2014 Year End Report

On the back of the successful exploration activities in Kenya during 2012 and 2013, the Company and its partners ramped up its exploration program in Kenya and Ethiopia. Entering 2014, the Company and its partners had seven drilling rigs operating in the region. Four Tullow-Africa Oil joint venture rigs were operating through 2014 in Northern Kenya in Blocks 10BB, 10BA and 13T, one of which was a testing and completions unit. Three additional drilling rigs completed drilling operations during 2014 in Block 9 (Kenya), South Omo Block (Ethiopia) and Blocks 7/8 (Ethiopia) and were released. The Company entered 2015 with four drilling rigs operating in Kenya. Due to the changing focus of the 2015 work program to appraisal and development of the discovered basin in Northern Kenya, the Africa Oil - Tullow partnership has released one of its four rigs operating in Kenya and plans to release two additional rigs by the end of the second quarter of 2015.

The focus of the work program in 2014 was drilling out the remaining prospect inventory in the discovered basin in Northern Kenya, appraising existing discoveries, drilling new basin opening wells and progressing the development studies towards project sanction for the discovered basin in Northern Kenya. During 2014, the Company participated in 23 wells of which 17 wells were exploration and appraisal wells in the discovered basin in Northern Kenya, 1 was an appraisal well in the Cretaceous Anza rift, and 5 were exploring new basins in Kenya and Ethiopia.

In light of the current and forecast short term oil price environment, the Company has worked closely with Tullow to focus the 2015 work program and budget on advancing the discovered basin development in Blocks 10BB and 13T (Kenya) by undertaking activities aimed at increasing resource certainty and progressing development studies with the intent of submitting a Field Development Plan ("FDP") around the end of 2015. The 2015 work program will include multiple appraisal and exploration wells in the discovered basin, Extended Well Tests ("EWT's") in the Amosing and Ngamia fields and reservoir and engineering studies (including extensive core analysis). In addition, the Africa Oil - Tullow joint venture will continue to work closely with the Government of Kenya and the Uganda Upstream partners to advance the regional oil export pipeline.

Outside of the discovered basin in Northern Kenya, the Africa Oil - Tullow joint venture new basin opening exploration program includes the Engomo-1 well in Block 10BA (Kenya) currently drilling and potentially the Cheptuket well in Block 12A (Kenya), a PSC commitment well that needs to be drilled before September 2016. Outside of the Africa Oil - Tullow joint venture blocks, the 2015 work program is focused on the Rift Basin Area Block in Ethiopia where a 2D seismic program of a minimum 400 kilometer land and lake survey has just commenced acquisition.

Tertiary Rift - Kenya

In January 2014, the Company announced further drilling success with its sixth and seventh consecutive discoveries in the discovered basin in Northern Kenya at Amosing-1 and Ewoi-1. Amosing-1 is located 7 kilometers southwest of the Ngamia-1 discovery along the Basin Bounding Fault Play in Block 10BB. Logs indicated 160 to 200 meters of potential net oil pay in good quality sandstone reservoirs. Ewoi-1 is located 4 kilometers to the east of the Etuko-1 discovery in the Basin Flank Play on the eastern side of the discovered basin in Northern Kenya also in Block 10BB. Logs indicated potential net pay of 20 to 80 meters. The main zone of interest tested approximately 50 barrels of oil per day ("bopd") from the lower Lokhone sands, which were relatively thin and of moderate quality. Data from the well indicated that the wellbore may have been located in a downdip position and the potential to drill updip on the structure is being assessed.

In February 2014, the Company announced the results of five well tests conducted on five Lokhone pay intervals at Etuko-1 located on the Basin Flank Play in Block 10BB. Light 36 degree API waxy crude oil was successfully flowed from three zones at a combined average rate of over 550 barrels of oil equivalent per day ("boepd"). In March 2014, the Company announced the results of the Etuko-2 exploration well drilled to test the upper Auwerwer sands overlying the previously announced Etuko discovery. Etuko-2 penetrated a potential significant oil column identified from formation pressure data and oil shows while drilling and in core, with good quality reservoir, however the well flowed only water on drill stem test. The results are considered inconclusive and analysis is underway to consider further options to evaluate this reservoir.

