Africa Oil November 9, 2012

1

5,

Success at Twiga supports southern ‘string of pearls’

A high-profile presence at Africa Oil Week was notable, with AOC

presenting alongside the majors and onshore East Africa described as

the "hottest exploration location on earth". The somewhat premature

announcement of Twiga was a talking point, and Africa Oil’s second

discovery strengthens our faith in the tertiary rift play in the southern

‘string of pearls’. As we highlighted in our last published note

‘Buy the

basin, not the well’

, we think it is the flow rate on Twiga that will be

significant and management indicated in Cape Town that reservoir

permeability is key – both should be confirmed by the DST. Aside from

Twiga, we maintain that new basin openers will be more meaningful

catalysts for the shares, which we estimate are discounting c. 1bn boe

on a gross basis for the East Africa play. Success in the northern 'string

of pearls' could be such a catalyst with the Sabisa well (rig currently

clearing customs in Djibouti) spudding towards year-end. With a 3-rig

drilling campaign across multiple sub-basins and geological plays

providing sustained news flow through next year, we maintain the longterm

risk reward appears attractive. Reiterate buy.

Feedback from Africa Oil Week (Tom Robinson, E&P analyst)

1. The key unknown for Twiga is permeability

, which the drill stem

test (DST) will confirm. If the clay-rich sands are highly compacted, oil

flow to the surface could be restricted. The light waxy crude is of similar

quality to Uganda where multi-Darcy permeability and flow rates in

excess of 10mbd (across 3-4 intervals) have been seen. On restricted

testing equipment, management is hoping for flow rates of c. 2- 5kb/d.

2. Success at Twiga further de-risks other prospects along the

bounding fault

. Kingoni, which lies between the Twiga and Ngamia

discoveries, now appears particularly promising. Further to the east in

10BB and off-trend is Kamba – one of AOI's 'favourite' prospects – which

we assume to be a c. 200mb prospect.

3. Sabisa is on track to spud by year-end

, with the rig currently

clearing customs in Djibouti. The key risk at Sabisa is source rock and

proving a working petroleum system in the relatively underexplored

northern ‘string of pearls'. We assume a prospect size of c. 70mb with

1/6 CoS (AOC interest is 30%).

4. In the cretaceous rift play, management remain

s cautious on Pai

Pai

. Trap integrity is the key risk on Pai Pai with previous unsuccessful

wells, drilled by Conoco and Amoco, encountering oil shows but on

breached traps. We assume a prospect size of c. 120mb with 20% CoS.

5. Kinyonga will be drilled independently of the Pai Pai result

and

will be the second test of the cretaceous rift play and first well in block 9.

The well is targeting a large 4-way closure that management described

as a "Mount Everest" sub-surface structure. We assume a prospect size

of c. 320mb with 19% CoS.

Africa Oil

AOIC.ST AOI SS

EUROPEAN OIL E&P

EQUITY RESEARCH

Feedback from Africa Oil Week

Quick Note

November 5, 2012

Rating

Remains

Buy

Target price

Remains

SEK 100.00

Closing price

November 2, 2012

SEK 69.75

Research analysts

European Oil & Gas: E&P

Theepan Jothilingam, CFA - NIplc

Theepan.Jothilingam@nomura.com

+44 20 7102 6673

Tom Robinson - NIplc

tom.robinson@nomura.com

+44 20 710 23285

Vishal Gupta

vishal.n.gupta@nomura.com

+91223053 2575

European Oilfield Services

Christyan Malek - NIplc

christyan.malek@nomura.com

+44 20 7102 5120

Industry specialist

Alan MacDonald - NIplc

alan.macdonald@nomura.com

+44 20 7102 2741

See Appendix A-1 for analyst

certification, important

disclosures and the status of

non-US analysts.

Africa Oil November 5, 2012

2

2

Fig. 1: Africa Oil summary NAV at USD 95/bbl (in SEK)

Source: Company data, Nomura estimates

Fig. 2: Africa Oil summary NAV at USD 95/bbl (in CAD)

