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Africa Oil Second Quarter of 2013 Financial and Operating Results

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VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 08/28/13 -- 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 and six months ended June 30, 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 October 2013. The Company, as operator, and its partner in Block 9 (Kenya) have secured a fifth rig, which will commence drilling operations in September 2013. In addition, the Company and its partners in Block 7/8 (Ethiopia) have secured a sixth rig, which will commence drilling operations in September 2013. For a period, the Company will have six drilling rigs operating and expects to exit the year with five rigs operating in the region. The Company plans to have drilled ten exploration wells and to have tested four wells across its exploration blocks during 2013-- During the first half of the year, the Company completed a series of well tests at both Twiga South-1 and Ngamia-1 on Blocks 13T and 10BB in Kenya, respectively. These successful well tests confirmed over 5,000 barrels of oil per day ("bopd") flow potential per well and a doubling of our previous estimates of net oil pay. Ekales-1, the next exploration well in the Basin Bounding Fault Play and on trend with Ngamia-1 and Twiga South-1, commenced drilling in July. Transient Pressure Analysis has been conducted on the Twiga South-1 and Ngamia-1 well tests. No pressure depletion was recorded over the duration of the tests. Flow periods ranged from 0.5 to 2.5 days and build up periods ranged between 3 to 12 days.-- Upon completing testing operations at Ngamia-1 in Block 10BB, the Weatherford 804 rig mobilized to the Ekales-1 well in Block 13T. The Ekales prospect is located on the main basin bounding fault midway between the Ngamia-1 and Twiga South-1 discoveries and is targeting the same formations that were productive in these discoveries. The well spud in July and is expected to be completed around end September.-- In July, the Company announced a new major oil discovery at Etuko-1. Etuko-1 is located 14 kilometers east of Twiga South-1 in Block 10BB and is the first test of the Basin Flank Play in the eastern part of the Basin. The well encountered approximately 40 meters of net oil pay in the Auwerwer and Upper Lokhone targets and approximately 50 meters of additional potential net pay in the Lower Lokhone interval. The well will be tested later in the year.-- In July, the Company reported that the Sabisa-1 well on the South Omo Block in Ethiopia, the most northerly well drilled on the Tertiary rift trend to date, had confirmed a viable hydrocarbon system with oil and heavy gas shows. Based on the encouragement of the results, the decision was made to drill the Tultule-1 as the next well on the South Omo Block. This well is expected to spud around the end August.-- 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 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 completed construction of the access road and well site for the Bahasi-1 exploration well. The Greatwall GW190 rig has commenced mobilization to site and the well is expected to spud in September.-- The Company and its partners continue to focus on the El Kuran oil accumulation on Block 8, discovered in the early 1970's. After completing reservoir characterization studies, the Company focused efforts on testing and completion strategies for producing commercial quantities of oil and gas. 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. The well site has been constructed, erection of the rig is ongoing at site and the well is expected to spud in September 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 PSC 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, which is approximately 70% complete, and is conducting an exhaustive environmental and social impact assessment over the block in preparation for a seismic program in 2014.-- Africa Oil ended the quarter in a strong financial position with cash of $179.5 million and working capital of $141.2 million.



Keith Hill, President and CEO, commented, "Africa Oil is very encouraged with the results of our first three 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."

Second Quarter 2013 Financial and Operating HighlightsConsolidated Statement of Net Income (Loss) and Comprehensive Income (Loss)(Thousands of United States Dollars)---------------------------------------------------------------------------- Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012----------------------------------------------------------------------------Operating expenses Salaries and benefits $ 477 $ 294 $ 1,040 $ 577 Stock-based compensation 7,088 587 7,785 1,217 Travel 446 237 727 462 Office and general 257 301 460 507 Donation - - 100 - Depreciation 12 14 25 26 Professional fees 91 3,152 194 3,243 Stock exchange and filing fees 162 147 362 274 Impairment of intangible exploration assets - - - 3,115---------------------------------------------------------------------------- 8,533 4,732 10,693 9,421Finance income (464) (9,980) (3,563) (1,371)Finance expense 1,354 132 2,405 13,904----------------------------------------------------------------------------Net income (loss) and comprehensive income (loss) (9,423) 5,116 (9,535) (21,954)--------------------------------------------------------------------------------------------------------------------------------------------------------Net income (loss) and comprehensive income (loss) attributable to non-controlling interest (160) 6,084 1,602 (7,344)Net loss and comprehensive loss attributable to common shareholders (9,263) (968) (11,137) (14,610)--------------------------------------------------------------------------------------------------------------------------------------------------------Net loss attributable to common shareholders per share Basic $ (0.04) $ (0.00) $ (0.04) $ (0.07) Diluted $ (0.04) $ (0.00) $ (0.04) $ (0.07)----------------------------------------------------------------------------Weighted average number of shares outstanding for the purpose of calculating earnings per share Basic 252,735,463 218,664,492 252,452,274 215,859,707 Diluted 252,735,463 225,318,773 252,452,274 215,859,707--------------------------------------------------------------------------------------------------------------------------------------------------------



