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Africa Oil First Quarter of 2013 Financial and Operating Results

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VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 05/28/13 -- Africa Oil Corp. (TSX VENTURE: AOI)(OMX: AOI) ("Africa Oil", "the Company" or"AOC") is pleased to announce its financial and operating results for the three months ended March 31, 2013.

-- On the back of the successful exploration activities in Kenya during 2012, the Company, together with its partners, continues to ramp up its exploration program in Kenya and Ethiopia. Entering the year, two Tullow-Africa Oil joint venture rigs were operating in Kenya and one joint venture rig was operating in Ethiopia. A fourth Tullow-Africa Oil joint venture rig has been secured and is expected to commence testing and drilling operations in Kenya on Blocks 10BB and 13T during the third quarter of 2013. The Company, as operator, and its partner in Block 9 (Kenya) have secured a fifth rig, which will commence drilling operations in the third quarter of 2013. In addition, the Company and its partners in Block 7/8 (Ethiopia) have secured a sixth rig, which will commence drilling operations in June 2013. For a period, the Company will have 6 drilling rigs operating and expects to exit the year with 5 rigs operating in the region. The Company plans to drill 10 to 12 wells and perform up to 5 well tests across its exploration blocks during 2013.-- The Company and its partner on Block 13T, Tullow, conducted well testing operations at Twiga South-1, which resulted in a cumulative flow rate of 2,812 barrels of oil per day ("bopd") from three zones, despite being constrained by surface equipment. With optimized production equipment, the cumulative flow rate is anticipated to have increased to a cumulative rate of approximately 5,200 bopd. High quality 37 degree API waxy sweet crude flowed from all three zones in the Auwerwer formation with good quality reservoir sands encountered. The well was suspended as a potential future production well.-- The Company and its partner on Block 10BB, Tullow, are currently conducting tests on a series of six zones at the Ngamia-1 discovery. Ngamia-1 was drilled in 2012 but testing operations were postponed until appropriate artificial lift equipment was sourced to properly assess the accumulation. The first of these tests was in the Lower Lokhone formation where up to 43 meters of potential pay had previously been identified by logging and MDT sampling. The well flowed 281 barrels of 30 degree API oil per day from this zone. The remaining 5 tests are being conducted in the Auwerwer formation which are the highest quality reservoirs penetrated in the Ngamia well and which produced very well in the Twiga South-1 well. Results of these remaining Ngamia-1 tests are expected to be announced in June 2013.-- In the first quarter of 2013, the Company and its operating partners on Block 10A completed drilling the Paipai-1 exploration well. The Paipai-1 well tested a large four-way closed structure with Cretaceous-age sandstone targets at multiple depths. Paipai-1 spudded in September 2012 and completed drilling in the first quarter of 2013 to a total depth of 4,255 meters. Light hydrocarbons were encountered while drilling a 55 meter thick gross sandstone interval. Attempts to sample the reservoir fluid were unsuccessful and the hydrocarbons encountered while drilling were not recovered to surface. The Company and its partners were unable to test the well at the time due to the unavailability, in country, of testing equipment capable of handling the higher reservoir pressures encountered at this depth. As a result, the well has been temporarily suspended pending further data evaluation.-- The rig that drilled the Paipai-1 well in Block 10A has mobilized to the Lokichar Basin in Block 10BB to drill the Etuko prospect in the flank play where oil was discovered in 1992 by Shell at the Loperot-1 well. The Etuko-1 well spud in early May 2013 and results from the well are expected in July 2013. Should Etuko-1 be successful, there are a number of drill ready follow-up prospects on the same trend.-- The Company and its partners on the South Omo Block (Ethiopia) spudded the Sabisa-1 well in January 2013 and the well was drilled to a preliminary total depth of 1,810 meters. Hydrocarbon indications in sands beneath a thick claystone top seal have been recorded while drilling, but hole instability issues have required the drilling of a sidetrack to comprehensively log and sample these zones of interest. The sidetrack is underway and a result is expected in late May/early June.-- The Company and its joint operating partners on Blocks 7/8 (New Age operated) are planning to drill and test the El Kuran-3 appraisal well. A rig has been secured, the well site has been constructed and the well is expected to spud towards the end of June 2013. Should the well show encouragement, a multi-zone acid fracture stimulation well test is planned during 2013.-- The Company and its partner on Block 9 are currently planning to drill one exploration well in 2013. Block 9 is in the Cretaceous rift basin on trend with the South Sudan oil fields and the play concept was confirmed by the recent Paipai-1 well drilled in Block 10A. Two major prospects, Bahasi-1 and Sala-1, with large volume potential have been identified. The Company, as operator, and its partners in Block 9 have secured a rig to drill the Bahasi-1 exploration well. Site construction for Bahasi-1 commenced in May and the well is expected to spud in the third quarter of 2013.-- The Company continues to actively acquire, process and interpret 2D seismic over Blocks 10BA, 10BB, 12A, 13T and South Omo. In addition, the Company and its partner in Blocks 10BB and 13T will mobilize a 3D seismic crew to complete a 550 square kilometer 3D seismic survey over the Ngamia and Twiga structures later in 2013.-- In first quarter of 2013, the Company executed a PSA for the Rift Basin Area in Ethiopia. Located north of the South Omo Block, the Rift Basin Area covers 42,519 square kilometers. This block is on trend with highly prospective blocks in the Tertiary rift valley including the South Omo Block in Ethiopia, and Kenyan Blocks 10BA, 10BB, 13T, and 12A. The Company commenced acquiring a Full Tensor Gradiometry survey in May 2013 and will conduct an exhaustive environmental and social impact assessment over the block later in the year in preparation for a seismic program in 2014.-- Africa Oil ended the quarter in a strong financial position with cash of $237.1 million and working capital of $198.8 million.



