Africa Oil to begin drilling in Puntland Somalia this year

[General Duke]

Africa Oil hatches Somalia deal

 

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 12, 2011) - Africa Oil Corp. (TSX VENTURE:AOI)(OMX:AOI) ("Africa Oil" or "the Company") and Denovo Capital Corp. (TSX VENTURE:DVO.P) ("Denovo") are pleased to announce that they have entered into a letter of intent dated May 11, 2011 for the creation of a new Puntland focused oil exploration company, to be named Puntland Petroleum Corp. Puntland Petroleum will be created as a result of the transfer of Africa Oil's interest in its oil and gas properties in Puntland Somalia to Denovo (the "Transaction"). Denovo is a capital pool company and intends for the Transaction to constitute the "Qualifying Transaction" of Denovo, as that term is defined in the policies of the TSX Venture Exchange.

[General Duke]

The Transaction

 

Under the terms of the letter of intent, Africa Oil and Denovo will negotiate and enter into a definitive agreement pursuant to which Africa Oil will transfer to Denovo all of the issued and outstanding shares of its subsidiary holding companies (the "Puntland Subsidiaries") which hold participating interests in the Dharoor Valley and Nugaal Valley Production Sharing Agreements in Puntland (Somalia) (the "Puntland PSAs"). Africa Oil will receive, in consideration of the transfer, 27,777,778 common shares of Denovo.

 

As a result of the Transaction, the Puntland Subsidiaries will become wholly owned subsidiaries of Denovo, which will change its name to Puntland Petroleum Corp., and the business of the Puntland Subsidiaries will be the business of Puntland Petroleum. The definitive agreement will contain representations and warranties between the parties that are customary for transactions of a similar nature.

 

Africa Oil currently holds a 45% participating interest in the Puntland PSAs. Upon completion of the transaction, previously announced on April 3, 2011, for the acquisition of Lion Energy Corp, Africa Oil's participating interest in the Puntland PSAs will be increased, directly or indirectly, to 60%. It is anticipated that the entire 60% participating interest will be transferred to Denovo. Africa Oil is currently in the process of planning a two well exploratory drilling campaign in Puntland (Somalia), with the first well planned to spud in Q3 2011. Drilling locations have been selected and a letter of intent has been signed with a drilling subcontractor.

 

Assuming satisfactory completion of due diligence by Denovo it is anticipated that the definitive agreement will be entered into by May 31, 2011. The definitive agreement will provide for conditions precedent that are standard for a transaction of this nature, including receipt, by both Africa Oil and Denovo, as required, of all regulatory, partner and third party approvals including TSX Venture Exchange (the "Exchange") approval. Denovo will also seek Denovo shareholder approval for a proposed 0.65 (new) for 1.00 (old) consolidation of its common shares and a change of name to Puntland Petroleum Corp., both of which are conditions precedent to completion of the transaction. It will also be a condition precedent of the transaction that Africa Oil will have completed its proposed acquisition of Lion Energy Corp. and that Denovo will have completed a private placement of CAD$35 million comprised of 38,888,889 subscription receipts of Denovo sold at a post-consolidation price of CAD$0.90 per subscription receipt. Each subscription receipt will be exercised, upon completion of the transaction, into a unit of Denovo, comprised of one common share and one share purchase warrant (a "Denovo Warrant"). Each Denovo Warrant will entitle the holder to acquire an additional Denovo share for $1.50 for two years, subject to accelerated exercise provisions if the Denovo shares trade at greater than $2.00 for 10 consecutive trading days. Denovo will also make commercially reasonable efforts to have the Denovo Warrants posted for trading on the Exchange. Denovo is a capital pool company listed on the Exchange. Denovo completed its initial public offering on October 5, 2010 and commenced trading on the Exchange on October 12, 2010.

 

Africa Oil will acquire 11,111,111 subscription receipts in the private placement financing, for proceeds of CAD$10 million. At the conclusion of the acquisition and the private placement financing Africa Oil will hold 54.6% (non-diluted) of the issued and outstanding common shares of Puntland Petroleum.

 

The Transaction is an arm's length transaction and therefore will not be subject to approval of the shareholders of Denovo. Upon completion of the Transaction it is expected that Puntland Petroleum will meet the listing requirements of the Exchange for a Tier II Oil and Gas Issuer.

 

Keith Hill, President of Africa Oil Corp., said "The creation of Puntland Petroleum allows Africa Oil Corp. to keep a large working interest in a highly prospective exploration project and also provides the necessary capital to pursue an aggressive drilling program. We are in advanced planning stages of a two well drilling program which will drill the first well in a basin that appears to be directly analogous to the rift basins in Southern Yemen that have yielded multi-billion barrels of reserves."

[General Duke]

Summary of Financial Information

 

Financial statements, as required by the Exchange, were not available at the time of the press release. The financial statements and summary financial information will be disclosed at a later date in accordance with the policies of the Exchange.

 

Other Information and Updates

 

Denovo's shares are currently listed for trading on the Exchange. In accordance with Exchange policy, however, Denovo's shares are currently halted from trading and will remain halted until such time as determined by the Exchange, which, depending on the policies of the Exchange, may not occur until the completion of the Transaction.

 

Denovo and Africa Oil will provide further details in respect of the Transaction, in due course, by way of press releases. However, Denovo will in due course make available to the Exchange all financial information as required by the Exchange, and will disclose at a later date summary financial information derived from such statements, in accordance with the policies of the Exchange.

[General Duke]

Africa Oil Signs Letter of Intent to Create New Puntland Focused Exploration Company

[Fiqikhayre]

Great News there. I hope for the Oil to be extracted this same year.