Operating expenses increased $3.8 million for the three months ended June 30, 2013 compared to the prior year due mainly to an increase of $6.5 million in stock-based compensation relating to the 5,673,500 options granted in the current period. The increase was offset partially by a decrease of $3.1 million in professional fees due to finder fees paid in shares during the second quarter of 2012. The remaining $0.4 million increase can be attributed to increased salary and travel related costs associated with increased headcount and operational activity.

Operating expenses increased $1.2 million for the six months ended June 30, 2013 compared to the prior year due mainly to an increase of $6.6 million in stock-based compensation relating to the 5,673,500 options granted in the current period. The increase was offset by a decrease of $3.2 million in professional fees due to finder fees paid in shares and $3.1 million in impairment of intangible exploration assets relating to the abandonment of Blocks 7 and 11 in Mali during the prior period. The remaining $0.8 million increase can be attributed to increased salary and travel related costs associated with increased headcount and operational activity.

Financial income and expense is made up of the following items:

---------------------------------------------------------------------------- Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012----------------------------------------------------------------------------Loss on marketable securities - - - (124)Fair value adjustment - warrants 155 9,906 2,882 (13,763)Interest and other income 309 74 681 236Bank charges (5) (9) (13) (17)Foreign exchange gain (loss) (1,349) (123) (2,392) 1,135----------------------------------------------------------------------------Finance income 464 9,980 3,563 1,371Finance expense (1,354) (132) (2,405) (13,904)--------------------------------------------------------------------------------------------------------------------------------------------------------



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 first quarter of 2012.

At June 30, 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 $0.2 million gain on the revaluation of warrants for the three months ended June 30, 2013 and a $2.9 million gain for the six months ended June 30, 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 six months 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)---------------------------------------------------------------------------- June 30, December 31, 2013 2012----------------------------------------------------------------------------ASSETSCurrent assets Cash and cash equivalents $ 179,487 $ 272,175 Accounts receivable 1,953 2,848 Prepaid expenses 1,171 1,124---------------------------------------------------------------------------- 182,611 276,147Long-term assets Restricted cash 1,625 1,119 Property and equipment 98 82 Intangible exploration assets 376,679 282,109---------------------------------------------------------------------------- 378,402 283,310Total assets $ 561,013 $ 559,457----------------------------------------------------------------------------LIABILITIES AND EQUITYCurrent liabilities Accounts payable and accrued liabilities $ 41,371 $ 36,188 Current portion of warrants 10 2,288---------------------------------------------------------------------------- 41,381 38,476Long-term liabilities Warrants 224 828---------------------------------------------------------------------------- 224 828Total liabilities 41,605 39,304----------------------------------------------------------------------------Equity attributable to common shareholders Share capital 560,023 558,555 Contributed surplus 19,445 12,123 Deficit (109,213) (98,076)---------------------------------------------------------------------------- 470,255 472,602 Non-controlling interest 49,153 47,551----------------------------------------------------------------------------Total equity 519,408 520,153---------------------------------------------------------------------------- Total liabilities and equity $ 561,013 $ 559,457----------------------------------------------------------------------------



