VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 26, 2011) - Africa Oil Corp. (News - Market indicators)(OMX:AOI) ("Africa Oil", "the Company" or "AOC") is pleased to announce its financial and operating results for the three months ended March 31, 2011.

Highlights and accomplishments during the first quarter of 2011 included:

• The Company completed the acquisition of Centric Energy Corp. ("Centric"), a publicly traded oil and gas company listed on the TSX Venture Exchange. Total consideration paid was valued at $60.2 million and included the issuance of 30,155,524 AOC common shares. Centric's primary asset is Block 10BA in Kenya which is strategically located within the highly prospective East African Tertiary Rift System between AOC's Block 10BB and its South Omo Block. Centric and Tullow Oil plc ("Tullow") are joint venture partners on the Block 10BA. In addition, Centric also has a carried 25% interest in Block 7 and Block 11, both located in the Republic of Mali and operated by Heritage Oil Corporation.
  
  
• Africa Oil entered into amending agreements with the Government of Puntland in the quarter, represented by the Puntland Petroleum and Mineral Agency, in respect of the production sharing agreements ("PSAs") for the Dharoor Valley Exploration Area and the Nugaal Valley Exploration Area. Under the PSAs, as amended, the First Exploration Agreement has been extended for a further 12 months, from January 17, 2011 to January 17, 2012. Under the amended PSAs, AOC is obligated to spud a minimum of one exploratory well in the Dharoor Valley Exploration Area by July 27, 2011. A second exploratory well is required to be spudded in the Nugaal Valley Exploration Area or, at the option of AOC, in the Dharoor Valley Exploration Area, by September 27, 2011. In conjunction with this amendment, the Company completed its farmout agreement with Red Emperor Resources NL ("Red Emperor"). Under the terms of the farmout agreement and an election made by Red Emperor to increase their interests, Red Emperor will earn a 20% interest in both the Dharoor and Nugaal Valley Blocks and is committed to paying a disproportionate share of costs related to the one well drilling commitment included in the first exploration period of both the Dharoor and Nugaal Valley Production Sharing Agreements.
  
  
• The Company signed a definitive agreement with Lion Energy Corp. ("Lion"), a publicly traded oil and gas company listed on the TSX Venture Exchange, to acquire all of the issued and outstanding common shares of Lion. Pursuant to the agreement with Lion, AOC will acquire, by way of a plan of arrangement, all of the issued and outstanding shares of Lion in consideration for 0.20 common shares of AOC for each common share of Lion. It is anticipated that 17,233,636 AOC shares will be issued as consideration to acquire Lion. Lion is a joint venture partner of AOC in Kenya and Puntland (Somalia), and currently holds the following working interests; 33.3% in Block 9 (Kenya), 10% in Block 10BB (Kenya), and 15% in each of Dharoor Valley and Nugaal Valley (Puntland). In addition to the above properties, Lion estimated that it had cash, accounts receivable and investments in marketable securities with an approximate aggregate value of CAD$30 million at the date of signing the definitive agreement. A meeting of Lion shareholders, to approve the transaction, is scheduled to be held on June 8, 2011 and, assuming shareholder approval, the transaction is expected to close shortly thereafter.
  
  
• Subsequent to the end of the first quarter, Africa Oil entered into a letter of intent for the creation of a new Puntland focused oil exploration company. The new company will be created as a result of the transfer of AOC's interest in its oil and gas properties in Puntland (Somalia) to Denovo Capital Corp. ("Denovo") (the "Transaction"). Denovo is a capital pool company and intends for the Transaction to constitute the "Qualifying Transaction" of Denovo, as that term is defined in the policies of the TSX Venture Exchange. Under the terms of the letter of intent:
   
  • Africa Oil and Denovo will negotiate and enter into a definitive agreement pursuant to which Africa Oil will transfer to Denovo all of the issued and outstanding shares of its subsidiary holding companies (the "Puntland Subsidiaries") which hold participating interests in the Dharoor Valley and Nugaal Valley Production Sharing Agreements in Puntland (Somalia) (the "Puntland PSAs"). Africa Oil will receive, in consideration of the transfer, 27,777,778 common shares of Denovo. As a result of the Transaction, the Puntland Subsidiaries will become wholly owned subsidiaries of Denovo. 
    