Keith Hill, President and CEO, commented, "Africa Oil is very encouraged with the results of our first two exploration wells in the Lokichar basin. Our fully funded 2013 work program is focused on drilling and testing multiple wells in the Lokichar sub-basin in Kenya in an effort to reach commercial thresholds and on drilling multiple potential basin-opening wells across its vast East African exploration acreage."

First Quarter 2013 Financial and Operating HighlightsConsolidated Statement of Net Loss and Comprehensive Loss(Thousands of United States Dollars)---------------------------------------------------------------------------- Three months Three months ended ended March 31, 2013 March 31, 2012----------------------------------------------------------------------------Operating expenses Salaries and benefits $ 563 $ 283 Stock-based compensation 697 630 Travel 281 225 Management fees 74 64 Office and general 129 143 Donation 100 - Depreciation 13 12 Professional fees 103 91 Stock exchange and filing fees 200 127 Impairment of intangible exploration assets - 3,115---------------------------------------------------------------------------- 2,160 4,690Finance income (3,099) (1,420)Finance expense 1,051 23,801----------------------------------------------------------------------------Net loss and comprehensive loss 112 27,071--------------------------------------------------------------------------------------------------------------------------------------------------------Net (income) loss and comprehensive (income) loss attributable to non-controlling interest (1,762) 13,429Net loss and comprehensive loss attributable to common shareholders 1,874 13,642--------------------------------------------------------------------------------------------------------------------------------------------------------Net loss attributable to common shareholders per share Basic $ 0.01 $ 0.06 Diluted $ 0.01 $ 0.06----------------------------------------------------------------------------Weighted average number of shares outstanding for the purpose of calculating earnings per share Basic 252,165,938 213,064,923 Diluted 252,165,938 213,064,923--------------------------------------------------------------------------------------------------------------------------------------------------------



Operating expenses decreased $2.5 million for the three months ended March 31, 2013 compared to the prior year due mainly to a $3.1 million impairment of intangible exploration assets relating to Blocks 7 and 11 in Mali recorded in the previous year. This decrease was offset by a $0.1 million donation to the Lundin Foundation and increased compensation related costs associated with increased headcount and operational activity. The Lundin Foundation is a registered Canadian non-profit organization that provides grants and risk capital to organizations dedicated to alleviating poverty in developing countries.

Financial income and expense is made up of the following items:---------------------------------------------------------------------------- March 31, 2013 March 31, 2012----------------------------------------------------------------------------Loss on marketable securities - (124)Fair value adjustment - warrants 2,727 (23,669)Interest and other income 372 162Bank charges (8) (8)Foreign exchange gain (loss) (1,043) 1,258----------------------------------------------------------------------------Finance income 3,099 1,420Finance expense (1,051) (23,801)--------------------------------------------------------------------------------------------------------------------------------------------------------



The loss on revaluation of marketable securities is the result of a decrease in the value of 10 million shares held in Encanto Potash Corp which were acquired as part of the acquisition of Lion. These shares were sold during the three months ended March 31, 2012.

At March 31, 2013, nil warrants were outstanding in AOC and 53.4 million warrants were outstanding in Horn. AOC holds 13.3 million of the warrants outstanding in Horn. The Company recorded a $2.7 million gain on the revaluation of warrants for the three months ended March 31, 2013 due to a reduction in the volatility of the shares of Horn combined with a reduction in the remaining life of the warrants. The Company will incur fair market value adjustments on the Horn warrants until they are exercised or they expire (43,868,527 expire September 20, 2013, 9,375,000 expire June 8, 2014, 156,248 expire June 11, 2014, and 15,000 expire June 18, 2014).

