Mr. Keith Hill reports
AFRICA OIL ANNOUNCES SIGNIFICANT INCREASE IN RESOURCE ESTIMATES OF KENYA OIL FIELDS AND CONFERENCE CALL
An independent assessment of Africa Oil Corp.'s contingent resources in the South Lokichar basin located in blocks 10BB and 13T in Kenya has been completed by Gaffney, Cline & Associates.
Total 2C gross contingent resources increased 67 per cent to 616 million barrels of oil, and total 3C gross contingent resources increased 52 per cent to 1.29 billion barrels of oil in the oil fields discovered to date in the South Lokichar basin. The prospective resource estimates outside of the field areas in the South Lokichar basin have not been updated, and it is planned to do a comprehensive update of all resources on all properties at year-end.
Given the number of discoveries in the South Lokichar basin, the two attached tables have been prepared for the convenience of readers by Africa Oil.
SUMMARY OF SOUTH LOKICHAR BASIN 2C OIL CONTINGENT RESOURCES
AS OF JULY 31, 2014
Gross 2C
estimate AOC working Net 2C
millions of barrels interest estimate
Field (MMbo) (%) (MMbo)
Ngamia 340 50% 170
Ekales 20 50% 10
Twiga 62 50% 31
Agete 57 50% 28
Etuko 16 50% 8
Amosing 118 50% 59
Ewoi 3 50% 2
Total 616 50% 308
SUMMARY OF SOUTH LOKICHAR BASIN 3C OIL CONTINGENT RESOURCES
AS OF JULY 31, 2014
Gross 3C AOC working Net 3C
estimate interest estimate
Field (MMbo) (%) (MMbo)
Ngamia 660 50% 330
Ekales 44 50% 22
Twiga 142 50% 71
Agete 163 50% 81
Etuko 42 50% 21
Amosing 231 50% 115
Ewoi 9 50% 5
Total 1291 50% 645
The independent assessment was carried out in accordance with the standards established by the Canadian Securities Administrators in National Instrument 51-101 (standards of disclosure for oil and gas activities). The effective date of the report is July 31, 2014.
In addition, the company is pleased to announce that two key exploration wells have commenced drilling: the Kodos-1 well, which is a basin-opening well in the Central Kerio basin, and the Ekosowan-1 well, which is a large prospect on the string of pearls trend on the western-basin-bounding fault in the South Lokichar basin directly south of the Amosing and Ngamia significant discoveries. These wells are expected to be completed by year-end.
Keith Hill, Africa Oil's president and chief executive officer, commented: "Gaffney Cline's independent assessment confirms a significant increase in contingent resources for the South Lokichar basin in northern Kenya. Based on the drilling and testing program over the past year, our best estimate is now that the company's discoveries in the South Lokichar basin contain gross contingent resources of 616 million barrels of oil (2C estimate), an increase of 67 per cent on previous estimates, and may contain as much as 1,291 million barrels of gross oil contingent resources (3C estimate), an increase of 52 per cent. This level of resources exceeds the threshold for development, and we are targeting development sanction at the end of 2015/early 2016. We continue to aggressively explore and appraise the basin with three rigs operating and are currently acquiring a large 3-D seismic survey in the west and north of the basin. The key factors to address to increase these resources over the next year will be related to recovery factors and reservoir connectivity, and the early appraisal results at Ngamia and Amosing provide encouragement on the lateral continuity of the Auwerwer sands. The upcoming extended well tests at Ngamia and Amosing and the ongoing appraisal and core analysis programs will provide additional data to support this understanding. We also have an exciting exploration portfolio on trend with the South Lokichar basin and will have drilled six new basins by the end of 2015. We are confident that our early successes will be repeated in at least one additional new basin."
