Oil and Gas Exploration in Africa

operations

Quarterly Operations Summary

First Quarter 2017

Block 2B, Republic of South Africa

On October 21, 2016, the Company closed three transactions resulting in the Company acquiring a 90% participating interest and operatorship in the Exploration Right for Block 2B offshore the Republic of South Africa. A well drilled in Block 2B by South African state company Soekor in 1988 discovered and tested light oil from a Cretaceous sandstone section confirming that this rift basin is hydrocarbon-bearing. The Company’s technical team has identified numerous prospects and potential drilling locations in Block 2B utilizing the previously acquired 3D seismic.

The following three transactions closed on October 21, 2016:

Afren plc (“Afren”)

The Company paid $1.0 million to Afren (in Administration) and certain of its subsidiaries, acquiring the subsidiary holding a 25% participating interest in Block 2B.

Thombo Petroleum Ltd. (“Thombo”)

The Company paid $2.0 million less obligations outstanding at the effective date and issued 14.8 million new common shares of the Company to acquire all of the shares of Thombo, a privately held company operating and holding a 34.5% participating interest in Block 2B. The Company may be required to issue up to an additional 20 million common shares of Africa Energy and, at the option of the Company, to either pay and/or issue up to $1.5 million in additional contingent cash and/or shares of Africa Energy, if certain milestones associated with the commercialization of Block 2B are achieved.

Crown Energy AB (“Crown”)

The Company completed a farm-in agreement with a subsidiary of Crown to acquire a 30.5% participating interest in Block 2B. The Company will reimburse Crown for up to $0.3 million of net back costs and will fund costs for Crown's remaining 10% participating interest associated with the drilling and testing of the next well in Block 2B.

Petroleum Exploration Licence 37, Republic of Namibia

During March 2017, the Company terminated the farmout agreement entered into on November 29, 2016 with a subsidiary of Pancontinental Oil & Gas N.L. Pursuant to the farmout agreement, the Company was to acquire a 10% participating interest in Petroleum Exploration Licence 37 offshore, Republic of Namibia. Africa Energy exercised its right to terminate the farmout agreement as a result of due diligence procedures performed by the Company which identified discrepancies in respect of certain agreed commercial terms of the farmout transaction.

OUTLOOK

The Company continues to aggressively identify, evaluate, and negotiate additional exploration and production opportunities. The Company’s proven Cape Town-based technical team remains the driving force behind the identification and evaluation of the opportunities available within this current oil sector downturn. Management expects the Block 2B transactions will be the first of a number of transactions to grow Africa Energy. An exploration driven strategy in Africa will deliver value to our shareholders as the world oil markets recover, and Africa Energy has the technical team and access to capital from supportive shareholders to deliver on this strategy.

FINANCING UPDATE

During November 2016, the Company completed a non-brokered private placement issuing 60 million common shares at a price of CAD$0.25 per share for gross proceeds of CAD$15.0 million, or approximately $11.2 million USD equivalent. A finder’s fee of approximately $0.3 million was paid in cash. The common shares issued under the private placement were subject to a statutory hold period which expired on March 16, 2017.

Year End 2016

Block 2B, Republic of South Africa

On October 21, 2016, the Company closed three transactions resulting in the Company acquiring a 90% participating interest and operatorship in the Exploration Right for Block 2B offshore the Republic of South Africa. A well drilled in Block 2B by South African state company Soekor in 1988 discovered and tested light oil from a Cretaceous sandstone section confirming that this rift basin is hydrocarbon-bearing. The Company’s technical team has identified numerous prospects and potential drilling locations in Block 2B utilizing the previously acquired 3D seismic.

The following three transactions closed on October 21, 2016:

Afren plc (“Afren”)

The Company paid $1.0 million to Afren (in Administration) and certain of its subsidiaries, acquiring the subsidiary holding a 25% participating interest in Block 2B.

Thombo Petroleum Ltd. (“Thombo”)

The Company paid $2.0 million less obligations outstanding at the effective date and issued 14.8 million new common shares of the Company to acquire all of the shares of Thombo, a privately held company operating and holding a 34.5% participating interest in Block 2B. The Company may be required to issue up to an additional 20 million common shares of Africa Energy and, at the option of the Company, to either pay and/or issue up to $1.5 million in additional contingent cash and/or shares of Africa Energy, if certain milestones associated with the commercialization of Block 2B are achieved.

Crown Energy AB (“Crown”)

The Company completed a farm-in agreement with a subsidiary of Crown to acquire a 30.5% participating interest in Block 2B. The Company will reimburse Crown for up to $0.3 million of net back costs and will fund costs for Crown's remaining 10% participating interest associated with the drilling and testing of the next well in Block 2B.

