2013 Second Quarter Update

On the back of the successful exploration activities in Kenya during 2012, the Company, together with its partners, continues to ramp up its exploration program in Kenya and Ethiopia. Entering the year, two Tullow-Africa Oil joint venture rigs were operating in Kenya and one joint venture rig was operating in Ethiopia. A fourth Tullow-Africa Oil joint venture rig has been secured and is expected to commence testing and drilling operations in Kenya on Blocks 10BB and 13T during October 2013. The Company, as operator, and its partner in Block 9 (Kenya) have secured a fifth rig, which will commence drilling operations in September 2013. In addition, the Company and its partners in Block 7/8 (Ethiopia) have secured a sixth rig, which will commence drilling operations in September 2013. For a period, the Company will have six drilling rigs operating and expects to exit the year with five rigs operating in the region. The Company plans to drill ten exploration wells and test four wells across its exploration blocks during 2013.

During the first half of the year, the Company completed a series of well tests at both Twiga South-1 and Ngamia-1 on Blocks 13T and 10BB in Kenya, respectively. These successful well tests confirmed over 5,000 barrels of oil per day ("bopd") flow potential per well and a doubling of our previous estimates of net oil pay. Ekales-1, the next exploration well in the Basin Bounding Fault Play and on trend with Ngamia-1 and Twiga South-1, commenced drilling in July. Transient Pressure Analysis has been conducted on the Twiga South-1 and Ngamia-1 well tests. No pressure depletion was recorded over the duration of the tests. Flow periods ranged from 0.5 to 2.5 days and build up periods ranged between 3 to 12 days.

In July, the Company announced a new major oil discovery at Etuko-1. Etuko-1 is located 14 kilometers east of Twiga South-1 in Block 10BB and is the first test of the Basin Flank Play in the eastern part of the Basin. The well encountered approximately 40 meters of net oil pay in the Auwerwer and Upper Lokhone targets and approximately 50 meters of additional potential net pay in the Lower Lokhone interval. The well will be tested later in the year with the fourth Tullow-Africa Oil joint venture rig which is expected to mobilize in the fourth quarter of the year.

The excellent results to date onshore Kenya are an important step towards understanding the overall Lokichar Basin potential and its commerciality. Resources discovered to date are of a scale that the Tullow-Africa Oil joint venture partnership will initiate discussions with the Government of Kenya and other relevant stakeholders to consider development options. These discussions include consideration of a "start-up phase" oil production system with potential to deliver significant production rates with oil export via road or rail in advance of a full-scale pipeline development. To facilitate these development activities in parallel with exploration and appraisal, an "Area of Interest" (AOI) encompassing the Basin discoveries and further prospects in Blocks 13T and 10BB, was agreed with the Government of Kenya in February 2013. This agreement allows a multiple field approach to development of the resources while permitting the continued focus on exploration to increase the resource base while concurrently appraising discoveries.

In July, the Company reported that the Sabisa-1 well on the South Omo Block in Ethiopia, the most northerly well drilled on the Tertiary rift trend to date, had confirmed a viable hydrocarbon system with oil and heavy gas shows. Based on the encouragement of the results, the decision was made to drill Tultule-1 as the next well on the South Omo Block. This well is expected to spud around the end August.

The Company and its partners plan to continue to actively acquire, process and interpret an extensive 2D seismic program totaling approximately 2,900 kilometers during 2013 over Blocks 10BA, 10BB, 12A, 13T in Kenya and the South Omo Block in Ethiopia with two onshore and one offshore 2D seismic crews operating throughout the remainder of the year. A third onshore 2D seismic crew operating in the South Omo Block was released in May 2013 after completing 1,174 kilometer of 2D seismic. In addition, the Company and its partner in Blocks 10BB and 13T will mobilize a 3D seismic crew to complete a 550 square kilometer 3D seismic survey over the Ngamia and Twiga discoveries later in 2013.

