African Petroleum announces licence extensions in Sierra Leone

12/5/2017

LONDON -- African Petroleum, an independent oil and gas exploration company with licence interests in four countries offshore West Africa, has announced that its wholly owned subsidiaries, European Hydrocarbon Limited and African Petroleum Sierra Leone Limited, have signed agreements with the Petroleum Directorate Sierra Leone to enter into the Second Extension Periods of the SL-03 and SL-4A-10 licences respectively, and to modify the work programs for both licences during these periods.

The Second Extension Period will expire on April 23, 2019, for the SL-03 licence and on Sept. 17, 2019, for the SL-4A-10 licence should the Subsidiary Companies commit, prior to Nov. 1, 2018, to drilling one exploration well in each licence area during the remaining term of the respective licence. During the next 12 months, the Subsidiary Companies will be utilizing state-owned well and seismic data, together with existing seismic data, to further de-risk the licences prior to deciding to commit to the drilling of an exploration well on each licence (which must be drilled prior to expiry of the respective Second Extension Period, if the Subsidiary Companies commit to drilling).

In accordance with the requirements of the petroleum licence agreements, African Petroleum has relinquished 50% of the SL-03 licence area, reducing the licence area from 1,930 km2 to 962 km2, and 50% of the SL-4A-10 licence area, reducing the licence area from 1,995 km2 to 995 km2.

Simultaneously with the approval of the entry into the next licence periods, the Petroleum Directorate Sierra Leone agreed to modify the work programmes and minimum expenditure requirements of the two licences, and to defer the social obligations of the two licences contingent on the drilling of an exploration well on each licence (Licence Amendments).

The entry into the next licence periods and the Licence Amendments were ratified by the Parliament of Republic of Sierra Leone on the Dec. 4, 2017.

The Subsidiary Companies have been working with ERC Equipoise to re-assess the prospective oil resources on the SL-03 and SL-4A-10 licences through the inclusion of two new material prospects: Leo and Vega. It is expected that the revised prospective resources for the SL-03 and SL-4A-10 licences will be published shortly.

The ultra-deep water (3,000-3,600 m) setting of these licences has received limited industry interest during the low oil price environment in the last few years. However, the Subsidiary Companies have recently experienced increased industry interest in this acreage due to technology improvements and cost reductions in ultra-deep water drilling together with the materiality of the prospects identified by the Subsidiary Companies on the SL-03 and SL-4A-10 licences.

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