Source: Company data, Nomura estimates

Country Asset Interest Type CoS Risked net Unrisked net NPV NPV NPV risked

NPV unrisked

% % mmboe mmboe $/boe $m SEK/share

SEK/share

Producing assets - - - -

-

Development assets - - - -

-

Net (debt)/cash 2 24 6

6

Others 1 2 0

0

Core - - 2 36 6.4

6

Kenya Ngamia-1 (10BB) 50% Oil 70% 18 26 4.2 7 4 2.0 3

Ethiopia Block 7/8 35% Oil 33% 18 54 4.2 7 4 2.0 6

Contingent assets 36 80 4.2 1 49 4.0

9

Kenya Twiga South (13T) 50% Oil 70% 21 30 4.2 8 6 2.3

3

Kenya Pai Pai (10A) 30% Oil 20% 7 36 4.2 3 0 0.8

4

Ethiopia Sabisa-1 (South Omo) 30% Oil 17% 3 20 4.2 1 4 0.4

2

Kenya Kinyonga (9) 50% Oil 19% 30 160 4.2 1 26 3.4

18

Kenya Pundamilia (9) 50% Oil 12% 24 201 4.2 1 00 2.7

23

Kenya Ngamia -1 (Updip) (10BB) 50% Oil 70% 48 69 4.2 1 99 5.4

8

Kenya Loperot (10BB) 50% Oil 70% 70 101 4.2 2 93 8.0

11

Kenya Kamba (10BB) 50% Oil 70% 81 116 4.2 3 36 9.1

13

Kenya Twiga North (13T) 50% Oil 70% 39 56 4.2 1 63 4.4

6

Kenya Kongoni (13T) 50% Oil 70% 22 32 4.2 9 3 2.5

4

Ethiopia Class 1_2 (South Omo) 30% Oil 15% 3 21 4.2 1 3 0.4

2

Ethiopia Class 1_3 (South Omo) 30% Oil 15% 4 26 4.2 1 6 0.4

3

Kenya Eliye (10BA) 50% Oil 5% 1 14 4.2 3 0.1

2

Exploration potential in 2H12+2013 354 881 1 ,475 40.1

100

Kenya Other Block 9 upside 50% Oil 5% 14 283 4.2 5 9 1.6

32

Kenya Other Block 10A upside 30% Oil 5% 7 140 4.2 2 9 0.8

16

Kenya Other Block 10BB upside 50% Oil 15% 192 1,282 4.2 8 00 21.7

145

Kenya Other Block 13T upside 50% Oil 15% 18 119 4.2 7 4 2.0

13

Kenya Block 10BA 50% Oil 5% 123 2,464 4.2 5 13 13.9

279

Kenya Block 12A 20% Oil 5% 46 916 4.2 1 91 5.2

104

Ethiopia Other South Omo upside 30% Oil 5% 37 742 4.2 1 54 4.2

84

Exploration potential in 2013+ 437 5,945 1 ,819 49.5

673

Total exploration assets 792 6,827 4.2 3 ,294 89.6

772

Risked NAV 827 6,906 4.2 3 ,678 100.0

788

Country Asset Interest Type CoS Risked net Unrisked net NPV NPV NPV risked

NPV unrisked

% % mmboe mmboe $/boe $m CAD/share

CAD/share

Producing assets - - - -

-

Development assets - - - -

-

Net (debt)/cash 2 24 1

1

Others 1 2 0

0

Core - - 2 36 1

1

Kenya Ngamia-1 (10BB) 50% Oil 70% 18 26 4 7 4 0.3 0

Ethiopia Block 7/8 35% Oil 33% 18 54 4 7 4 0.3 1

Contingent assets 36 80 4.2 1 49 0.6

1

Kenya Twiga South (13T) 50% Oil 70% 21 30 4.2 8 6 0.4

1

Kenya Pai Pai (10A) 30% Oil 20% 7 36 4.2 3 0 0.1

1

Ethiopia Sabisa-1 (South Omo) 30% Oil 17% 3 20 4.2 1 4 0.1

0

Kenya Kinyonga (9) 50% Oil 19% 30 160 4.2 1 26 0.5

3

Kenya Pundamilia (9) 50% Oil 12% 24 201 4.2 1 00 0.4

3

Kenya Ngamia -1 (Updip) (10BB) 50% Oil 70% 48 69 4.2 1 99 0.8

1

Kenya Loperot (10BB) 50% Oil 70% 70 101 4.2 2 93 1.2

2

Kenya Kamba (10BB) 50% Oil 70% 81 116 4.2 3 36 1.4

2

Kenya Twiga North (13T) 50% Oil 70% 39 56 4.2 1 63 0.7

1

Kenya Kongoni (13T) 50% Oil 70% 22 32 4.2 9 3 0.4

1

Ethiopia Class 1_2 (South Omo) 30% Oil 15% 3 21 4.2 1 3 0.1

0

Ethiopia Class 1_3 (South Omo) 30% Oil 15% 4 26 4.2 1 6 0.1

0

Kenya Eliye (10BA) 50% Oil 5% 1 14 4.2 3 0.0

0

Exploration potential in 2H12+2013 354 881 1 ,475 6.0

15

Kenya Other Block 9 upside 50% Oil 5% 14 283 4.2 5 9 0.2

5

Kenya Other Block 10A upside 30% Oil 5% 7 140 4.2 2 9 0.1

2

Kenya Other Block 10BB upside 50% Oil 15% 192 1,282 4.2 8 00 3.3

22

Kenya Other Block 13T upside 50% Oil 15% 18 119 4.2 7 4 0.3

2

Kenya Block 10BA 50% Oil 5% 123 2,464 4.2 5 13 2.1

42

Kenya Block 12A 20% Oil 5% 46 916 4.2 1 91 0.8

16

Ethiopia Other South Omo upside 30% Oil 5% 37 742 4.2 1 54 0.6

13

Exploration potential in 2013+ 437 5,945 1 ,819 7.4

101

Total exploration assets 792 6,827 4.2 3 ,294 13.5

116

Risked NAV 827 6,906 4.2 3 ,678 15.0

Africa Oil November 9, 2012

3

5,

Appendix A-1

Analyst Certification

I, Theepan Jothilingam, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views

about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or

will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of

my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc.,

Nomura International plc or any other Nomura Group company.

Issuer Specific Regulatory Disclosures

The term "Nomura Group Company" used herein refers to Nomura Holdings, Inc. or any affiliate or subsidiary of Nomura Holdings, Inc. Nomura

Group Companies involved in the production of Research are detailed in the disclaimer below.

Issuer name Ticker Price Price date Stock rating Sector rating Disclosures

Africa Oil AOI SS SEK 69.75 02-Nov-2012 Buy Bullish

Previous Rating

Issuer name Previous Rating Date of change

Africa Oil Not Rated 01-Mar-2012

Africa Oil (AOI SS) SEK 69.75 (02-Nov-2012)

Rating and target price chart (three year history)

Buy (Sector rating: Bullish)

Date Rating Target price Closing price

09-Oct-12 100.00 72.50

08-May-12 90.00 50.50

20-Apr-12 74.00 36.00

01-Mar-12 BUY 12.75

01-Mar-12 35.00 12.75

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology

.