Africa Oil 2012 Financial and Operating Results

Africa Oil 2012 Financial and Operating Results 
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 03/26/13 -- Africa Oil
Corp. (TSX VENTURE:AOI)(NASDAQ OMX:AOI) ("Africa Oil", "the Company"
or "AOC") is pleased to announce its financial and operating results
for the year ended December 31, 2012. 


 
--  Following the significant light oil discovery at Ngamia-1 exploration
    well in Block 10BB, the Company and its partner moved the rig 22
    kilometers to drill the Twiga South-1 exploration well in Block 13T
    (Kenya) which is on trend with Ngamia-1. Twiga South-1 successfully
    encountered 30 meters of net oil pay in three Auwerwer sandstone
    intervals analogous to Ngamia-1. The Company and its partner performed a
    DST on five intervals at Twiga South-1. The DST on three Auwerwer
    sandstone intervals resulted in a cumulative flow rate of 2,812 bopd,
    constrained by surface equipment. With optimized testing equipment,
    these flow rates are anticipated to have increased to a cumulative rate
    of approximately 5,200 bopd. Two deeper tests were also completed on the
    tight reservoir rock at the bottom of the well, and despite reconfirming
    the presence of movable oil, both zones produced at sub-commercial flow
    rates. The well has been suspended as a potential future production
    well. The rig has now been moved to Ngamia-1 where testing operations on
    five to six zones have commenced.
      
--  The Ministry of Energy in Kenya has been provided with the Twiga South-1
    testing results, which accompanied a formal Notice of Discovery under
    the terms of the Block 13T PSC. Following this Notice of Discovery, the
    Ministry of Energy has agreed to the Tullow proposal, as operator of
    Blocks 10BB and 13T, to carry out a combined exploration and evaluation
    program over a defined Area of Interest ("AOI") including all of the
    mapped prospects and leads along the basin bounding fault on the western
    edge of the Lokichar Basin. The basis of the AOI approach is to adopt a
    basin-wide approach to concurrently explore and evaluate the area as
    opposed to undertaking well-by-well appraisals for each discovery well.
    This basin-wide approach, with regards to the AOI, is mutually agreed to
    be the most efficient and quic
kest approach to moving the exploration
    and evaluation work program forward towards reaching a commercial
    threshold of reserves required to justify any large scale oil
    development.
      
--  During December 2012, the Company completed a non-brokered private
    placement issuing an aggregate of 30 million common shares at a price of
    CAD$7.75 per common share for gross proceeds of CAD$232.5 million. The
    Company paid a finder's fee of CAD$8.3 million in cash on the private
    placement.
      
--  The Company and its operating partners on Block 10A (Kenya) spud the
    Paipai-1 exploration well in September 2012. Paipai-1 was drilled 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 partners selected Sabisa-1 as the first drilling
    location in the South Omo Block (Ethiopia). Sabisa-1 spud in January
    2013 and is currently drilling.
      
--  In Puntland (Somalia), the Company, through its 44.6% ownership interest
    in Horn Petroleum Corporation ("Horn"), completed site restoration at
    both Shabeel-1 and Shabeel North-1 wells and demobilization from
    Puntland has been completed. While the Company was disappointed that the
    first two exploration wells in Puntland did not flow oil, the Company
    remains highly encouraged that all of the critical elements exist for
    oil accumulations and based on this encouragement, the Company and its
    partners have entered into the next exploration period in both the
    Dharoor Valley and Nugaal Valley PSC's which carry a commitment to drill
    one exploration well in each block by October 2015.
      
--  The Company completed a farmout transaction with Marathon Oil
    Corporation ("Marathon") during the fourth quarter of 2012 whereby
    Marathon acquired a 50% interest in Block 9 (Kenya) and a 15% interest
    in Block 12A (Kenya). In accordance with the farmout agreement, Marathon
    paid the Company $32.0 million in consideration of past exploration
    expenditures, and has agreed to fund the Company's working interest
    share of future joint venture expenditures on these blocks to a maximum
    of $25.0 million. The Company has retained a 20% working interest in
    Block 12A and a 50% working interest in Block 9.
      