The increase in total assets from December 31, 2012 to June 30, 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 Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012----------------------------------------------------------------------------Cash flows provided by (used in):Operations: Net income (loss) and comprehensive income (loss) for the period $ (9,423) $ 5,116 $ (9,535) $ (21,954) Items not affecting cash: Stock-based compensation 7,088 587 7,785 1,217 Share-based expense - 3,298 - 3,298 Depreciation 12 14 25 26 Gain on marketable securities - - - (124) Impairment of intangible exploration assets - - - 3,115 Fair value adjustment - warrants (155) (9,906) (2,882) 13,763 Unrealized foreign exchange loss 1,116 1,477 2,235 87 Changes in non- cash operating working capital (46) (597) (796) (785)---------------------------------------------------------------------------- (1,408) (11) (3,168) (1,357)Investing: Property and equipment expenditures (27) - (41) (64) Intangible exploration expenditures (55,304) (38,249) (94,570) (60,144) Proceeds from sale of marketable securities - - - 2,690 Changes in non- cash investing working capital (7) 7,591 6,827 9,264---------------------------------------------------------------------------- (55,338) (30,658) (87,784) (48,254)Financing: Common shares issued 1,005 13,431 1,005 24,233 Deposit of cash for bank guarantee (1,250) (375) (1,250) (375) Release of bank guarantee 450 - 744 1,275---------------------------------------------------------------------------- 205 13,056 499 25,133 Effect of exchange rate changes on cash and cash equivalents denominated in foreign currency (1,116) (1,477) (2,235) (47)----------------------------------------------------------------------------Decrease in cash and cash equivalents (57,657) (19,090) (92,688) (24,525)Cash and cash equivalents, beginning of period 237,144 104,123 $ 272,175 $ 109,558----------------------------------------------------------------------------Cash and cash equivalents, end of period 179,487 $ 85,033 $ 179,487 $ 85,033-------------------------------------------------------------------------------------------------------------------------------------------------------- Supplementary information: Interest paid Nil Nil Nil Nil Income taxes paid Nil Nil Nil Nil----------------------------------------------------------------------------



The decrease in cash for the three and six months ended June 30, 2013 is mainly the result of intangible exploration expenditures and cash-based operating expenses.

Consolidated Statement of Equity(Thousands United States Dollars)---------------------------------------------------------------------------- June 30, June 30, 2013 2012----------------------------------------------------------------------------Share capital: Balance, beginning of period $ 558,555 $ 306,510 Exercise of warrants - 14,340 Exercise of options 1,468 1,271---------------------------------------------------------------------------- Balance, end of period 560,023 322,121----------------------------------------------------------------------------Contributed surplus: Balance, beginning of period $ 12,123 $ 8,425 Exercise of Horn warrants - 1,148 Stock based compensation 7,785 1,217 Exercise of options (463) (407) Shares to be issued in lieu of professional fees - 3,298---------------------------------------------------------------------------- Balance, end of period 19,445 13,681----------------------------------------------------------------------------Deficit: Balance, beginning of period $ (98,076) $ (75,283) Net loss and comprehensive loss attributable to common shareholders (11,137) (14,610)---------------------------------------------------------------------------- Balance, end of period (109,213) (89,893)---------------------------------------------------------------------------- Total equity attributable to common shareholders $ 470,255 245,909--------------------------------------------------------------------------------------------------------------------------------------------------------Non-controlling interest: Balance, beginning of period $ 47,551 $ 36,296 Non-controlling interest on issuance of Horn shares - 8,328 Net income (loss) and comprehensive income (loss) attributable to non-controlling interest 1,602 (7,344)---------------------------------------------------------------------------- Balance, end of period 49,153 37,280---------------------------------------------------------------------------- Total equity $ 519,408 $ 283,189--------------------------------------------------------------------------------------------------------------------------------------------------------



The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis for the three and six months ended June 30, 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 Company is significantly increasing the pace of exploration. For a period during the last half of the year, the Company will have six drilling rigs operating and expects to exit the year with five rigs operating.

The Ngamia-1, Twiga South-1 and Etuko-1 light oil discoveries in the Lokichar sub-basin, combined with positive results from reservoir analysis and flow rate tests at Ngamia-1 and 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 near term focus of these rigs is to continue drilling and testing wells in the Lokichar sub-basin in Kenya with improved efficiencies in an effort to continue building its contingent resource base, and to drill potential basin-opening wells in the Turkana, Chew Bahir, and Kerio basins in the tertiary rift play within Kenya and Ethiopia. Resources discovered to date are of a scale that the Tullow-Africa Oil joint venture partnership will initiate discussions with the Government of Kenya and other relevant stakeholders to consider development options. These discussions include consideration of a "start-up phase" oil production system with potential to deliver significant production rates with oil export via road or rail in advance of a full-scale pipeline development. 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 mobilizing Greatwall GW190 rig to drill the Bahasi-1 exploratory well. This well which is planned to spud in September 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 in early 2014 in Block 9. The Company and its operating partners in Blocks 7/8 in Ethiopia are currently mobilizing a rig to drill a well to appraise reservoir characteristics of Jurassic carbonates on the El Kuran oil accumulation. The main focus of this well which is expected to spud in September, is to establish commercial rates with acidizing, fraccing and horizontal sidetracks being considered.

Based on the encouragement provided by the Shabeel wells, the Company 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 ending October 2015. 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. Horn has been in discussion with potential joint venture partners and is reviewing new venture opportunities in the region.

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 Pareto Provider Ohman (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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