KENYA

The Company and its operating partners in the Kenyan blocks are actively exploring for oil as described below.

Block 10BB

Based on the very positive results at Ngamia-1 on Block 10BB in 2012, the Company and its partner, Tullow, have accelerated the pace of exploration along the Ngamia trend in Block 10BB and Block 13T. The Company currently has two drilling rigs operating in the Lokichar Basin and has committed to mobilize a third light drilling/testing rig to the area to commence operations in October. The Company plans to have drilled five exploration wells and to have tested three wells across Blocks 10BB and 13T during 2013.

The Company has completed a series of six well tests at the Ngamia-1 discovery. The cumulative flow rate from the six well tests was over 3,200 bopd constrained by completion techniques and surface equipment. With optimized completion techniques and surface equipment it is estimated that these combined flow rates would increase to a rate of 5,400 bopd. Five of the well tests were completed over the Auwerwer sandstones to verify reservoir quality and fluid content which appears of similar quality to those tested at the Twiga South-1 well in the same basin. High quality waxy sweet crude (25-35 degrees API) was flowed from all five zones in the Auwerwer formation with good quality reservoir sands encountered. One well test was conducted in the Lower Lokhone sandstone proving it to be a productive reservoir with 30 degree API oil. All zones produced dry oil with no water produced and no pressure depletion. As a result of testing several previously indeterminate zones in the well, net oil pay in the Ngamia-1 well has double to over 200 meters over a gross oil column of over 1,100 meters. The Weatherford 804 rig that was used to test the Ngamia-1 well was mobilized to drill the Ekales-1 well in Block 13T.

In July, the Company announced a new major oil discovery at Etuko-1. Etuko-1 is located 14 kilometers east of Twiga South-1 in Block 10BB and is the first test of the Basin Flank Play in the eastern part of the Lokichar Basin. The well encountered approximately 40 meters of net oil pay in the Auwerwer and Upper Lokhone targets and approximately 50 meters of additional potential net pay in the Lower Lokhone interval. The well has been suspended and will be tested later in the year upon mobilization of the PR Marriot 46 rig in October. There are a number of follow-on prospects on trend with Etuko-1, which will be evaluated over the next year.

The 2D seismic crews operating in Block 10BB intend to acquire approximately 1,270 kilometers of 2D seismic during 2013. Much of this program will be focused on defining prospects in the South and North Kerio Sub-Basins, with the aim of defining drilling prospects for the 2014 exploratory drilling program. The Company and its partner have also committed to acquire 550 square kilometers of 3D seismic over the Ngamia and Twiga structures in Block 10BB and Block 13T combined. Acquisition will commence later in the year.

The current exploration phase under the Block 10BB PSC, which expires in July 2014, includes a commitment to drill one exploratory well and acquire 300 square kilometers of 3D seismic. The planned work program in Block 10BB will exceed the PSC commitment.

Block 13T

During the first quarter of 2013, the Company and its partner, Tullow, conducted well testing operations at Twiga South-1, which resulted in a cumulative flow rate of 2,812 bopd from three zones, despite being constrained by surface equipment. With optimized production equipment, the cumulative flow rate is anticipated to have increased to a cumulative rate of approximately 5,200 bopd. High quality 37 degree API waxy sweet crude flowed from all three zones in the Auwerwer formation with good quality reservoir sands encountered. The well was suspended as a potential future production well.

Upon completing testing operations at Ngamia-1 in Block 10BB, the Weatherford 804 rig mobilized to the Ekales-1 well in Block 13T. The Ekales prospect is located on the main basin bounding fault midway between the Ngamia-1 and Twiga South-1 discoveries and is targeting the same formations that were productive in these discoveries. The well spud in July and is expected to be completed around end September.

Upon completion of the Etuko-1 well in Block 10BB, the Sakson PR-5 rig will mobilize to drill the Agete-1 well in Block 13T. The Agete prospect is another closure against the basin bounding fault and lies just to the north of the Twiga South-1 discovery. Agete-1 is expected to spud around end September.

