Africa Oil Corp is pleased to report, further to its May 12, 2011 news release, that it has now signed a definitive agreement (the "Share Exchange Agreement") with Denovo Capital Corp. ("Denovo") pursuant to which Africa Oil will transfer to Denovo its 60% participating interest in the Puntland (Somalia) projects (the "Transaction"). Africa Oil's 60% participating interest in each of the Dharoor Valley and the Nugaal Valley Production Sharing Agreements in Puntland (Somalia) is indirectly held by its wholly owned subsidiary, Canmex Holdings (Bermuda) I Ltd.("Canmex I"). Pursuant to the Share Exchange Agreement, all of the issued and outstanding shares of Canmex I will be transferred to Denovo. In consideration of the transfer, Africa Oil will receive 27,777,778 common shares of Denovo.
Denovo is a capital pool company and intends for the Transaction to constitute its "Qualifying Transaction", as that term is defined in the policies of the TSX Venture Exchange (the "Exchange"). The Share Exchange Agreement provides for conditions precedent that are standard for a transaction of this nature, including receipt, by both Africa Oil and Denovo, as required, of all regulatory, partner and third party approvals including Exchange approval. At its June 30, 2011 meeting of shareholders Denovo obtained shareholder approval for a 0.65 (new) for 1.00 (old) consolidation of its common shares and a change of name to Horn Petroleum Corporation ("Horn Petroleum").
On August 2, 2011, Denovo completed a $40.98 million private placement financing, with assistance from Africa Oil. These proceeds will be used to fund Denovo's share of costs associated with the drilling of two exploratory wells in the Dharoor Valley Block. Africa Oil subscribed for $10 million of the private placement and will have an approximately 50% interest in Denovo when the Transaction completes.
Final planning for a two well exploratory drilling campaign in the Dharoor Valley Block is underway. Drilling locations have been selected over two robust prospects targeting gross best estimated prospective resources of over 300 million barrels each, based on internal estimates. Contracts are being entered into with drilling and drilling related subcontractors and ground drilling and logistical operations have commenced.
The Puntland Government and Dharoor Valley communities are fully supportive of the drilling project and have ensured they will do all that they can to allow the project to move forward safely and expeditiously. Specific milestone target dates have been adjusted by the Puntland Government allowing the partners to move the drilling start-up to the fourth quarter of 2011. In addition, partial relinquishments in both the Dharoor Valley and Nugaal Valley agreements have been finalized and approved. The Puntland Government has also given its approval for the formation of Horn Petroleum and the pending transaction with the Company.
