Africa Energy Reports First Quarter 2022 Results

Source: 5/16/2022, Location: Africa

Africa Energy Corp., an oil and gas company with exploration assets offshore South Africa and Namibia, announces financial and operating results for the three months ended March 31, 2022.

Garrett Soden, the Company's President and CEO, commented: "We are excited to drill the Gazania oil exploration well offshore South Africa this year. The Island Innovator drilling rig is now expected to mobilize from the North Sea in July and spud the well in September. Gazania is seven kilometers up-dip from an existing oil discovery and therefore has a high chance of success with material upside for our shareholders. In parallel, the Block 11B/12B joint venture is advancing the Luiperd early production system with the goal of agreeing gas terms and applying for the production license by September."

The Block 2B joint venture has contracted a semi-submersible rig to drill the Gazania-1 well, which is expected to spud in September 2022. Block 2B is located offshore South Africa in the Orange Basin where Total and Shell recently announced the large Venus and Graff oil and gas discoveries across the border offshore Namibia. The block has significant contingent and prospective resources in shallow water close to shore and includes the A-J1 discovery from 1988 that flowed light sweet crude oil to surface. Gazania-1 will target two large prospects seven kilometers up-dip from A-J1.

The Block 11B/12B joint venture is currently performing development studies and preparing a field development plan and an environmental application in order to submit an application for the Production Right by September 2022. The joint venture is contemplating an early production system ("EPS") for a phased development of the Paddavissie Fairway. The EPS would provide first gas and condensate production from the Luiperd discovery and would accelerate the Block 11B/12B development timeline by utilizing nearby infrastructure on the adjacent block in order to supply natural gas to customers in Mossel Bay. The EPS would significantly decrease the capital expenditures required to reach first production on Block 11B/12B. The Company expects that a full development of the Paddavissie Fairway would follow the EPS as the gas market expands in South Africa. We are encouraged by the 2D and 3D seismic data that has identified additional prospectivity in the Paddavissie Fairway and to the east, confirming the large exploration upside remaining across the block. The development of Block 11B/12B will have positive implications for the South African economy and will be critical in facilitating the country's energy transition beyond coal with a domestic natural gas supply.

- At March 31, 2022, the Company had US$9.5 million in cash and no debt.
- On April 14, 2022, Eco (Atlantic) Oil & Gas Ltd. deposited approximately US$20 million in escrow to support its capital expenditure requirements for the Gazania-1 well on Block 2B offshore South Africa.
- On March 3, 2022, the Block 2B joint venture partners contracted the Island Innovator semi-submersible rig to drill the Gazania-1 oil exploration well.

The Company recorded $2.5 million of operating expenses for the three months ended March 31, 2022, compared to $2.4 million of operating expense for the same period in 2021. While salary and benefit costs decreased by $0.8 million due to a reduction in annual bonuses paid to employees compared to the same period in 2021, stock-based compensation increased by $1.0 million compared to the same period in 2021 as stock options were granted to directors, officers, employees and consultants of the Company during the quarter, of which one-third vest immediately, versus nil in the first quarter of the prior year.

At March 31, 2022, the Company had cash of $9.5 million and working capital of $8.0 million compared to cash of $10.9 million and working capital of $9.5 million at December 31, 2021. The decrease in cash and working capital can be attributed to cash-based operating expenditures and investments in Main Street 1549 required to fund Block 11B/12B expenditures.

The Company plans to report results for the six months ended June 30, 2022, on August 11, 2022.

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