In addition to the above wells, the Company and its partner have plans to spud an appraisal well at the Twiga South discovery before year-end.

In 2013, the Company plans to commence acquiring a 550 square kilometer 3D seismic survey over the Twiga South and Ngamia structures, in Blocks 13T and 10BB combined.

The current exploration phase under the Block 13T PSC, which expires in September 2014, includes a commitment to drill one exploratory well, which was satisfied with the drilling of Twiga South-1, and a commitment to acquire 200 square kilometers of 3D seismic. The planned work program in Block 13T during 2013 will exceed the PSC commitment.

Block 10A

In the first quarter of 2013, the Company and its operating partners on Block 10A completed drilling the Paipai-1 exploration well. The Paipai-1 well tested a large four-way closed structure with Cretaceous-age sandstone targets at multiple depths. Paipai-1 spudded in September 2012 and completed drilling in the first quarter of 2013 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. Paipai-1 fully satisfied the remaining work obligations for the initial exploration period, which was extended to January 2014 to allow for evaluation of the well results. The rig was subsequently mobilized to Block 10BB (Kenya) to drill follow-up prospects in the Lokichar Sub-Basin commencing with Etuko-1.

Block 10BA

The Company and its operating partner on Block 10BA, Tullow, are conducting a 1,350 kilometer 2D seismic program. The onshore program has largely been completed and the offshore and near shore portions of the 2D program commenced in January 2013 and are approximately 45% complete. The 2D seismic acquired to date exceeds the work obligations of the initial exploration period under the Block 10BA PSC which expires in April 2014.

Block 12A

The Company and its partners on Block 12A have determined that a 600 kilometer 2D seismic acquisition program will mainly be focused in the Kerio Valley in the southwestern portion of the block or the Saguta basin in the eastern portion of the block. The Block 12A 2D seismic program commenced shooting near the end of the second quarter of 2013. The planned 2D seismic program will satisfy the 500 kilometer 2D seismic work obligation for the initial exploration period under the Block 12A PSC which expires in September 2013.

Block 9

The Company and its partner on Block 9 are currently planning to drill one exploration well in 2013. Block 9 is in the Cretaceous rift basin on trend with the South Sudan oil fields and the play concept was confirmed by the recent Paipai-1 well drilled in Block 10A. Two major prospects, Bahasi-1 and Sala-1, with large volume potential have been identified. The Company, as operator, and its partners in Block 9 have completed construction of the access road and well site for the Bahasi-1 exploration well. The Greatwall GW190 rig has commenced mobilization to site and the well is expected to spud in September. The Bahasi-1 well will satisfy the remaining exploration commitment for the second exploration period under the PSC, which expires in December 2013. The potential to spud the Sala-1 well in early 2014 is being evaluated.

ETHIOPIA

South Omo Block

The South Omo Block is located in the northern portion of the Tertiary East African Rift trend where Africa Oil and their partner, Tullow, have made three significant oil discoveries in the Lokichar Basin of Kenya. The Company and its partners on the South Omo Block (Tullow operated) spudded the Sabisa-1 well in January 2013 and the well was drilled to a preliminary total depth of 1,810 meters. Hydrocarbon indications in sands beneath a thick claystone top seal have been recorded while drilling, but hole instability issues required the drilling of a sidetrack to comprehensively log and sample these zones of interest. The sidetrack was drilled to a total depth of 2,082 meters. The well encountered reservoir quality sands, oil shows and heavy gas shows indicating an oil prone source rock and thick shale section which should provide a good seals for the numerous fault bounded traps identified in the basin. Only the lowermost sands appeared to be in trapping configuration at Sabisa-1. Based on the encouragement of the results of this well, the Company decided to drill the nearby Tultule prospect, which appears to be a horst-block structure 4 kilometers to the east of Sabisa-1. The Exalo N-75 rig is mobilizing to site and is expected to spud Tultule-1 around end August.