Petroleum Exploration Licence 37 (“PEL 37”), Republic of Namibia

On November 29, 2016, the Company entered into a farmout agreement with a subsidiary of Pancontinental Oil & Gas N.L. ("Pancontinental") pursuant to which the Company will acquire a 10% participating interest in PEL 37 offshore, Republic of Namibia. Under the terms of the farmout agreement, the Company's participating interest share of all joint venture costs, including the drilling of the first exploration well on PEL 37, will be fully carried through the current exploration period by a joint venture partner. The Company has agreed to pay Pancontinental $1.7 million at close of the farmout agreement, and an additional $4.8 million upon spud of the first exploration well. Completion of the farmout agreement is subject to receipt of all requisite government approvals, other regulatory approvals, third party consents, partner approvals, and finalization of due diligence procedures.

OUTLOOK

The Company continues to aggressively identify, evaluate, and negotiate additional exploration and production opportunities. The Company’s proven Cape Town-based technical team remains the driving force behind the identification and evaluation of the opportunities available within this current oil sector downturn. Management expects the Block 2B transactions will be the first of a number of transactions to grow Africa Energy. An exploration driven strategy in Africa will deliver value to our shareholders as the world oil markets recover, and Africa Energy has the technical team and access to capital from supportive shareholders to deliver on this strategy.

Third Quarter 2016

Block 2B, Republic of South Africa

On October 21, 2016, the Company closed three transactions resulting in the Company acquiring a 90% participating interest and operatorship in Block 2B offshore the Republic of South Africa. A well drilled in Block 2B by South African state company Soekor in 1988 discovered and tested light oil from a Cretaceous sandstone section confirming that this rift basin is hydrocarbon-bearing. The Company’s technical team has identified numerous prospects and potential drilling locations in Block 2B utilizing the previously acquired 3D seismic.

The following three transactions closed on October 21, 2016:

Afren plc

The Company paid $1.0 million to Afren plc (in Administration) and certain of its subsidiaries, acquiring the subsidiary holding a 25% participating interest in Block 2B.

Thombo Petroleum Ltd.

The Company paid $2.0 million and issued 14.8 million new common shares of the Company to acquire all of the shares of Thombo Petroleum Ltd., a privately held company operating and holding a 34.5% participating interest in Block 2B. The Company may be required to issue up to an additional 20 million common shares of Africa Energy and, at the option of the Company, to either pay and/or issue up to $1.5 million in additional contingent cash and/or shares of Africa Energy, if certain milestones associated with the commercialization of Block 2B are achieved.

Crown Energy AB

The Company completed a farm-in agreement with a subsidiary of Crown Energy AB ("Crown") to acquire a 30.5% participating interest in Block 2B. The Company will reimburse Crown for up to US$0.3 million of net back costs and will fund costs for Crown's remaining 10% participating interest associated with the drilling and testing of the next well in Block 2B.

OUTLOOK

The Company has recently taken the first step of its new corporate strategy by acquiring 90% of Block 2B in South Africa. The Company continues to identify, evaluate, and negotiate additional exploration and production opportunities. The Company’s proven Cape Town-based technical team remains the driving force behind the identification and evaluation of the opportunities available within this current oil sector downturn. Management expects these initial transactions will be the first of a number of transactions to grow Africa Energy. An exploration driven strategy in Africa will deliver value to our shareholders as the world oil markets recover, and Africa Energy has the technical team and access to capital from supportive shareholders to deliver on this strategy.

Second Quarter 2016

PENDING TRANSACTIONS

On December 16, 2015, the Company executed the following three definitive agreements which, if completed, will result in the Company holding a 90% participating interest and operatorship in Block 2B offshore in the Republic of South Africa:

Afren plc

The Company executed a sale and purchase agreement with Afren plc, in Administration, and certain of its subsidiaries whereby the Company will acquire the Afren plc subsidiary owning a 25% participating interest in Block 2B for cash consideration of $1 million.

Thombo Petroleum Ltd.

The Company executed a share purchase agreement to acquire all of the shares of Thombo Petroleum Ltd. (“Thombo”) for cash consideration of $2 million as well as the issuance of 14.8 million new common shares of the Company. The Company has also agreed to issue up to an additional 20 million common shares of Africa Energy and, at the option of the Company, to either pay and/or issue up to $1.5 million in additional contingent cash and/or shares of Africa Energy, both payable on milestones associated with the commercialization of Block 2B. Thombo holds a 34.5% participating interest and operatorship in Block 2B.

Crown Energy AB

The Company executed a farm-in agreement with Crown Energy AB (“Crown”) to acquire a 30.5% participating interest in Block 2B. The Company will reimburse Crown for $0.3 million of net back costs and will fund costs for Crown's remaining 10% participating interest associated with the drilling and testing of the next well in Block 2B.

Completion of the above three definitive agreements is subject to receipt of government approval.

OUTLOOK

The Company has recently taken the first step of its new corporate strategy by entering into agreements to acquire 90% of Block 2B in South Africa. The Company continues to pursue additional exploration and production opportunities. The Company’s proven Cape Town-based technical team remains the driving force behind the identification and evaluation of the opportunities available within this current oil sector downturn. Management expects these initial transactions will be the first of a number of transactions to grow Africa Energy. An exploration driven strategy in Africa will deliver value to our shareholders as the world oil markets recover, and Africa Energy has the technical team and access to capital from supportive shareholders to deliver on this strategy.