--  The Company completed a farmout transaction with New Age (Africa Global
    Energy) Limited ("New Age") during the fourth quarter of 2012 whereby
    New Age acquired an additional 25% interest in the Company's Blocks 7 &
    8 (Ethiopia), together with operatorship of Blocks 7 & 8 and the Adigala
    Area (Ethiopia). In accordance with the farmout agreement, New Age paid
    the Company $1.5 million in consideration of past exploration
    expenditures. The Company has retained a 30% working interest in Blocks
    7/8.
      
--  The Company continues to actively acquire, process and interpret 2D
    seismic over Blocks 10BA, 10BB, 12A, 13T and South Omo with three
    seismic crews currently active.
      
--  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.
      
--  Africa Oil ended the quarter in a strong financial position with cash of
    $272.2 million and working capital of $237.7 million as compared to cash
    of $109.6 million and working capital of $90.2 million at December 31,
    2011. 

 
Keith Hill, President and CEO, commented, "Africa Oil is very
encouraged with the results of our first two exploration wells in the
Lockichar basin. Our improved financial position as a result of the
non-brokered private placement and the farmouts completed in the
fourth quarter of 2012 will enable the Company to drill and test
multiple wells in the Lokichar sub-basin in Kenya in an effort to
reach commercial thresholds, and to drill multiple additional
potential basin-opening wells across its vast East African
exploration acreage." 
2012 Financial and Operating Highlights 


 
Consolidated Statement of Net Loss and Comprehensive Loss                   
(Thousands of United States Dollars)                                        
----------------------------------------------------------------------------
For the years ended                              December 31,  December 31, 
                                                         2012          2011 
----------------------------------------------------------------------------
                                                                 
           
Operating expenses                                                          
  Salaries and benefits                          $      3,665  $      1,696 
  Stock-based compensation                              4,943         4,348 
  Travel                                                1,469         1,133 
  Management fees                                         294           245 
  Office and general                                      718         1,508 
  Donation                                              2,313             - 
  Depreciation                                             48            48 
  Professional fees                                     4,187         1,476 
  Stock exchange and filing fees                          916           547 
  Impairment of intangible exploration assets           3,127         6,969 
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                                                       21,680        17,970 
Gain on acquisition of Lion Energy                          -        (4,143)
Dilution loss on sale of subsidiary                         -         4,579 
Finance income                                         (1,727)      (12,079)
Finance expense                                           164         2,626 
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Net loss and comprehensive loss                        20,117         8,953 
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Net income and comprehensive income attributable                            
 to non-controlling interest                           (2,676)       (1,691)
Net loss and comprehensive loss attributable to                             
 common shareholders                                   22,793        10,644 
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Net loss attributable to common shareholders per                            
 share                                                                      
  Basic                                          $       0.10  $       0.06 
  Diluted                                        $       0.10  $       0.08 
----------------------------------------------------------------------------
Weighted average number of shares outstanding                               
 for the purpose of calculating earnings per                                
 share                                                                      
  Basic                                           220,664,278   193,417,492 
  Diluted                                         220,664,278   194,030,846 
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----------------------------------------------------------------------------

 
Operating expenses increased $3.7 million for the year ended December
31, 2012 compared to the prior year. In the current year, the Company
recorded a $3.1 million impairment of intangible exploration assets
relating to Blocks 7 and 11 in Mali, while in the previous year, the
Company recorded a $7.0 million impairment of intangible exploration
assets relating to Blocks 2/6 in Ethiopia. In 2012, the Company made
a $2.3 million donation to the Lundin Foundation, a registered
Canadian non-profit organization that provides grants and risk
capital to organizations dedicated to alleviating poverty in
developing countries. The increase in professional fees in 2012 was
the result of 420,000 common shares issued in the year as a
settlement of claimed professional fees relating to previously
completed farmout transactions. Compensation related costs and travel
costs increased due to increased compensation related costs and
travel costs associated with increased operational activity,
increased headcount, and the exploration success in 2012. 
The gain relating to the acquisition of Lion Energy Corp. ("Lion") in
the second quarter of 2011 was a result of the Company acquiring net
working capital and intangible exploration assets in excess of the
consideration issued. The consideration paid was valued at $21.7
million, net of AOC shares acquired, versus working capital acquired
of $20.1 million, excluding the value of AOC shares held by Lion, and
the fair market value of intangible assets acquired estimated at $5.7
million. 
A $4.6 million dilution loss on the sale of a subsidiary was
recognized during the third quarter of 2011 as a result of Africa Oil
transferring its Puntland (Somalia) exploration assets to Horn. This
transaction was recorded as a reverse acquisition. 
Financial income and expense is made up of the following items: 


