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From: howestreetbull	5/19/2014 10:17:14 AM
	of 233883

AOI.to/TPN.v/SMB.v Sala from Nordea Possible discovery on Sala prospect Africa Oil provided an operational update yesterday. The disappointing result for the Ekunyuk-1 exploration well in Lokichar seemed to get investors' attention, sending the share down 2.8%. We valued the prospect at SEK 1.6 per share pre-drilling, ie 1.5% of our NAV estimate. However, in our view, the good appraisal-drilling result of the Twiga discovery and signals that Sala might be a discovery balance out the dry well news. We keep our Strong Buy recommendation and target price of SEK 83. There is plenty of news flow expected in the coming weeks, including two well results from new basins and two well tests. Positive appraisal well An appraisal at Twiga discovered 62m of vertical net oil pay in the Auwerwer formation, with similar quality as the initial Twiga-1 discovery in November 2012. Twiga-1 had 30m of net pay with good flow rates from the test. Our initial view is that this is a positive result and leaves upside to the gross 87 mmboe estimate for Twiga. In our valuation, we up our estimate to 120 mmboe. Disappointing exploration result The Ekunyuk-1 well encountered good reservoir sands so far on the east flank, but was water-bearing. Additionally, the presence of a thick extensive oil shale gives us new options to study the basin's substantial unconventional oil potential. We reduce the value of Ekumyuk to zero and put no value on oil shale in the block. Plenty of news in the pipeline We forecast an extensive news flow from AOI the coming weeks, where the first update should be at the end of May with results from two tests (Agate and Ngamia) and one exploration well in a new basin (Shimela in the Chew Bahir basin). In June, we anticipate drilling results from the Sala well in the Anza basin and an updated resource report from Gaffney, Cline & A. We also expect a listing on the NASDAQ OMX Stockholm in July

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