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Energy Summary for Sept. 17, 2014

2014-09-17 19:51 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for October delivery lost 46 cents to $94.42 on the New York Merc, while Brent for November lost eight cents to $98.97 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.20 to WTI ($81.22), unchanged. Natural gas for October added 1.8 cents to $4.01. The TSX energy index lost 3.64 points to close at 307.27.

Keith Hill's Africa Oil Corp. (AOI) added six to $6.06 on 344,600 shares, regaining some of the 22 cents it lost yesterday after releasing an updated resource report for blocks 10BB and 13T in Kenya's South Lokichar basin. It holds these blocks 50-50 with Tullow Oil. Total gross 2C (best estimate) contingent resources are 616 million barrels of oil, up from around 370 million in last year's report, and total gross 3C (high estimate) contingent resources are 1.3 billion barrels, up from around 850 million. The increases are mainly because Africa Oil and Tullow discovered four fields in between reports to bring the total to seven. When they discovered the sixth and seventh fields at the beginning of the year, Tullow estimated that resources would be around 600 million barrels, so 616 million is in line. Investors seem to have wanted more. President and chief executive officer Hill certainly did. He told a conference call yesterday that Africa Oil's internal estimates are "significantly higher," but resource evaluator Gaffney Cline said not enough work has been done to justify higher numbers, something Mr. Hill said will be fixed over the next six to 12 months. He also noted that the new report does not account for all of Africa Oil's reservoirs and does not include any prospective resources at undrilled prospects, such as Ekosowan in the southern part of South Lokichar or Kodos in the unexplored Central Kerio basin. The company plans to release a new report to address some of this in the first quarter of next year. It has started drilling the Ekosowan-1 well and the Kodos-1 well on the above-mentioned prospects, and expects results in late October or early November. The Kodos-1 well, said Mr. Hill, is particularly exciting because it is a potential "basin-opener" targeting a basin that looks just like South Lokichar. The company has not had much luck opening basins so far. Previous wells targeting the Turkana and Anza basins in Kenya and the Chew Bahir basin in Ethiopia were dry or low in oil (although Africa Oil says a recent gas discovery at Anza could prove quite profitable). High hopes are riding on Kodos-1 in the Central Kerio basin, which is just east of South Lokichar and is geologically similar.

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