Lion Energy, which focuses on oil and gas projects in east and central Africa, is the joint venture partner of Africa Oil on four blocks in Kenya and Somalia.
The LOI provides that each share of Lion Energy will be exchanged for 0.2 of Africa Oil’s common shares.
The parties are expected to enter into a definitive agreement for the takeover transaction by 25 March 2011.
Africa Oil president and CEO Keith Hill said that the acquisition of Lion Energy consolidates Africa Oil’s interest in the East African rift basins in Kenya and Puntland (Somalia).
"The cash portion of the deal will further strengthen our balance sheet to allow us to fully fund the upcoming aggressive exploration drilling campaign," Hill said.