The Company and its partners have completed a 1,174 kilometer 2D seismic program in the Chew Bahir Sub-Basin on the eastern portion of the South Omo Block. This survey has identified a number of prospects and leads. The Shimela prospect has been identified as the first well in the area and is expected to spud late in the fourth quarter of 2013. The current exploration period under the PSC expires in January 2015. The remaining work commitments on the block will be satisfied by the completion of the Tultule-1 well.

Ogaden Blocks 7/8

The Company and its partners continue to focus on the El Kuran oil accumulation on Block 8, discovered in the early 1970's. After completing reservoir characterization studies, the Company focused efforts on testing and completion strategies for producing commercial quantities of oil and gas. The Company and its joint operating partners on Blocks 7/8 (New Age operated) are planning to drill and test the El Kuran-3 appraisal well. The well site has been constructed, erection of the rig is ongoing at site and the well is expected to spud in September 2013. Should the well show encouragement, a multi-zone acid fracture stimulation well test is planned during early 2014. The initial exploration period under the PSC has been extended to April 2014 to allow drilling and testing of the well.

Adigala Block

As part of work obligations for the second exploration period which expired July 2013, the Company and its partner (NewAge operated) incorporated newly acquired Full Tensor Gradiometry data with seismic data to improve the subsurface interpretation of the block. The Company also integrated results of recent surface geological studies and reprocessed data acquired in 2009 with the goal of improving the data quality. All work obligations on this block have been completed.

Rift Basin Area

In first quarter of 2013, the Company executed a PSC 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. The Company commenced acquiring a Full Tensor Gradiometry survey in May 2013, which is approximately 70% complete, and is conducting an exhaustive environmental and social impact assessment over the block in preparation for a seismic program in 2014. The initial exploration period, which expires in February 2016, includes a commitment to acquire a Full Tensor Gradiometry survey and 400 kilometers of 2D seismic.

PUNTLAND (SOMALIA)

Dharoor Valley and Nugaal Valley Blocks

The Company continues to evaluate the encouraging results of the two wells drilled in 2012 on the Dharoor Valley block which proved all the critical elements exist for oil accumulations, namely a working petroleum system, good quality reservoirs and thick seal rocks. Based on these encouraging results, the Company, through its ownership interest in Horn, committed to enter the next exploration period, which carries a commitment to drill one exploration well in each block within an additional three year term ending October 2015.

Efforts are now focused on making preparations for a seismic acquisition campaign in the Dharoor Valley area which will include a regional seismic reconnaissance grid in the previously unexplored eastern portion of the basin as well as prospect specific seismic to delineate a drilling candidate in the western portion of the basin where an active petroleum system was confirmed by the recent drilling at the Shabeel-1 and Shabeel North-1 locations. The Company continues to pursue efforts to drill an exploration well in the Nugaal Valley block and is working with the Puntland government to move this project forward.

Horn has been in discussion with potential joint venture partners and is reviewing new venture opportunities in the region. Somalia is going through an unprecedented period in its history with a real opportunity for all stakeholders to assist in the rebuilding of the country. The first internationally recognized Federal government took power in 2012 following over 20 years of transitional or no government. Africa Oil actively engages with a range of governments and organizations, domestic and international, around how Somalia can best develop a stable Federal state including the institutions and systems it needs to properly manage its natural resources.

MALI

Blocks 7 and 11

The deteriorating security and political situation in Mali halted operations on the Company's blocks. As a consequence, the Company impaired $3.1 million of capitalized intangible exploration assets during the first quarter of 2012. During the first quarter of 2013, the Company and its operating partner, Heritage, terminated their interest in Block 7 and 11 and have been released from all future PSC obligations in relation to these blocks by the Ministry of Mines in the Republic of Mali.