep) in Block 12A situated in the Kerio Valley Basin in line with PSC commitments that needs to be drilled before September 2016.

In addition, Africa Oil and Tullow Oil plan to work closely with the Government of Kenya and the Uganda upstream partners to advance the regional oil export pipeline.

According to Citibank which classifies Africa Oil as high risk as given it has no producing assets the explorer will however have to fight a number of risks including the low commodity prices as well as changing political forces could impact on Africa Oil’s legal ownership fiscal take and pace of development activity in any country in which it operates with particular focus to Puntland where the company also has acreage through its subsidiary Horn Petroleum.

Africa Oil also has to deal with the temptation to follow the merger and acquisition route with access to resources becoming more challenging and natural and man-made disasters which could bring the burden of additional costs from remediation, fines and restrictions on future business activities.

Author: OilNews

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