    
  • Africa Oil currently holds a 45% participating interest in the Puntland PSAs. Upon completion of the transaction for the acquisition of Lion Energy Corp, AOC's participating interest in the Puntland PSAs will be increased, directly or indirectly, to 60%. It is anticipated that the entire 60% participating interest will be transferred to Denovo.
    
    
  • The definitive agreement will provide for conditions precedent that are standard for a transaction of this nature, including receipt, by both AOC and Denovo, as required, of all regulatory, partner and third party approvals including TSX Venture Exchange approval. Denovo will also seek Denovo shareholder approval for a proposed 0.65 (new) for 1.00 (old) consolidation of its common shares and a change of name of the company, both of which are conditions precedent to completion of the transaction. It will be a condition precedent of the transaction that Africa Oil will have completed its proposed acquisition of Lion Energy Corp. and that Denovo will have completed a private placement of CAD$35 million comprised of 38,888,889 subscription receipts of Denovo sold at a post- consolidation price of CAD$0.90 per subscription receipt. Each subscription receipt will be exercised, upon completion of the transaction, into a unit of Denovo, comprised of one common share and one share purchase warrant (a "Denovo Warrant"). Each Denovo Warrant will entitle the holder to acquire an additional Denovo share for $1.50 for two years, subject to accelerated exercise provisions if the Denovo shares trade at greater than $2.00 for 10 consecutive trading days. It is anticipated that the definitive agreement will be entered into during the second quarter of 2011.
    
    
  • Africa Oil will acquire 11,111,111 subscription receipts in the private placement financing, for proceeds of CAD$10 million. At the conclusion of the Transaction and the private placement financing described above, AOC is anticipated hold approximately 55% (non- diluted) of the issued and outstanding common shares of Denovo. Upon completion of the Transaction it is expected that Denovo will meet the listing requirements of the Exchange for a Tier II Oil and Gas Issuer.
    
    
• Africa Oil ended the quarter in a strong financial position with cash of $77.8 million and working capital of $57.2 million as compared to cash of $76.1 million and working capital of $70.6 million at December 31, 2010. The Company's liquidity and capital resource position improved since year end primarily as the result of payments received upon the completion of farmout transactions. Working capital improved $24.4 million subsequent to the end of the quarter as the current portion of the warrant and convertible debenture obligations were settled in shares.
  
  
• Africa Oil currently has more than sufficient funds to meet its portion of the $163 million expenditure obligations ($43 million net) as per the active work programs approved by the Company's Board of Directors for 2011. During the first quarter, the Company spent $5.0 million of the 2011 Board of Directors approved $43 million in capital expenditures.
  
  
• As of the end of the first quarter, the Company has completed all previously announced farmout transactions with Tullow. Tullow has acquired a 50% interest in, and operatorship of, five of AOC's east African exploration blocks, comprised of four exploration blocks in Kenya and one exploration block in Ethiopia.
  
  
• The Company completed the amendment to their farmout agreement with Lion. The amendment reduced Lion's interest in Block 10BB to 10% (originally 20%) and eliminated its interest in Block 10A (originally 25%).
  
  
• The Company, together with its joint venture partner Lion, entered into the First Additional Exploration Phase under the Block 9 PSC in Kenya. As a result of the withdrawal of its two other joint venture partners, AOC will now hold a 66.7% working interest in the PSC and has been approved by the government as Operator of Block 9. Lion will hold the remaining 33.3%. The First Additional Exploration Phase commenced on December 31, 2010 and will expire on December 31, 2013 with a one well work commitment (minimum depth 1,500 meters).
  
  
• The Company continued to actively explore in East Africa:
  
  
  • In Block 10BB, the Company, together with its partners, is currently in the process of undertaking Full Tensor Gravity ("FTG") surveys and finalizing the prospect and lead inventory on Block 10BB. Drilling is scheduled to commence in the third quarter of 2011.
    
    
  • In Block 10A, the Company, together with its partners, has completed recording approximately 800km (gross) of 2D seismic. Seismic data acquired is currently being processed. The Company expects to drill a well on this block in the fourth quarter of 2011.
    