Interest income increased in the first quarter of 2013 due to a significant increase in cash late in the fourth quarter of 2012 as a result of cash received from the non-brokered private placement in December of 2012.

The foreign exchange gains and losses are the direct result of changes in the value of the Canadian dollar in comparison to the US dollar. The Company's cash holdings are primarily in US and Canadian currency.

Consolidated Balance Sheets(Thousands United States Dollars)---------------------------------------------------------------------------- March 31, 2013 December 31, 2012----------------------------------------------------------------------------ASSETSCurrent assets Cash and cash equivalents $ 237,144 $ 272,175 Accounts receivable 2,584 2,848 Prepaid expenses 1,080 1,124---------------------------------------------------------------------------- 240,808 276,147Long-term assets Restricted cash 825 1,119 Property and equipment 83 82 Intangible exploration assets 321,375 282,109---------------------------------------------------------------------------- 322,283 283,310Total assets $ 563,091 $ 559,457----------------------------------------------------------------------------LIABILITIES AND EQUITYCurrent liabilities Accounts payable and accrued liabilities $ 41,964 $ 36,188 Current portion of warrants 8 2,288---------------------------------------------------------------------------- 41,972 38,476Long-term liabilities Warrants 381 828---------------------------------------------------------------------------- 381 828Total liabilities 42,353 39,304----------------------------------------------------------------------------Equity attributable to common shareholders Share capital 558,555 558,555 Contributed surplus 12,820 12,123 Deficit (99,950) (98,076)---------------------------------------------------------------------------- 471,425 472,602 Non-controlling interest 49,313 47,551----------------------------------------------------------------------------Total equity 520,738 520,153----------------------------------------------------------------------------Total liabilities and equity $ 563,091 $ 559,457----------------------------------------------------------------------------



The increase in total assets from December 31, 2012 to March 31, 2013 is primarily attributable to intangible asset expenditures incurred during the quarter in Kenya, Ethiopia and Puntland (Somalia).

Consolidated Statement of Cash Flows(Thousands United States Dollars)---------------------------------------------------------------------------- Three months Three months ended ended March 31, 2013 March 31, 2012----------------------------------------------------------------------------Cash flows provided by (used in):Operations: Net loss and comprehensive loss for the period $ (112) $ (27,071) Items not affecting cash: Stock-based compensation 697 630 Depreciation 13 12 Loss (gain) on marketable securities - 124 Impairment of intangible exploration assets - 3,115 Fair value adjustment - warrants (2,727) 23,669 Unrealized foreign exchange loss (gain) 1,119 (1,390) Changes in non-cash operating working capital (750) (187)---------------------------------------------------------------------------- (1,760) (1,098)Investing: Property and equipment expenditures (14) (64) Intangible exploration expenditures (39,266) (21,896) Proceeds from sale of marketable securities - 2,442 Changes in non-cash investing working capital 6,834 1,673---------------------------------------------------------------------------- (32,446) (17,845)Financing: Common shares issued - 10,802 Release of bank guarantee 294 1,275---------------------------------------------------------------------------- 294 12,077Effect of exchange rate changes on cash and cash equivalents denominated in foreign currency (1,119) 1,430----------------------------------------------------------------------------Decrease in cash and cash equivalents (35,031) (5,436)Cash and cash equivalents, beginning of period $ 272,175 $ 109,558----------------------------------------------------------------------------Cash and cash equivalents, end of period $ 237,144 $ 104,122----------------------------------------------------------------------------



The decrease in cash for the three months ended March 31, 2013 is mainly the result of intangible exploration expenditures and cash-based operating expenses.

Consolidated Statement of Equity(Thousands United States Dollars)---------------------------------------------------------------------------- March 31, 2013 March 31, 2012----------------------------------------------------------------------------Share capital: Balance, beginning of period $ 558,555 $ 306,510 Exercise of warrants - 14,339 Exercise of options - 1,275 -------------------------------------------------------------------------- Balance, end of period 558,555 322,124 --------------------------------------------------------------------------Contributed surplus: Balance, beginning of period $ 12,123 $ 8,425 Stock based compensation 697 630 Exercise of options - (374) -------------------------------------------------------------------------- Balance, end of period 12,820 8,681 --------------------------------------------------------------------------Deficit: Balance, beginning of period $ (98,076) $ (75,283) Net loss and comprehensive loss attributable to common shareholders (1,874) (13,642) -------------------------------------------------------------------------- Balance, end of period (99,950) (88,925) -------------------------------------------------------------------------- Total equity attributable to common shareholders $ 471,425 241,880 -------------------------------------------------------------------------- --------------------------------------------------------------------------Non-controlling interest: Balance, beginning of period $ 47,551 $ 36,296 Non-controlling interest on issuance of Horn shares - 64 Net income (loss) and comprehensive income (loss) attributable to non-controlling 1,762 (13,429) interest -------------------------------------------------------------------------- Balance, end of period 49,313 22,931 -------------------------------------------------------------------------- Total equity $ 520,738 $ 264,811--------------------------------------------------------------------------------------------------------------------------------------------------------



The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis for the three months ended March 31, 2013 and the 2012 Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.africaoilcorp.com).

