AOI's Kenyan operations map (Company)

AOI’s Kenyan operations map (Company)

East African oil and gas explorer, Africa Oil (AOI:TSXV) has shutdown two significant oil blocks; Block 10BB and Block 13T.  According to the release, AOI’s operating partner, Tullow Oil has agreed to shutdown activities at these two blocks in Kenya due to local protests surrounding employment issues.  The release notes that this is a precautionary measure and that the company’s are working closely with local leaders and the national government to resolve the issue.  AOI and Tullow employ 800 local workers out of a workforce of 1,400 employees in Kenya.

Block 10BB hosts the Ngamia-1 well which is estimated to flow at a rate of more than 5,400bopd once the appropriate facilities are in place.  Block 10BB also hosts the Etuko-1 well which was recently deepened and encountered 50 metres of net oil pay after discovering 40 metres of net oil pay in the shallower reservoirs.

Block 13T hosts the Twiga South-1 well which initially discovered 30 metres of net oil and is expected to flow at over 5,200bopd once the appropriate surface equipment is in place.  On September 16, 2013 AOI spud the Agete-1 exploration well which is expected to host some 276 million barrels of oil (p 54).  Block 13T also hosts the recently completed Ekales well which encountered roughly 60 to 100 metres of net oil pay which is in the process of being flow tested (see: Africa Oil Makes Fourth Consecutive Discovery in Kenya).

AOI is coincidentally in the midst of a $450 million US brokered financing, among the largest in TSX-Venture Exchange history, at a price of $8.25 Canadian equivalent per share. Judging by AOI’s impressive share price run into the $9.60 range since the financing announcement, there has been strong demand for the financing.

The Kenyan blocks which have been temporarily suspended today represent significant parts of AOI’s growth and net asset value; as a result expect weakness on this news, however that may present an opportunity to buy into AOI.