In March 2014, the Company announced the results of the Emong-1 well located in Block 13T (Kenya), 4 kilometers northwest of the Ngamia-1 field discovery. The well encountered oil and gas shows while drilling, however the Auwerwer sandstones that are the primary reservoirs in the Ngamia field were thin and poorly developed in Emong-1 and the well was plugged and abandoned. It is believed that the reservoir was poorly developed due to its proximity to the basin bounding fault and its location within what appears to be a local isolated slumped fault margin. This well, which was aimed at establishing an additional play, has no impact on the potential of the Ngamia oil accumulation.

Also in March 2014, the Company announced the results of a well test on the Ekales-1 discovery drilled in 2013 and located on the Basin Bounding Fault Play between the Ngamia-1 and Twiga South-1 discoveries. Testing operations on the Ekales-1 well confirmed this significant oil discovery. Two drill stem tests were completed and flowed at a combined rate of over 1,000 bopd from a combined 41 meter net pay interval. The upper zone had a very high productivity index of 4.3 stb/d/psi.

In May 2014, the Company drilled a new prospect in the discovered basin in Northern Kenya, the Ekunyuk-1 well, located on the Basin Flank Play on trend with the Etuko and Ewoi discoveries. The well encountered 5 meters of net oil pay and found 150 meters of good quality Lokhone sands, although there was a lack of trap at this level within the well. The quality of Lokhone sands indicates that there is further exploration potential in this area of the basin.

Also in May 2014, the Company announced the results of the Twiga-2 appraisal well where the initial wellbore was drilled near the basin bounding fault and encountered some 18 meters of net oil pay within alluvial fan facies, with limited reservoir quality. A decision was made to sidetrack the well away from the fault to explore north of Twiga-1 and some 62 meters of vertical net oil pay was discovered in the Auwerwer formation at Twiga-2A, similar in quality to the initial Twiga-1 discovery. Four flow tests were completed on the Twiga-2A well, achieving production rates between 150 and 3,270 bopd under natural flow with no depletion, the highest oil production rate seen to date in Kenya. With optimized equipment, the maximum flow potential from the best zone could have increased to around 10,000 bopd demonstrating excellent reservoir deliverability.

In June 2014, the Company announced the results of the Ngamia-2 appraisal well, which was drilled 1.7 kilometers from the Ngamia-1 discovery well to test the northwest flank of the field. The well encountered up to 39 meters of net oil pay and 11 meters of net gas pay and appeared to have identified a new fault trap, north of the main Ngamia accumulation.

Also in June 2014, the Company drilled the Agete-2 exploratory appraisal well drilled some 2.2 kilometers southeast of Agete-1. The well intersected water bearing reservoirs at this down-dip location and further appraisal drilling is planned. Additionally in June, the Agete-1 well was tested at 500 bopd.

In August 2014, the Company announced the results of the Etom-1 exploration well located in Block 13T, 7 kilometers north of the Agete oil discovery on the Basin Bounding Fault Play. The well encountered between 5 and 20 meters of potential net oil pay sands based on wireline logs in the Auwerwer and Upper Lokhone Formations. Oil was recovered in MDT sample chambers, which appears to be of similar quality as the other discoveries in the basin. There is an additional 400 meters of porous sands in the Auwerwer and Lokhone Formations, which also confirms the extension of thick reservoir sections into the northern portion of the basin. Oil and gas shows were noted throughout drilling of the well confirming the extension of the petroleum system to the northern portion of the discovered basin in Northern Kenya. Based on these positive results, the original 3D seismic survey was extended to cover the northern portion of this basin where several additional large prospects have been identified by 2D seismic.

Also in August 2014, the Company drilled the Ngamia-3 and Amosing-2/2A appraisal wells in the discovered basin in Northern Kenya in Block 10BB. The results of these wells appear to confirm the thickness and lateral extent of the Auwerwer sands at both locations and also has extended the known oil column significantly downdip which will extend the proven field areas. The range of thickness of the Auwerwer reservoir quality sands in all six penetrations of these two structures is between 146 and 200 meters, and the sands appear to be consistent over the field areas. The upcoming EWT's on both of these fields will be designed to evaluate reservoir connectivity and help constrain estimates of flow rates and recovery factors for field development planning purposes.

In October 2014, the Company announced the results of the Kodos-1 basin opening exploration well drilled in the Kerio Basin in Block 10BB. The well encountered hydrocarbon shows, which indicated the presence of an active petroleum system. This is the first well in the Kerio basin, northeast of the discovered basin in Kenya, and it appears to have been drilled in an area of unfavorable reservoir development, near the basin bounding fault.

