Update from Canaccord today Exciting times ahead...Africa Oil released its Q3/12 financials results, which were generally in line. Canaccord Genuity Oil & Gas Analyst Christopher Brown believes the key takeaways were the unconsolidated cash and working capital balances, which came in at US$39.3 and US$19.6 million, respectively. These figures exclude farm-out payments of US$33.5 million (which were received in Q4/12), along with cash and working capital attributable to Horn Petroleum (HRN). Capital expenditures for
the quarter were US$30.1 million, of which US$21.1 million was associated with exploration programs in Kenya and Ethiopia. More importantly, over the coming weeks, the market will await the results of Ngamia-1’s follow-up location, Twiga South-1.
Brown believes Africa Oil will look to raise funds following Twiga’s results in order to fund its 2013 drilling program; he would expect any financing to close in Q1/13. He also believe that the stock will likely rally on Twiga South-1 results.
However, he is less optimistic about Paipai-1. Paipai-1 is currently drilling and is expected to be complete in early 2013. Brown believes that Paipai-1 will likely have oil indications on logs, but will likely production test a significant volume of water. As such, he is relatively bearish on the prospect. He adds that while he believes there was once oil in the region, he is concerned that the region may have been breached and swept with water. Should this have occurred, it could have oil-stained the rocks, resulting in a positive log response, even though the pore space is predominantly filled with water. An additional rig has been mobilized to the South Omo Block in Ethiopia to commence drilling the Sabisa-1 prospect. This prospect is testing the “North
String of Pearls” concept.