2013 Third 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. Two additional Tullow-Africa Oil joint venture rigs (one of which is a testing and completion unit) have been mobilized and will commence operations in Kenya during November 2013. The Company, as operator, and its partner in Block 9 (Kenya) secured a sixth rig, which commenced drilling operations in September 2013. In addition, the Company and its partners in Block 7/8 (Ethiopia) mobilized a seventh rig for a one well commitment, which commenced drilling operations in October 2013. For a period, the Company will have seven rigs operating and expects to exit the year with five drilling rigs and one testing and completion rig operating in the region. The Company expects that at year end it will have completed eight exploration wells and two multi-zone well tests across its exploration blocks during 2013, and will exit the year with four wells drilling and two wells under test

All operations in Block 10BB and Block 13T in Northern Kenya were temporarily suspended on October 28, 2013 as a precautionary measure following demonstrations by members of local communities. Operations resumed on November 8, 2013 after successful discussions relating to the operating environment with central and regional government and local community leaders. These discussions led to the signing of a Memorandum of Understanding which clearly lays out a plan for the Government of Kenya, county government, local communities in Northern Kenya and the Tullow-Africa Oil joint venture to work together inclusively over the long-term and to ensure operations can continue without disruption in the future.

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. 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 three to twelve 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 discovered basin in Northern Kenya. 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. Well testing will commence later in November utilizing one of the recently mobilized Tullow-Africa Oil joint venture rigs. Following testing operations, an appraisal well will be drilled from the same well pad to test a shallow Auwerwer zone that was not able to be properly evaluated in the Etuko-1 discovery well.

In September, the Company announced a new oil discovery at Ekales-1 located in the Basin Bounding Fault Play between the Ngamia-1 and Twiga South-1 discoveries. Logs indicate a potential pay zone of 60 to 100 meters which will be confirmed by flow testing. Well testing will commence later in November utilizing the recently mobilized Tullow-Africa Oil joint venture testing and completion rig.

In November, the Company announced a new oil discovery at Agete-1 located seven kilometers north of the Twiga South-1 discovery along the Basin Bounding Fault Play in Block 13T. The Agete-1 well is the fifth consecutive oil discovery by the Tullow-Africa Oil joint venture in the Northern Kenyan basin. Logs indicate a significant oil column with an estimated 100 meters of net oil pay in good quality sandstone reservoirs. Well testing will commence early in 2014 utilizing the recently mobilized Tullow-Africa Oil joint venture testing and completion rig.

The Amosing-1 exploration well, located south of the Ngamia discovery and also along the Basin Bounding Fault Play, is scheduled to commence later this month.

The Ewoi-1 exploration is scheduled to commence before the end of the year, and will be the second exploration well drilled by the Tullow-Africa Oil joint venture in the Basin Flank Play in the eastern part of the discovered basin in Northern Kenya.

The excellent results to date onshore Kenya are an important step towards understanding the overall potential and commerciality of the discovered basin in Northern Kenya. Resources discovered to date are of a scale that the Tullow-Africa Oil joint venture 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. It is understood that discussions are ongoing between the Governments of Kenya, Uganda and Sudan regarding a regional crude oil pipeline export system to Lamu in Kenya and the Government of Kenya has indicated that it will issue an Expression of Interest within the next few months seeking parties willing to fund, build and operate the pipeline system.

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 currently drilling and results are expected in December. Preparations are also underway to drill two exploration wells in the Chew Bahir basin, located to the east of the South Omo Block, in 2014.

The Company and its partners plan to continue to actively acquire, process and interpret an extensive 2D seismic program totaling approximately 2,648 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 kilometers of 2D seismic. In addition, the Company and its partner in Blocks 10BB and 13T have mobilized a 3D seismic crew to begin a 550 square kilometer 3D seismic survey over the Ngamia-1 and Twiga South-1 discoveries.

In September, the Company announced details of an updated independent assessment of the Company's contingent and prospective resources on its Kenyan and Ethiopian exploration properties. The effective date of this assessment was 31 July 2013 and it was carried out in accordance with the standards established by the Canadian Securities Administrators in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. The assessment confirmed that the discovered basin in Northern Kenya contains gross contingent resources of 368 million barrels of oil, an increase of 557% over the assessment conducted in mid 2012. In addition, gross risked prospective resources of 1,213 million barrels of oil are estimated for the discovered basin in Northern Kenya. Net Contingent Resources for the Company are estimated at 231 million barrels of oil. Net Unrisked Prospective Resources for the Company are estimated at 9,647 million barrels of oil (excluding Puntland) and Net Risked Prospective Resources at 1,294 million barrels of oil (excluding Puntland). Please refer to the Company's press release dated September 3, 2013 for details of the prospective and contingent resources by prospect and lead, including the geologic chance of success.