Africa Oil's holdings in the South Lokichar basin comprise non-operated 50-per-cent working interests in blocks 10BB and 13T in Kenya. The South Lokichar basin contains eight hydrocarbon discoveries in various stages of appraisal and numerous prospects and leads that have proven and productive analogs. Since the effective date (July 31, 2013) of Gaffney Cline's previous evaluation of the contingent and prospective resources for the South Lokichar basin, highlights of the company's exploration and appraisal activities for this basin include:
- Drilling and production testing the Ekales-1 well in block 13T, resulting
in an additional oil discovery and demonstrating high-quality Auwerwer
sands containing light waxy sweet crude;
- Drilling the Agete-1 and 2 wells and production testing Agete-1 in block
13T, resulting in an additional oil discovery with high-quality Auwerwer
sands containing light waxy sweet crude;
- Drilling the Amosing-1, -2 and -2A wells in block 10BB, resulting in an
additional oil discovery in high-quality Auwerwer sands with further
reservoirs developed in the Lokhone formation. The Amosing-2 and 2A
appraisal wells suggest reservoir and pressure continuity between the
wells, which will be determined by the coming extended well test;
- Drilling and production testing the Ewoi-1 well in block 10BB resulting
in an additional oil discovery in the lower-quality Lokhone sandstones
developed on the eastern flank of the basin;
- Production testing the Etuko-1 discovery in block 10BB further
demonstrating the production potential of sands within the Lokhone shale
source rock; Etuko-2A was drilled to test oil shows seen while drilling
the Auwerwer reservoir at Etuko-1; the results of the well are
considered inconclusive, and analysis is under way to consider further
options to evaluate this reservoir;
- Drilling the Emong-1 well in block 13T, which encountered oil and gas
shows in poorly developed reservoirs at the Auwerwer target interval; it
is believed that the reservoir was poorly developed due to its proximity
to the basin-bounding fault and its location within what appears to be a
local isolated slumped fault margin;
- Drilling the Ekunyuk-1 well in block 10BB on the eastern flank play,
which encountered a small zone of non-commercial oil pay within thick
good-quality Lokhone sands; the quality of Lokhone sands indicates that
there is further exploration potential in this area of the basin;
- Drilling the Twiga-2 appraisal wells in block 13T located near the basin-bounding fault encountering relatively thin net oil pay within an
alluvial fan facies, with limited reservoir quality; the Twiga-2A
sidetrack was drilled to the northeast away from the fault and
encountered similar high-quality Auwerwer formations to the Twiga-1
discovery; production testing of Twiga-2A continuing;
- Drilling the Ngamia-2 appraisal well in block 10BB confirming the
thickness and lateral extent of the Auwerwer sands and identifying a new
fault trap, north of the main Ngamia accumulation; drilling the Ngamia-3
appraisal well in block 10BB further confirmed the thickness and lateral
extent of the Auwerwer sands over the Ngamia structure and also extended
the known oil column significantly downdip from the Ngamia-1A discovery
well;
- Drilling the Etom-1 well in block 13T resulting in an additional oil
discovery within high-quality Auwerwer sands, along the western-basin-bounding fault play; the well results were announced after the effective
date for the Gaffney Cline resource assessment and are therefore still
carried in prospective resources;
- To date, 10 exploration wells drilled in the basin, resulting
in eight oil discoveries, an 80-per-cent success rate;
- Acquisition of a 704-square-kilometre 3-D seismic survey approximately
90 per cent complete over the discoveries and prospects along the western-basin-bounding fault, and fast-track-processed results over the Ekosowan
prospect and Amosing discovery were utilized in this updated resource
assessment; in addition, a further 100 kilometres of 2-D seismic were
acquired in the basin;
- Acquisition of 890 metres of whole core in wells at Agete, Amosing
Ekales, Etuko, Ngamia and Twiga to aid in reservoir understanding;
- All production tests indicate similar-quality light waxy sweet crudes.
The company continues to aggressively explore and appraise the South Lokichar basin. Two drilling rigs and a completion/test rig are currently operating in the basin and are planned to continue through 2015. The Ngamia-4 appraisal well and the Ekosowan-1 exploration well are currently drilling, and production testing is continuing at Twiga-2A.