Also in October 2014, the Company announced the results of the Ekosowan-1 exploration well located in Block 10BB, 12 kilometers southeast and updip of the Amosing oil discovery. The well encountered a 900 meter column of near continuous oil shows throughout an interval of tight sands which also appear to be as a result of drilling too close to the basin bounding fault. A downdip appraisal well between the Amosing field and this potential updip sealing location is being considered.

Also in October 2014, the Company drilled the Ngamia-4 appraisal well located 1.1 kilometers west of the Ngamia-1 discovery. The well encountered up to 120 meters of hydrocarbon pay, of which up to 80 meters was oil.

In November 2014, the Company drilled the Ngamia-5 appraisal well located 500 meters northeast of the Ngamia-1 discovery well in a different fault compartment and encountered 160 to 200 meters net oil pay.

In December 2014, the Company drilled the Ngamia-6 appraisal well located 800 meters north of Ngamia-1 and in the same fault compartment as Ngamia-5 and encountered up to 135 meters net oil pay. Pressure data from the Ngamia-1, 3, 5 and 6 wells demonstrates connectivity between the wells at multiple reservoir horizons, which will be further tested with the Ngamia EWT.

Also in December 2014, the Company announced the results of the Epir-1 basin opening exploration well drilled in the North Kerio Basin in Block 10BB. The well encountered a 100 meter interval of wet hydrocarbon gas shows with florescence indicating the presence of an active petroleum system. The hydrocarbon shows were encountered primarily in rocks not of reservoir quality. Technical work in the basin will now focus on identifying a prospect in the basin where there is a high chance of trapping hydrocarbons in reservoir quality rock.

In January 2015, the Company drilled the Amosing-3 appraisal well located 1 kilometer northwest of the Amosing-1 discovery well. The well encountered up to 140 meters net oil pay and proved an extension of the field. Pressure data from Amosing-3 indicated connectivity in some reservoir horizons encountered in the Amosing-1, 2 and 2A wells. Multi-zone completions were installed in December 2014 and January 2015 in the Amosing-1 and 2A wells and EWT operations on the field have commenced.

Two rigs are currently operating in the discovered basin in Northern Kenya. The Ngamia-7 appraisal well is currently drilling, which is testing a large potential eastern extension of the field identified from the new 3D seismic survey. And the Ekales-2 well is testing a possible eastern extension of the field in the Auwerwer formation and will also test a deeper objective in the Lokhone interval. One additional rig is currently drilling outside of the discovered basin in Northern Kenya. The Engomo-1 basin opening exploration well is currently drilling, the first test of the North Turkana Basin in Block 10BA. This prospect is located to the west of Lake Turkana where numerous naturally occurring oil slicks and seeps have been observed.

During 2014, the Company and its partners continued to actively acquire and process seismic data in Blocks 12A, 10BA, 10BB and 13T in Kenya. In Block 12A, a 674 kilometer 2D seismic program was completed in the first quarter 2014. In Block 10BB, a 750 kilometer North Kerio Basin 2D seismic program was completed in the first quarter 2014. In Blocks 10BA, 10BB and 13T a 600 kilometer 2D seismic program over the North Lokichar and Turkwell basins was completed in the fourth quarter 2014. In Blocks 10BB and 13T, the acquisition of a 951 square kilometer 3D seismic survey over the series of significant discoveries along the western basin bounding fault in the discovered basin in Northern Kenya completed in the fourth quarter 2014 and the full fast track processed data set is available. Initial evaluation of the 3D seismic indicates significantly improved structural and stratigraphic definition and additional prospectivity not evident on the 2D seismic.

Due to the delays in acquiring the 3D seismic survey in Blocks 10BB and 13T, the Government of Kenya has approved a one year extension to the PSC exploration terms for both blocks, and as a result, the final exploration periods will expire in July 2017 and September 2017, respectively.

Additionally, the Africa Oil - Tullow partnership has acquired over 1,100 meters of whole core from the discovered basin wells and an extensive program of detailed core analysis is ongoing that will provide results from the first quarter of 2015 onwards.

Given the significant volumes discovered and the extensive exploration and appraisal program planned to fully assess the upside potential of the discovered basin in Northern Kenya, the Tullow-Africa Oil joint venture has agreed with the Government of Kenya to commence development and ESIA studies for the upstream facilities. In addition, the partnership is involved in a comprehensive pre-FEED study of the export pipeline. The governments of Kenya, Uganda and Rwanda have signed a Memorandum of Understanding (MoU) and formed a Steering Committee to progress a regional crude oil export pipeline from Uganda through Kenya and have appointed a Technical Advisor to advise on the development of the pipeline project. The Kenya upstream partners have also signed a cooperation agreement with the Uganda upstream partners in support of the same objective. The current intent of the Africa Oil - Tullow joint venture is to submit a FDP around end of 2015 and are targeting Final Investment Decision ("FID") for development, including an export pipeline, around end 2016.

Cretaceous Anza Rift - Kenya

In May 2014, the Company announced the results of the Sala-1 exploration well (Block 9, Kenya) which tested a large prospect on the northeastern flank of the Cretaceous Anza rift and is up-dip of two wells that had significant hydrocarbon shows. An upper gas bearing interval tested dry gas at a maximum rate of 6 mmcf/d from a 25 meter net pay interval. The interval had net sand of over 125 meters and encountered a gas-water contact, inferring an updip extension. A lower interval tested low rates of dry gas from a 50 meter net pay interval which can also be accessed at the up-dip location. Significant oil shows were also encountered while drilling.

In October 2014, the Company announced the results of the Sala-2 appraisal well, which was drilled updip from the Sala-1 well. Sala-2 failed to find significant hydrocarbons as there appears to be a stratigraphic or structural separation between the two wells. The Company is reviewing additional potential appraisal targets as well as on trend prospects in the block which has proven oil and gas generation.

Tertiary Rift - Ethiopia

At the South Omo Block in Ethiopia, the Company completed drilling of the Shimela-1 exploration well in May 2014 to test a new basin in the Tertiary trend, the Chew Bahir Basin, located on the eastern side of the block. The Shilmela-1 exploration well encountered water bearing reservoirs and volcanics with trace gas shows. In July 2014, the Company completed drilling of the Gardim-1 exploration well on the eastern flank of the Chew Bahir Basin. The Gardim-1 well intersected lacustrine and volcanic formations, similar to those found in the Shimela-1 well, again minor intervals encountered gas shows. Drilling operations have been demobilized. Seismic interpretation continues on independent prospectivity elsewhere in the South Omo Block and the next phase of the Ethiopia exploration campaign are expected to target these prospects.

The Company, as operator, and its partner are have recently commenced acquiring a minimum 400 kilometer 2D seismic program over the Rift Basin Area. The Rift Basin Area is located north of the South Omo Block and 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 completed the acquisition of a 36,500 line kilometer Full Tensor Gradiometry ("FTG") survey in October 2013. The Company has completed an exhaustive environmental and social impact assessment over the block in preparation for the 2D seismic program.

Ogaden Blocks 7/8 - Ethiopia

In Ethiopia Block 7/8, the Company and its partners completed the drilling of the El Kuran-3 appraisal well on Block 8 in the first half of the year. Although the El Kuran-3 well demonstrated some oil and gas potential, the Company did not consider it warranted further evaluation due to concerns over reservoir quality and commerciality. Consequently, the Company notified the Ethiopian Government and its partners that it intends to withdraw from Blocks 7&8.

Adigala Block - Ethiopia

During 2014, the Company and its partners have completed a 1,000 kilometer 2D seismic program in the block in which Africa Oil holds a 10% interest. Having assessed the results of the seismic, the Company notified the Ethiopian Government and its partners that it intends to withdraw from the Adigala Block.

Puntland (Somalia)

The Company has informed the Government of Puntland (Somalia) that the Company will be significantly reducing its presence in Bosaso, Puntland and will refrain from any operational activity and associated expenditures pending a resolution of the political situation between the Regional Government of Puntland and the Federal Government of Somalia regarding the legitimacy of oil concession contracts. Given the considerable efforts taken by the Company to date in Puntland (Somalia), the Company has requested a two year extension to the current exploration period from the Government of Puntland to allow time for these political challenges to be resolved. Accordingly, the Company has elected during the fourth quarter of 2014 to record a $90.6 million non-cash impairment charge related to its assets in Puntland. As at December, 2014, intangible exploration assets related to these properties was nil.

Horn is actively pursuing new venture opportunities across the African continent.