 
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For the years ended                              December 31,  December 31, 
                                                         2012          2011 
----------------------------------------------------------------------------
                                                                            
Gain (loss) on marketable securities                     (124)          236 
Fair value adjustment - warrants                          832         8,845 
Fair value adjustment - convertible debt                    -         2,032 
Interest and other income                                 326           966 
Bank charges                                              (40)         (154)
Foreign exchange gain (loss)                              569        (2,472)
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Finance income                                          1,727        12,079 
Finance expense                                          (164)       (2,626)
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----------------------------------------------------------------------------

 
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 December 31, 2012, nil warrants were outstanding in AOC. The
Company incurred a $3.8 million gain on the revaluation of Horn
warrants during the year ended December 31, 2012 due to a significant
decrease in the share price of Horn during the year. 
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)                                           
----------------------------------------------------------------------------
                                                December 31,   December 31, 
                                                        2012           2011 
----------------------------------------------------------------------------
             
                                                               
ASSETS                                                                      
Current assets                                                              
  Cash and cash equivalents                    $     272,175  $     109,558 
  Marketable securities                                    -          2,606 
  Accounts receivable                                  2,848          2,717 
  Prepaid expenses                                     1,124            600 
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                                                     276,147        115,481 
Long-term assets                                                            
  Restricted cash                                      1,119          2,919 
  Property and equipment                                  82             39 
  Intangible exploration assets                      282,109        185,672 
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                                                     283,310        188,630 
                                                                            
Total assets                                   $     559,457  $     304,111 
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LIABILITIES AND EQUITY                                                      
Current liabilities                                                         
  Accounts payable and accrued liabilities     $      36,188  $      23,768 
  Current portion of warrants                          2,288          1,513 
----------------------------------------------------------------------------
                                                      38,476         25,281 
Long-term liabilities                                                       
  Warrants                                               828          2,882 
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                                                         828          2,882 
                                                                            
Total liabilities                                     39,304         28,163 
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Equity attributable to common shareholders                                  
  Share capital                                      558,555        306,510 
  Contributed surplus                                 12,123          8,425 
  Deficit                                            (98,076)       (75,283)
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                                                     472,602        239,652 
  Non-controlling interest                            47,551         36,296 
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Total equity                                         520,153        275,948 
----------------------------------------------------------------------------
Total liabilities and equity                   $     559,457  $     304,111 
----------------------------------------------------------------------------

 
The increase in total assets from December 31, 2011 to December 31,
2012 is primarily attributable to cash received from the CAD$232.5
million non-brokered private placement and farmout transactions which
closed in 2012, as well as significant intangible asset expenditures
in Kenya, Ethiopia and Puntland (Somalia). 


 
Consolidated Statement of Cash Flows                                        
(Thousands United States Dollars)                                           
----------------------------------------------------------------------------
                                                  December 31, December 31, 
                                                          2012         2011 
----------------------------------------------------------------------------
Cash flows provided by (used in):                                           
Operations:                                                                 
  Net loss and comprehensive loss for the year     $   (20,117) $    (8,953)
  Items not affecting cash:                                                 
    Stock-based compensation                             4,943        4,348 
    Share-based expense                                  3,763            - 
    Depreciation                                            48           48 
    Loss (gain) on marketable securities                   124         (236)
    Gain on acquisition of Lion Energy                       -       (4,143)
    Impairment of intangible exploration assets          3,127        6,969 
    Dilution loss on sale of subsidiary                      -        4,579 
    Fair value adjustment - warrants                      (832)      (8,845)
    Fair value adjustment - convertible debt                 -       (2,032)
    Unrealized foreign exchange loss                     1,055        1,901 
    Changes in non-cash operating working capital         (657)        (622)
----------------------------------------------------------------------------
                                                        (8,546)      (6,986)
Investing:                                                                  
    Property and equipment expenditures                    (91)         (39)
    Intangible exploration expenditures               (133,823)     (41,285)
    Farmout proceeds                                    34,259       14,901 
    Cash received on business acquisitions, net of                          
     cash issued                                             -       18,637 
    Proceeds on disposal of Canmex, net of                                  
     investment in Horn                                      -       29,923 
    Proceeds from sale of marketable securities          2,442            - 
    Changes in non-cash investing working capital       12,373       16,611 
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                                                       (84,840)      38,748 
Financing:                                                                  
    Common shares and warrants issued, net of                               
     issuance costs                                    255,169        3,020 
    Repayment of liability portion of convertible                           
     debt                                                    -         (411)
    Deposit of cash for bank guarantee                    (375)      (2,175)
    Release of bank guarantee                            2,175        2,888 
    Changes in non-cash financing working capital            -          169 
----------------------------------------------------------------------------
                                                       256,969        3,491 
Effect of exchange rate changes on cash and cash                            
 equivalents denominated in foreign currency              (966)      (1,821)
----------------------------------------------------------------------------
Increase in cash and cash equivalents                  162,617       33,432 
Cash and cash equivalents, beginning of year           109,558  $    76,126 
----------------------------------------------------------------------------
Cash and cash equivalents, end of year                 272,175  $   109,558 
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  Supplementary information:                                                
    Interest paid                                          Nil      411,220 
    Taxes paid                                             Nil     
     Nil 
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The increase in cash in 2012 is mainly the result of funds raised on
the AOC and Horn non-brokered private placements, the exercise of
warrants and stock options, and the proceeds from farmouts completed,
partially offset by intangible exploration expenditures and
cash-based operating expenses. 


 
Consolidated Statement of Equity                                            
(Thousands United States Dollars)                                           
----------------------------------------------------------------------------
                                                  December 31, December 31, 
                                                          2012         2011 
----------------------------------------------------------------------------
                                                                            
Share capital:                                                              
  Balance, beginning of year                       $   306,510  $   163,231 
  Acquisition of Centric Energy                              -       60,165 
  Acquisition of Lion Energy, net of AOC shares                             
   acquired                                                  -       21,561 
  Issued on conversion of convertible debenture              -       52,215 
  Amended farmout agreement with Lion Energy                 -        5,275 
  Private placement, net                               226,446            - 
  Exercise of warrants                                  14,340        3,024 
  Shares issued in lieu of professional fees             3,763          167 
  Exercise of options                                    7,496          872 
  --------------------------------------------------------------------------
  Balance, end of year                                 558,555      306,510 
  --------------------------------------------------------------------------
Contributed surplus:                                                        
  Balance, beginning of year                       $     8,425  $     4,392 
  Expiration of warrants                                     -            4 
  Exercise of Horn warrants                              1,148            - 
  Acquisition of Lion Energy                                 -          110 
  Stock based compensation                               4,943        4,348 
  Issuance of shares in lieu of professional fees            -         (167)
  Exercise of options                                   (2,393)        (262)
  --------------------------------------------------------------------------
  Balance, end of year                                  12,123        8,425 
  --------------------------------------------------------------------------
Deficit:                                                                    
  Balance, beginning of year                       $   (75,283) $   (56,570)
  Dilution loss through equity                               -       (8,069)
  Net loss and comprehensive loss attributable to                           
   common shareholders                                 (22,793)     (10,644)
  --------------------------------------------------------------------------
  Balance, end of year                                 (98,076)     (75,283)
  --------------------------------------------------------------------------
  Total equity attributable to common shareholders $   472,602      239,652 
  --------------------------------------------------------------------------
  --------------------------------------------------------------------------
Non-controlling interest:                                                   
  Balance, beginning of year                       $    36,296  $         - 
  Non-controlling interest on disposal of Canmex             -       34,605 
  Non-controlling interest on issuance of Horn                              
   shares                                                8,579            - 
  Net income and comprehensive income attributable                          
   to non-controlling interest                           2,676        1,691 
  --------------------------------------------------------------------------
  Balance, end of year                                  47,551       36,296 
  --------------------------------------------------------------------------
  Total equity                                     $   520,153  $   275,948 
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The Company's consolidated financial statements, notes to the
financial statements, management's discussion and analysis for the
year ended December 31, 2012 and the 2011 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 B'hir 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 we
ll. 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, Ethiopia and Mali 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 Lockichar 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 state
ments 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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