Commitment has been made to expand the 3-D seismic survey to cover an additional 247 square kilometres over the Etom area, and the full survey is expected to be complete by around the end of first quarter 2015. Consideration is also been given to expanding the survey over the eastern flank play. It is expected that the results of the 3-D seismic survey will lead to better subsurface understanding and identify additional prospectivity. Due to the delays in acquiring the 3-D seismic survey, the government has recently approved a one-year extension to the PSC exploration term for both blocks 10BB and 13T, which means the final exploration periods will expire in July, 2017, and September, 2017, respectively.
The anchor for a development of the South Lokichar basin will be the series of high-quality Auwerwer reservoir discoveries made along the western-basin-bounding fault at Amosing, Ngamia, Ekales, Twiga and Agete. The appraisal program is focused on increasing the subsurface certainty through multiple appraisal wells, extended well tests at Amosing and Ngamia, and special core analysis. The wide distribution between 1C, 2C and 3C contingent resources is in part driven by the assumed recovery factor range for the Auwerwer reservoir of P90: 16 per cent, P50: 26 per cent and P10: 36 per cent, which is a function of uncertainty over reservoir distribution and connectivity. The continuing appraisal program is aimed at both narrowing uncertainty around contingent resources and confirming the company's expectation of a recovery factor at the upper end of the current range.
The South Lokichar basin exceeds threshold oil volumes for undertaking development studies, and development planning is being fast-tracked. It is anticipated that a field development plan will be submitted to the government in the second half of 2015, and project sanction, including an export pipeline, is being targeted at the end of 2015/early 2016. This will be the catalyst for booking reserves for the basin.
SUMMARY OF GROSS OIL CONTINGENT RESOURCES
AS AT JULY 31, 2014
Discovery Formation 1C (MMbbl) 2C (MMbbl) 3C (MMbbl)
Ngamia Auwerwer 170.1 330.3 639.7
Upper Lokone 1.1 3.1 6.8
Lower Lokone 2.6 6.4 13.8
Ekales Auwerwer 7.4 19.7 44.4
Twiga Auwerwer 20.0 52.4 112.0
Upper Lokone 3.3 9.9 29.6
Agete Auwerwer 19.1 57.0 162.6
Etuko Upper Lokone 5.4 16.0 42.3
Amosing Auwerwer 43.0 86.3 174.6
Upper Lokone 17.8 31.3 55.9
Ewoi Upper Lokone 1.2 3.3 9.2
SUMMARY OF NET OIL CONTINGENT RESOURCES
AS AT JULY 31, 2014
Discovery Formation 1C (MMbbl) 2C (MMbbl) 3C (MMbbl)
Ngamia Auwerwer 85.1 165.2 319.9
Upper Lokone 0.6 1.6 3.4
Lower Lokone 1.3 3.2 6.9
Ekales Auwerwer 3.7 9.9 22.2
Twiga Auwerwer 10.0 26.2 56.0
Upper Lokone 1.7 5.0 14.8
Agete Auwerwer 9.6 28.5 81.3
Etuko Upper Lokone 2.7 8.0 21.2
Amosing Auwerwer 21.5 43.2 87.3
Upper Lokone 8.9 15.7 28.0
Ewoi Upper Lokone 0.6 1.7 4.6
Conference call
A conference call will held to discuss the resource update on Sept. 16, 2014, at 11 a.m. ET, 4 p.m. United Kingdom time or 5 p.m. Swedish time.
Please call in 10 minutes before the conference starts and stay on the line (an operator will be available to assist you).
Call-in number for the conference call (North America): 1-416-340-2216
Call-in number for the conference call (North America toll-free): 1-866-223-7781
Call-in number for the conference call (Europe): 800-6578-9898
A replay of the telephone conference will be available approximately one hour after the completion of the conference call until Sept. 23, 2014.
Replay number in North America: 1-905-694-9451
North America (toll-free): 1-800-408-3053
Passcode for the replay: 9087224
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