Report to Shareholders | December 31, 2022
Africa Oil Corp.
RISK FACTORS - CONTINUED
Office for its final ascension, has been returned to the National Assembly for further consultation and deliberation. Considering the
recent Presidential and National Assembly elections and the transition to a new government, the timing for the final passage of the
Finance Bill and its provisions, including changes that could be relevant to the oil and gas industry are uncertain. If there are adverse
consequences to the oil and gas industry, this could cause further delay to the conversion of OML 127 and early renewal of OML 130.
Nigeria’s general election took place on February 25, 2023 to elect the President and Vice President and members of the Senate and
House of Representatives.
Investments in Associates and Investments in Joint Ventures
The Company has invested in other frontier oil and gas exploration companies that are similar to it, and that face similar risks and
uncertainties, which could have a material adverse effect on their businesses, prospects and results of operations. Such risks include,
without limitation, equity risk, liquidity risk, commodity price risk, credit risk, currency risk, foreign investment risk, and changes in
environmental regulations, economic, political or market conditions, or the regulatory environment in the countries in which they
operate. The associates or joint ventures are entities in which the Company has influence but given its equal interest or minority interest,
no or limited control over their decisions, including, without limitation, financial and operational policies, and has no or limited control
over financial outcomes and performances. The Company’s access to information is subject to the contractual provisions of Shareholder
Agreements. The Company are reliant on the information provided by investments, and may not have the ability to independently
verify such information. The Company’s investments are not diversified over different types of investments and industries, rather, they
are concentrated in one type of investment. If an associated company or jointly controlled entity in which the Company has invested
fails, liquidates, or becomes bankrupt, it could face the potential risk of loss of some, or all, of its investments, and the Company may
be unable to recover its initial investment amount, or any amount, from its various investments in other frontier oil and gas exploration
companies.
International Operations
The Company participates in oil and gas projects located in emerging markets, primarily in Africa. Oil and gas exploration, development
and production activities in these emerging markets are subject to significant political, economic, and other uncertainties that may
adversely affect the Company’s operations. The Company could be adversely affected by changes in applicable laws and policies
in the countries where the Company has interests. Additional uncertainties include, but are not limited to, the risk of war, terrorism,
expropriation, civil unrest, nationalization, renegotiation or nullification of existing or future concessions and contracts, the imposition
of international sanctions, a change in crude oil or natural gas pricing policies, changes to taxation laws and policies, assessments
and audits (including income tax) against the Company by regulatory authorities, difficulty or delays in obtaining necessary regulatory
approvals, risks associated with potential future legal proceedings, and the imposition of currency controls. These uncertainties, all
of which are beyond the Company’s control, could have a material adverse effect on the Company’s business, prospects and results
of operations. In addition, if legal disputes arise related to oil and gas concessions acquired by the Company, they could be subject
to the jurisdiction of courts other than those of Canada. The Company’s recourse may be very limited in the event of a breach by
a government or government authority of an agreement governing a concession in which the Company acquires an interest. The
Company may require licenses or permits from various governmental authorities to carry out future exploration, development and
production activities. There can be no assurance that the Company will be able to obtain all necessary licenses and permits when
required.
Different Legal System and Litigation
The Company’s exploration, development and production activities are located in countries with legal systems that in various degrees
differ from that of Canada. Rules, regulations and legal principles may differ in respect of matters of substantive law and of such matters
as court procedure and enforcement. Almost all material exploration and production rights and related contracts of the Company are
subject to the national or local laws and jurisdiction of the respective countries in which the operations are carried out. This means that
the Company’s ability to exercise or enforce its rights and obligations may differ between different countries and also from what would
have been the case if such rights and obligations were subject to Canadian law and jurisdiction.
The Company’s operations are, to a large extent, subject to various complex laws and regulations as well as detailed provisions in
concessions, licenses and agreements that often involve several parties. If the Company was to become involved in legal disputes
in order to defend or enforce any of its rights or obligations under such concessions, licenses, and agreements or otherwise, such
disputes or related litigation could be costly, time consuming and the outcome would be highly uncertain. Even if the Company
ultimately prevailed, such disputes and litigation may still have a substantially negative effect on the Company’s business, assets,
financial conditions, and its operations.
Anti-Bribery and Anti-Corruption Laws
The Company is subject to various anti-bribery and anti-corruption laws, including the Corruption of Foreign Public Officials Act
(Canada) and the Bribery Act 2010 (United Kingdom). Failure to comply with such laws could subject the Company to, among other
things, reputational damage, civil and criminal penalties, other remedial measures and legal expenses which could adversely affect
the Company’s business, results in operations, and financial condition. Weaknesses in the anti-corruption legal and judicial system of
certain countries may undermine the Company’s or a host government’s capacity to effectively detect, prevent and sanction corruption.
To mitigate this risk, the Company has implemented an anti-corruption compliance and onboarding program for anyone that does
business with the Company, anti-corruption training initiatives for its personnel and consultants, and an anti-corruption policy for
its personnel, and consultants. However, the Company cannot guarantee that its personnel, contractors, or business partners have
not in the past or will not in the future engage in conduct undetected by the onboarding processes and procedures adopted by the
Company, and it is possible that the Company, its personnel or contractors, could be subject to investigations or charges related to
bribery or corruption as a result of actions of its personnel or contractors.
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