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Africa Oil to acquire Lion Energy

Africa Oil Corp. has announced that it has entered into a letter of intent to acquire all of the issued and outstanding common shares of Lion Energy Corp., a publicly traded oil and gas company listed on the TSX Venture Exchange. Under the letter of intent the parties will negotiate and enter into a definitive agreement pursuant to which Africa Oil will acquire Lion, by way of a plan of arrangement. As per the terms of the letter of intent, Africa Oil is proposing to exchange each share of Lion for 0.2 shares of Africa Oil. Lion currently has 86,118,177 common shares issued and outstanding, 2,580,000 share options with a weighted average exercise price of $0.16/share, and 11,445,000 warrants. It is proposed that each warrant will be exchanged into an equivalent number of warrants of Africa Oil, adjusted for 0.2:1 ratio noted above.

In addition to the above properties, Lion has cash, cash receivables and tradable securities with an approximate aggregate value of $30,352,336.

Assuming satisfactory completion of due diligence, it is anticipated that the definitive arrangement agreement will be entered into by March 25, 2011. The definitive agreement will provide for conditions precedent that are standard for a transaction of this nature, including receipt of all regulatory, partner and third party approvals, TSX Venture Exchange approval and approval by Lion' s shareholders. Lockup agreements have been signed with Lion' s directors and certain of its principal shareholders who hold, in aggregate, 29.23% of the issued and outstanding Lion shares.

Keith Hill, Africa Oil' s President and Chief Executive Officer, commented, "The acquisition of Lion consolidates our interest in the East African rift basins in Kenya and Puntland (Somalia). The cash portion of the deal will further strengthen our balance sheet to allow us to fully fund the upcoming aggressive exploration drilling campaign."

Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya, Ethiopia and Puntland (Somalia). Africa Oil' s East African holdings are in what is considered a truly world-class exploration play fairway. The Company' s total gross land package in this prolific region is in excess of 350,000 square kilometers. The East African Rift Basin system is one of the last of the great rift basins to be explored. New discoveries have been announced on all sides of Africa Oil' s virtually unexplored land position including the major Albert Graben oil discovery in neighbouring Uganda. Similar to the Albert Graben play model, Africa Oil' s concessions have older wells, a legacy database, and host numerous oil seeps indicating a proven petroleum system. Good quality existing seismic show robust leads and prospects throughout Africa Oil' s project areas. The

Company is listed on the TSX Venture Exchange and on First North at NASDAQ OMX-Stockholm under the symbol "AOI".

03/14/2011

 

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