Puntland Oil update: Tullow Oil on board

[General Duke]

Making Deals and Profits in the East African Rift

Cutting the Dark Continent

By Christian A. DeHaemer

Friday, September 3rd, 2010

 

The East African Rift is a geological zone where continental plates in Eastern Africa have developed a tectonic plate boundary.

 

This is a part of the larger Great Rift Valley, where the African Plate is in the process of dividing into two new tectonic plates called the Somali Plate and the Nubian Plate.

 

As you can tell by the map above, it runs almost the entire length of Africa.

 

What you don't see on the map is that the East African Rift is suspected to be one of the last great oil and natural gas deposits on earth.

 

According to Time:

 

Seismic tests over the past 50 years have shown that countries up the coast of East Africa have natural gas in abundance. Early data compiled by industry consultants also suggest the presence of massive offshore oil deposits.

 

There is now a land grab going on. Oil explorers are dropping more wells in East Africa, one of the last great frontiers in the hunt for hydrocarbons.

 

I first recommended Tullow Oil (London: TWL) a few years ago, after they discovered 2 billion barrels in Uganda...

 

It's been off to the races every since:

 

 

In March, Texas-based oil company Anadarko Petroleum Corp. (NYSE: APC) announced that it had found a giant reservoir of natural gas off the coast of Mozambique.

 

Now companies are making deals and cutting up the continent into exploration blocks.

 

Tullow just announced it would acquire a 50% interest in — and management of — three of Africa Oils East African exploration blocks. These include two blocks in Kenya and one exploration block in Ethiopia.

 

Tullow will pay $10 million USD for these new exploration blocks.

 

The company will also fund Africa Oil's working interest share of future joint venture expenditures in these blocks until the cap of US$23.75MM is reached.

 

A lot of untapped oil...

 

North Africa has seen 20,000 wells sunk over the past few decades. Drillers have sunk 14,000 wells in and off West Africa.

 

However, in East Africa, only 500 wells have been explored...

There are some oil men and geologists who think that there are 10 billion barrels of oil in Somalia. But constant political unrest in the nation means that no one is willing to spend the money to explore.

 

I have recommended one company in this region that is sitting on a few key blocks.

 

 

I'll keep you updated.

 

Sincerely,

 

Christian DeHaemer

Energy & Capital

[General Duke]

Tullow Oil and Africa Oil to Jointly Explore New East African Rift Trend

 

VANCOUVER, BRITISH COLUMBIA, Sep 02, 2010 (MARKETWIRE via COMTEX) -- Africa Oil Corp. /quotes/comstock/11v!aoi (CA:AOI 1.30, +0.02, +1.56%) ("Africa Oil" or "the Company") is pleased to report that it has signed a definitive farmout agreement with Tullow Oil plc ("Tullow") whereby Tullow will acquire a 50% interest in, and operatorship of, three of Africa Oil's east African exploration blocks, comprised of two exploration blocks in Kenya and one exploration block in Ethiopia. In order to provide the necessary interest to Tullow, Africa Oil has also amended its existing farmout agreement with Lion Energy Corp. ("Lion"). Under the terms of the Tullow farmout agreement, Tullow will acquire a 50% interest in, and operatorship of, Blocks 10BB and 10A in Kenya and of the South Omo Block in Ethiopia. In consideration for the assignment of these interests, Tullow will pay to Africa Oil approximately US$10MM, representing 50% of Africa Oil's past costs in the blocks, subject to a post-closing audit. Tullow will also fund Africa Oil's working interest share of future joint venture expenditures in these blocks until the cap of US$23.75MM is reached. This cap is expected to cover the upcoming seismic program in each of the three blocks as well as the majority of costs for at least 2 wells on these areas. Once the expenditure cap has been met, Africa Oil will be responsible for its working interest share of future costs.

 

Additionally, Tullow has also entered into an agreement to acquire 50% of Africa Oil's interest in, and operatorship of, two additional exploration blocks in Kenya, 12A and 13T, recently acquired by Africa Oil. Tullow will be responsible for paying Africa Oil its pro-rata share of back costs, including acquisition costs, and its respective share of future joint venture expenditures.

 

The amendment of the Lion farmout agreement provides that Lion will reduce its interest in Block 10BB to 10% (originally 20%) and will not retain any interest in Block 10A (originally 25%). As consideration Africa Oil has agreed to pay Lion US$2.5 million in cash and to issue to Lion 2.5 million common shares of Africa Oil. Africa Oil has also agreed to the elimination of future expenditure promotes in Block 10BB and on the Company's projects in Puntland (Somalia).

 

The resultant interest in the three blocks upon closing of the Tullow farmout agreement and the Lion amending agreement will be: