Africa Oil Corporation has closed a $50 million non-brokered private placement of shares to fund the appraisal and development of the South Lokichar basin in northwestern Kenya.

The South Lokichar basin straddles blocks 10BB and 13T, where crude oil has been discovered.

Africa Oil, which is listed on the Toronto and Stockholm stock exchanges, said 31.1 million shares had been released to the International Finance Corporation (IFC), the private lending arm of World Bank Group, following an equity subscription agreement dated August 18.

“The IFC now holds approximately 6.83 per cent of the issued and outstanding common shares of the company,” said the firm in a statement.
With the issuance of 31.1 million new units, the total number of shares stand at 456.4 million.

Before the end of the year, Africa Oil with Tullow Oil Plc are required to submit field development plans of pipelines and other facilities for South Lokichar for approval by the Kenyan government.

The shares issued to the IFC in an equity subscription agreement will be subject to resale restrictions under Canadian securities laws for a period of four months plus one day from August 31.

“The Toronto Stock Exchange has conditionally approved the private placement and the new shares will be admitted to trading on the Nasdaq Stockholm,” said Africa Oil’s chief executive Keith Hill.

Stampede Natural Resources, owned by a fund advised by Helios Investment Partners, in May acquired a 12.4 per cent stake in Africa Oil by subscribing to 52.6 million shares on private placement for $100 million.

Experts say that many firms are looking for new partners to avoid cancellation of their production sharing contracts, as the fall in oil prices has made it difficult to get funding for exploration.

Blocks 10BB and 13T have 600 million barrels that Africa Oil discovered jointly with Tullow Oil Plc.

“Tullow has funds to undertake all its activities in West and East Africa. The company produces around 68,000 barrels of oil per day in West Africa alone, which gives us substantial revenues,” said the firm’s head of media relations George Cazenove.

The company’s capital expenditure for 2015 in West Africa and East Africa is $1.9 billion, of which $1.3 billion has been allocated to developments in Ghana. The budget for maintaining mature production and near field drilling activities for the rest of the countries on the continent is $200 million.

Tullow’s capital expenditure for exploration and appraisal drilling in Kenya is $100 million. This year’s budget for pre-development activities to support final investment decisions in Kenya and Uganda is $170 million.

Tullow, jointly with China National Offshore Oil Corporation (CNOOC) and Total of France, has discovered 6.5 billion barrels of oil in the Albertine basin in western Uganda. Kenya and Uganda are expected to start producing oil from 2018 onwards after construction of $4 billion pipeline is completed.

The Kenyan and Ugandan government in August agreed to build 1,500-kilometre pipeline from Hoima in western Uganda to Lamu port on Kenya’s Coast, to pass through South Lokichar basin.