    
  • In Puntland, the Company has recently signed a letter of intent with a drilling contractor and plans to spud the first well in the Dharoor Block during the third quarter of 2011. A second well in the Dharoor Block is planned to commence following completion of the first exploration well.
    
    
  • In Block 9, the Company, together with its partners, has recently commenced 750km (gross) 2D seismic survey focused on the oil prone Kaisut sub-basin. The seismic crew has recently commenced recording and is anticipated to be completed during the third quarter of 2011.
    
    
  • The Company completed its seismic acquisition program in the Company's Ogaden area of Ethiopia, acquiring 500 km 2D seismic. The new data has been integrated with existing seismic to generate a series of new prospect maps. The Company continues to focus efforts on the large El Kuran prospect.

Keith Hill, President and CEO, commented, "Africa Oil continued to add highly prospective exploration acreage to its portfolio during the first quarter of 2011. Exploration activities continued throughout the quarter with FTG, 2D seismic and drilling preparations continuing on multiple blocks. The Company is very well financed, has a well diversified exploration portfolio and reputable joint venture partners. We are looking forward to the commencement of continuous drilling in 2011."

As the Company is in the exploration stage, no oil and gas revenue has been generated to date. Accordingly, income reported primarily relates to interest income on its cash deposits, potential foreign exchange gains mainly the result of holding Canadian dollar deposits, and fair market value adjustments on warrants and convertible debentures

Operating expenses increased to $3.0 million in the first quarter of 2011 from $1.1 million in the first quarter of 2010 due a $1.3 million increase in stock-based compensation related to options granted in the first quarter of 2011. The remainder of the increase can be attributed to increased salary and benefit costs, increased costs associated with our listing on the NASDAQ OMX, and an increase in general office costs and professional fees associated with increased operational expansion.

Finance income for the three months ended March 31, 2011 and 2010 is made up of the following items:

The fair market value gain on warrants and convertible debt was significantly larger in the first quarter of 2010 due to a larger reduction in AOC's share price from the end of the previous quarter. Interest income was higher in the first quarter of 2011 due to a significant increase in the average cash balance versus the first quarter of 2010. The $1.6 million foreign exchange gain in the first quarter of 2011 is the result of an increase in the value of the Canadian dollar at a time when AOC was holding a significant amount of Canadian dollars raised through the non-brokered private placement (CAD $25 million gross proceeds) which closed during July 2010 and the warrant exercises in the fourth quarter of 2010 (CAD $55.8 million gross proceeds).

The increase in total assets from January 1, 2010 to December 31, 2010 is attributable to the equity financings, expansion of acreage in East Africa (Blocks 12A and 13T (Kenya) and South Omo (Ethiopia)), drilling of Bogal-1 in Block 9, and the seismic acquisition programs on Block 10BB in Kenya and the Ogaden blocks in Ethiopia. The increase in total assets from December 31, 2010 to March 31 2011 is primarily attributable to closing of the acquisition of Centric which was funded by the issuance of shares and a nominal cash value.

The increase in cash in 2010 is indicative of the significant amount of equity financing obtained by the company via the July 2010 non-brokered private placement raising CAD$25 million (gross) and the exercise of warrants which raised CAD$55.8 million (gross). The increase in cash in 2011 is a result of proceeds received on close of farmouts offset partially by intangible exploration expenditures, operating expenses and issuance of cash on bank guarantees.

The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis and Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.africaoilcorp.com). The Annual Information Form includes the Company's reserves and resource data for the period ended December 31, 2010 and other oil and natural gas information prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.

Outlook

AOC and its partners have an aggressive exploration program planned for the next two years, which is anticipated to include seismic and drilling across all play types and geographic areas of operation. The Company enters the second quarter of 2011 in an extremely strong financial position with working capital in excess of $57 million. Additional financing is not required at this time to meet current operational plans.

New discoveries have been announced on all sides of the Company's virtually unexplored land position including the major Tullow Albert Graben oil discovery in neighboring Uganda. Similar to the Albert Graben play model, the Company'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 the AOC's project areas.

Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya, Ethiopia, Puntland (Somalia) and Mali. 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 300,000 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".

FORWARD-LOOKING STATEMENTS

Certain statements 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 First North is E. Öhman J:or Fondkommission AB.