Africa Oil to buy Centric for 0.3077 share per share
2010-11-29 09:16 ET - News Release
Also News Release (C-CTE) Centric Energy Corp
Mr. Keith Hill reports
AFRICA OIL TO ACQUIRE CENTRIC ENERGY ADDING HIGHLY PROSPECTIVE BLOCKS TO ITS EXISTING AFRICA PORTFOLIO
Africa Oil Corp. has signed a definitive agreement to acquire all of the issued and outstanding common shares of Centric Energy Corp. Pursuant to the agreement, Africa Oil will acquire, by way of a plan of arrangement, all of the issued and outstanding shares of Centric in consideration for 0.3077 Africa Oil share (and 0.01 cent) for each common share of Centric.
Centric's primary asset is block 10BA in Kenya which is strategically located within the oil-rich East African Tertiary rift system between Africa Oil's block 10BB and its South Omo block, where Africa Oil is currently operating. This trend hosts the recent discoveries in the Albert graben in Uganda where up to two billion barrels of oil have been discovered by Tullow. In addition, Centric also has a carried 25-per-cent interest in block 7 and block 11, both located in the republic of Mali and operated by Heritage Oil Corp.
About block 10BA
Block 10BA is highly underexplored, with only sparse seismic data acquired in 1991. It covers 16,205 square kilometres and is directly north of the Loperot oil discovery drilled by Shell Exploration (Kenya) in 1992, within Africa Oil's block 10BB. The planned acquisition of new seismic data onshore and offshore is expected to considerably improve the understanding of the hydrocarbon potential of this block.
Centric and Tullow have executed a definitive farm-in and joint operating agreement whereby Tullow will earn a 50-per-cent participating interest and operatorship in block 10BA by financing 80 per cent of the first $30-million of expenditures under the block 10BA production sharing agreement and reimbursing approximately $750,000 in past costs. The closing of the farm-in is conditional upon satisfactory resolution of a Kenyan court proceeding concerning a judicial review application filed against the Kenyan Ministry of Energy expected on Dec. 16, 2010.
An independent assessment of the prospective resources of block 10BA has been completed by Gustavson & Associates under a resources evaluation report prepared in accordance with National Instrument 51-101 -- Standards for Disclosure for Oil and Gas Activities(i). This report calculates prospective resources (defined below) for 25 Centric leads and prospects in the block. The total of the prospective resources ranges from a low case (P90) of 955 million barrels of oil up to a high case (P10) of 4.379 billion barrels of oil, with a best estimate (P50) of 2.188 billion barrels of oil.
About blocks 7 and 11, republic of Mali
The company holds a 25-per-cent interest in two exploration licences in Mali where its costs are fully carried by Heritage Oil under the terms of a farm-out agreement through the primary seismic program and the first exploration well. The area of the licences totals approximately 73,000 square kilometres and is part of the Cretaceous-aged Central Africa rift trend which contains significant oil accumulations in Chad, Sudan and Niger. The basin has been sparsely explored with only 600 kilometres of older vintage seismic data, the most recent shot in 1974, and one exploration well, drilled in 1976. A nearby water well had significant shows of oil and gas demonstrating an active petroleum system. The acquisition of at least 1,000 kilometres of new seismic data and the drilling of one exploration well is planned for 2011.
Keith Hill, Africa Oil's president and chief executive officer, commented: "The acquisition of Centric allows Africa Oil to consolidate its interests in the Tertiary-age East African rift basin in Kenya and Ethiopia. We will also be adding an interesting new play area in Mali which, although frontier, has many of the characteristics of the rift basins we are exploring in East Africa. The partnership agreements with Tullow and Heritage allow the company to explore these basins with experienced rift basin operators at significantly reduced costs. Combining the Africa Oil and Centric portfolio of oil and gas interests provides our shareholders with multiple identified prospects and leads, geographically and geologically diversified across four African countries and five underexplored petroleum systems."
A meeting of Centric shareholders to approve the transaction is planned to be held in February, 2011, and the transaction is expected to close by no later than March 15, 2011. Lock-up agreements have been signed with 42.78 per cent of the Centric shareholders, including the board of directors. The transaction is subject to certain conditions precedent, including completion, by each of Africa Oil and Centric, of their previously announced farm-out agreements with Tullow, TSX Venture Exchange, Kenyan and Mali government, and court approvals, and any requisite third party consents and right-of-first-refusal waivers.
(i) The Jan. 1, 2010, report entitled, "Resource Evaluation Report, Centric Energy Corporation, Kenya Block 10BA," is filed on SEDAR under the company's profile. Prospective resources are defined as: "Those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. They are technically viable and economic to recover." Note that the estimated prospective resources could be oil or gas and that the estimate does not include consideration for the risk of failure in exploring for these resources. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.