Outlook

The Ngamia-1 and Twiga South-1 light oil discoveries in the Lokichar sub-basin, combined with positive results from reservoir analysis and flow rate tests at Twiga South-1, has led to a significant increase in the pace of exploration focused on tertiary rift basins. The Company and its joint venture partners in the tertiary rift play in east Africa plan to have four rigs operating by the end of 2013. The focus of these rigs in 2013 will be to continue drilling and testing wells in the Lokichar sub-basin in Kenya with improved efficiencies in an effort to reach commercial thresholds, and to drill potential basin-opener wells in the Turkana and the Chew Bahir basins in the tertiary rift play within Ethiopia. The Company and its partners will continue to acquire seismic data throughout the tertiary rift in Kenya and Ethiopia in an effort to add to its existing portfolio of drill-ready prospects.

The Company and its operating partner in Block 9 in Kenya are currently planning to drill the Bahasi-1 exploratory well. This well will be drilled on a large anticlinal structure targeting tertiary and cretaceous sandstones where six billion barrels of oil was discovered along trend in Sudan in a similar geologic setting. A follow-up well is also being considered towards the end of 2013 in Block 9. The Company and its operating partners in Blocks 7/8 in Ethiopia are currently planning to drill a well to appraise reservoir characteristics of Jurassic carbonates on the El Kuran oil accumulation. The main focus of this well is to establish commercial rates with acidizing, fraccing and horizontal sidetracks being considered.

The Company, through its 44.6% ownership interest in Horn, and its partners entered the next exploration period in both the Dharoor Valley and Nugaal Valley PSAs which carry a commitment to drill one well in each block within an additional three year term. The current operational plan is to contract a seismic crew to acquire additional data in the Dharoor Valley block and to hold discussions with the Puntland Government regarding drill ready prospects in the Nugaal Valley block. The focus of the Dharoor Valley block seismic program will be to delineate new structural prospects for the upcoming drilling campaign.

Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya and Ethiopia as well as Puntland (Somalia) through its 45% equity interest in Horn Petroleum Corporation. Africa Oil's East African holdings are in within a world-class exploration play fairway with a total gross land package in this prolific region in excess of 250,000 square kilometers. The East African Rift Basin system is one of the last of the great rift basins to be explored. Two new significant discoveries have been announced in the Lokichar basin in which the Company holds a 50% interest along with operator Tullow Oil plc. The Company is listed on the TSX Venture Exchange and on First North at NASDAQ OMX-Stockholm under the symbol "AOI".

FORWARD-LOOKING STATEMENTS

Certain statements made and information contained herein constitute "forward-looking information" (within the meaning of applicable Canadian securities legislation). Such statements and information (together, "forward looking statements") relate to future events or the Company's future performance, business prospects or opportunities. Forward-looking statements include, but are not limited to, statements with respect to estimates of reserves and or resources, future production levels, future capital expenditures and their allocation to exploration and development activities, future drilling and other exploration and development activities, ultimate recovery of reserves or resources and dates by which certain areas will be explored, developed or reach expected operating capacity, that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

All statements other than statements of historical fact may be forward-looking statements. Statements concerning proven and probable reserves and resource estimates may also be deemed to constitute forward-looking statements and reflect conclusions that are based on certain assumptions that the reserves and resources can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "seek", "anticipate", "plan", "continue", "estimate", "expect, "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions) are not statements of historical fact and may be "forward-looking statements". Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The Company does not intend, and does not assume any obligation, to update these forward- looking statements, except as required by applicable laws. These forward-looking statements involve risks and uncertainties relating to, among other things, changes in oil prices, results of exploration and development activities, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government or other regulatory approvals, actual performance of facilities, availability of financing on reasonable terms, availability of third party service providers, equipment and processes relative to specifications and expectations and unanticipated environmental impacts on operations. Actual results may differ materially from those expressed or implied by such forward-looking statements.

ON BEHALF OF THE BOARD

Keith C. Hill, President and CEO

Africa Oil's Certified Advisor on NASDAQ OMX First North is Pareto Ohman AB.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.



Contacts:
Africa Oil Corp.
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)
africaoilcorp@namdo.com
www.africaoilcorp.com



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