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 three drilling rigs and a testing and completion rig operating in the discovered basin in Northern Kenya. At year end, the Company will have drilled three exploration wells and will have tested two wells across Blocks 10BB and 13T during 2013. In addition, on exiting the year the Company will have two exploration wells drilling and two wells under test.

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.

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 discovered basin in Northern Kenya. 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. Testing of the well will commence during November. Following testing operations an appraisal well will be drilled from the same well pad to test a shallow Auwerwer zone that was not able to be properly evaluated in the Etuko discovery well. There are a number of follow-on prospects on trend with Etuko-1, the first of which is Ewoi-1, which is expected to spud before year-end.

The Amosing-1 exploration well, located south of the Ngamia-1 discovery and also along the Basin Bounding Fault Play, is scheduled to commence later this month.

The 2D seismic crews operating in Block 10BB intend to acquire approximately 1,128 kilometers of 2D seismic during 2013. Much of this program will be focused on defining prospects in the South and North Kerio Basins, with the aim of defining drilling prospects for the 2014 exploratory drilling program. In addition, the Company and its partner have commenced a 550 square kilometers 3D seismic survey over the Ngamia and Twiga South structures in Block 10BB and Block 13T combined.

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.

In September, the Company announced a new oil discovery at Ekales-1 located in the Basin Bounding Fault Play between the Ngamia-1 and Twiga South-1 discoveries. Logs indicate a potential pay zone of 60 to 100 meters which will be confirmed by flow testing. Well testing will commence later in November utilizing the recently mobilized Tullow-Africa Oil joint venture testing and completion rig.

In November, the Company announced a new oil discovery at Agete-1. Logs indicate a significant oil column with an estimated 100 meters of net oil pay in good quality sandstone reservoirs. Well testing will commence early in 2014 utilizing the recently mobilized Tullow-Africa Oil joint venture testing and completion rig.

The Company has recently commenced the acquisition 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 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. A well test for Paipai-1 is being scheduled for 2014. 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 discovered basin in Northern Kenya.

Block 10BA
The Company and its operating partner on Block 10BA, Tullow, have concluded a 1,450 kilometer 2D seismic program, split evenly between onshore and offshore, half of which was acquired in 2013. Plans are currently being made to acquire an additional 250 kilometers of 2D seismic program offshore. 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 expect to complete a 520 kilometer 2D seismic acquisition program by the end of the year. The 2D seismic program is mainly focused in the Kerio Valley in the southwestern 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 was recently extended and now expires in September 2014.

Block 9
The Company and its partner are currently drilling the Bahasi-1 exploration well in Block 9, and expect to complete the well in November. 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 were identified by 2D seismic. Following drilling of the Bahasi-1 well, the Company and its partners will mobilize the rig to drill the Sala-1 exploration well, which will spud around year-end. Access road and well site construction are ongoing for the Sala-1 well. The Bahasi-1 well will satisfy the remaining exploration commitment for the second exploration period under the PSC which expires in December 2013. Discussions are ongoing with the Government of Kenya to enter the final exploration period under the PSC which will expire in December 2015. The Sala-1 well would fulfill the minimum work obligation under the final exploration period.

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 partners have made five significant oil discoveries in Northern Kenya. The Company and its partners on the South Omo Block 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 four kilometers to the east of Sabisa-1. The Tultule-1 well is currently drilling and is expected to complete in December.

The Company and its partners have completed a 1,174 kilometer 2D seismic program in the Chew Bahir 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 in 2014. A second well location is also being considered for 2014.

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 are currently drilling the El Kuran-3 appraisal well which is expected to complete around end November. Should the well show encouragement, a multi-zone acid fracture stimulation well test is planned during 2014. The initial exploration period under the PSC has been extended to April 2014 to allow drilling and testing of the well. The Company's remaining work obligation for the Block will be satisfied by the completion of the El Kuran-3 well.

Adigala Block
As part of work obligations for the second exploration period which expired July 2013, the Company and its partner incorporated newly acquired Full Tensor Gradiometry data with seismic data to improve the subsurface interpretation of the block. The Company and its partner also integrated results of recent surface geological studies and reprocessed data acquired in 2009 with the goal of improving the data quality. The parties to the block agreed to enter the final exploration period under the PSC, which expires in July 2015 and carries a 500 kilometer 2D seismic work commitment. The Company and its partner have committed to a 1,000 kilometer 2D seismic program which will commence in December.

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 90% 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.