Africa Oil Corp. signed a definitive agreement with the Government of Ethiopia to jointly study the Rift Valley Block.
The Block is located north of the Company’s South Omo Block and encompasses the remainder of the Tertiary age East Africa Rift Trend in Ethiopia. The Company has committed to carry out an airborne geophysical survey over the Block, which spans 42,519 square kilometers.
Africa Oil will also work closely with seconded members of the Ethiopian Ministry of Mines to support local capacity building. The Joint Study Agreement has an 18 month term, following which Africa Oil will have the exclusive right to enter into negotiations for a production sharing agreement for all or part of the Rift Valley Block. The Company plans to carry out the airborne geophysical survey, together with reconnaissance field geology, in 2011.
The Company also announced that it has closed the Ethiopian portion of the previously announced five-block farmout transaction with Tullow Oil plc. As a result of the completion of the South Omo Block portion of the transaction, Tullow now has a 50% operated position in the block, with Africa Oil holding a 30% interest and Agriterra Limited holding the remaining 20%.
Tullow has paid $1.3 million to Africa Oil, in consideration of back costs, and is obligated to fund the next $23.75 million of Africa Oil’s future costs in the blocks. The closing of the Tullow transactions on the additional four blocks, being Blocks 10A, 10BB, 12A and 13T, all located in Kenya, remains subject to the conclusion of the Interstate Petroleum Ltd. court proceedings.
Keith Hill, Africa Oil’s President and Chief Executive Officer, commented, “I am pleased to announce this latest addition to our growing position in the East African Rift Trend. There has been no previous exploration activity in this vast block, but it is clearly positioned along the northerly continuation of the prospective trend. The Joint Study vehicle allows Africa Oil to perform the initial exploratory work under minimal commitments and capital exposure with the exclusive option to move into a full production sharing agreement if our results are positive. The partial closing of the Tullow deal is also positive and we look forward to completing the rest of that transaction in the near future.”