Exit from Somalia, Ethiopia Blocks cost Africa Oil over $100 million in 2014/15

Africa Oil which earlier said it has elected to not continue exploration activities in the Dharoor and Nugaal exploration blocks in Puntand, Somalia and Adigala Block in Ethiopia reveals this resulted to an impairment of $90.6 million and $5.8 million respectively.

The fourth quarter financial and full year financial and operating results released last week also show that Africa Oil during the fourth quarter of 2015, as a result of exploration results to date and current oil industry environment, the Company wrote off $70.7 million of capitalized intangible exploration assets relating to Ethiopia.

This decrease was offset by a $1.0 million increase in professional fees relating to entering into the Maersk farmout agreement, a $1.0 million donation to the Lundin Foundation and increased salary costs associated with annual bonuses.

This said the impairment of intangible exploration assets charges were $57.5 million less during 2015.

In addition to the Puntland and Adigala impairment provisions booked during the fourth quarter of 2014 the Company recorded a $30.8 million impairment of previously capitalized Blocks 7/8 (Ethiopia) exploration expenditures during 2014 as the Company elected to withdraw from the Block.

The Company’s investment in Africa Energy it says changed from a position of control to a position of significant influence during the first quarter of 2015, which required the Company’s investment in Africa Energy to be recorded as an equity investment, resulting in the recognition of a $4.2 million gain for accounting purposes. This gain is partially offset by the recognition $1.1 million of losses from Africa Energy during 2015.