First Quarter 2016

PENDING TRANSACTIONS

On December 16, 2015, the Company executed the following three definitive agreements which, if completed, will result in the Company holding a 90% participating interest and operatorship in Block 2B offshore in the Republic of South Africa:

Afren plc

The Company executed a sale and purchase agreement with Afren plc, in Administration, and certain of its subsidiaries whereby the Company will acquire the Afren plc subsidiary owning a 25% participating interest in Block 2B for cash consideration of $1 million.

Thombo Petroleum Ltd.

The Company executed a share purchase agreement to acquire all of the shares of Thombo Petroleum Ltd. (“Thombo”) for cash consideration of $2 million as well as the issuance of 14.8 million new common shares of the Company. The Company has also agreed to issue up to an additional 20 million common shares of Africa Energy and, at the option of the Company, to either pay and/or issue up to $1.5 million in additional contingent cash and/or shares of Africa Energy, both payable on milestones associated with the commercialization of Block 2B. Thombo holds a 34.5% participating interest and operatorship in Block 2B.

Crown Energy AB

The Company executed a farm-in agreement with Crown Energy AB (“Crown”) to acquire a 30.5% participating interest in Block 2B. The Company will reimburse Crown for $0.3 million of net back costs and will fund costs for Crown's remaining 10% participating interest associated with the drilling and testing of the next well in Block 2B.

Completion of the above three definitive agreements is subject to receipt of government approval.

OUTLOOK

The Company has recently taken the first step of its new corporate strategy by entering into agreements to acquire 90% of Block 2B in South Africa. The Company’s proven Cape Town-based technical team remains the driving force behind the identification and evaluation of the opportunities available within this current oil sector downturn. Management expects these initial transactions will be the first of a number of transactions to grow Africa Energy. An exploration driven strategy in Africa will deliver value to our shareholders as the world oil markets recover, and Africa Energy has the technical team and access to capital from supportive shareholders to deliver on this strategy.

FINANCING UPDATE

During March 2015, the Company completed a non-brokered private placement issuing an aggregate of 32,486,153 shares at a price of CAD$0.13 per share for gross proceeds of $3.4 million. A finder’s fee was paid in the amount of $0.08 million in cash. The common shares issued under the private placement were subject to a statutory hold period which expired in July of 2015. As anticipated, net proceeds from the private placement were used to fund corporate costs including the Company’s new office and technical team, in Cape Town, South Africa as well as pursuing onshore and offshore upstream oil opportunities in Africa.

During December 2015, the Company completed a non-brokered private placement issuing an aggregate of 115,041,666 shares at a price of CAD$0.06 per share for gross proceeds of $5.0 million. A finder’s fee was paid in the amount of $0.04 million in cash. The common shares issued in the private placement are subject to a statutory hold period which expired on May 1, 2016. Net proceeds of the private placement will be used towards the Company's acquisition costs for the three South African transactions and related exploration activities, as well as for general working capital purposes.

Year End 2015

PENDING TRANSACTIONS

On December 16, 2015, the Company executed the following three definitive agreements which, if completed, will result in the Company holding a 90% participating interest and operatorship in Block 2B offshore in the Republic of South Africa:

Afren plc

The Company executed a sale and purchase agreement with Afren plc, in Administration, and certain of its subsidiaries whereby the Company will acquire the Afren plc subsidiary owning a 25% participating interest in Block 2B for cash consideration of $1 million.

Thombo Petroleum Ltd.

The Company executed a share purchase agreement to acquire all of the shares of Thombo Petroleum Ltd. ("Thombo") for cash consideration of $2 million as well as the issuance of 14.8 million new common shares of the Company. The Company has also agreed to issue up to an additional 20 million common shares of Africa Energy and, at the option of the Company, to either pay and/or issue up to $1.5 million in additional contingent cash and/or shares of Africa Energy, both payable on milestones associated with the commercialization of Block 2B. Thombo holds a 34.5% participating interest and operatorship in Block 2B.

Crown Energy AB

The Company executed a farm-in agreement with Crown Energy AB ("Crown") to acquire a 30.5% participating interest in Block 2B. The Company will reimburse Crown for $0.3 million of net back costs and will fund costs for Crown's remaining 10% participating interest associated with the drilling and testing of the next well in Block 2B.

Completion of the above three definitive agreements is subject to receipt of all requisite government and other regulatory approvals, third party consents and waiver of pre-emptive rights.

OUTLOOK

The Company has recently taken the first step of its new corporate strategy by entering into agreements to acquire 90% of Block 2B in South Africa. The Company's proven Cape Town-based technical team remains the driving force behind the identification and evaluation of the opportunities available within this current oil sector downturn. Management expects these initial transactions will be the first of a number of transactions to grow Africa Energy. An exploration driven strategy in Africa will deliver value to our shareholders as the world oil markets recover, and Africa Energy has the technical team and access to capital from supportive shareholders to deliver on this strategy.