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Scl - Sacoil Holdings Limited - Restructuring Of Proposed Investment, Extension

Release Date: 26/07/2010 17:28:02      Code(s): SCL
SCL - SacOil Holdings Limited - Restructuring of proposed investment, extension 
of agreement and withdrawal of cautionary                                       
SacOil Holdings Limited                                                         
Incorporated in the Republic of South Africa                                    
Registration number 1993/000460/06                                              
Share code: SCL                                                                 
ISIN: ZAE000127460                                                              
("SacOil" or "the company")                                                     
Restructuring of proposed investment, extension of agreement and withdrawal of  
cautionary                                                                      
1. Introduction                                                                 
Further to previous announcements, the last of which was                        
published on 25 June 2010, SacOil shareholders are advised                      
that the proposed investment in oil concession rights (the                      
"Block 3 Rights") pertaining to Block 3, Albertine Graben,                      
Democratic Republic of the Congo ("DRC") ("Block 3") and                        
oil concession rights (the "Block 1 Rights") pertaining to                      
Block 1, Albertine Graben, DRC ("Block 1") has been                             
restructured (the "Restructure").                                               
The purpose of this announcement is to set out the terms                        
of the Restructure.                                                             
2. Terms of the Restructure                                                     
On 24 October 2008 SacOil posted a circular to SacOil                           
shareholders regarding the proposed acquisition (the                            
"Original Transaction") by the company of the entire                            
issued share capital and shareholder loan accounts of                           
South Africa Congo Oil Company (Proprietary) Limited                            
("SacOil (Pty) Limited") from the following parties:                            
Divine Inspiration Group (Proprietary) Limited ("DIG"),                         
a company controlled by Ms A Brown;                                             
Encha Group Limited ("Encha"), a company controlled by                          
the Moseneke family;                                                            
Columbia Falls Properties 114 (Proprietary) Limited                             
("Columbia"), a company controlled by Mr Phatudi Maponya;                       
and                                                                             
The Kulsum Moosa Family Trust ("Moosa")                                         
(collectively referred to as the "Initial Vendors").                            
The aforesaid sale transaction was encapsulated in a Sale                       
of Shares Agreement concluded between SacOil and the                            
Initial Vendors (the "Initial Sale of Shares Agreement").                       
SacOil (Pty) Limited is party to a Production Sharing                           
Agreement in respect of Block 3 (the "Block 3 Production                        
Sharing Agreement"). DIG is party to a Production Sharing                       
Agreement in respect of Block 1 (the "Block 1 Production                        
Sharing Agreement"). As a component of the Original                             
Transaction, it was contemplated that DIG would assign to                       
SacOil (Pty) Limited its rights and obligations under the                       
Block 1 Production Sharing Agreement in terms of an                             
Agreement of Assignment concluded between DIG and SacOil                        
(Pty) Limited (the "Initial Agreement of Assignment"). The                      
Original Transaction was conditional upon inter alia the                        
issuance of Ordinances by the President of the DRC                              
("Presidential Ordinance") approving the Block 1                                
Production Sharing Agreement and/or the Block 3 Production                      
Sharing Agreement by 31 May 2010.                                               
The Original Transaction was approved by SacOil                                 
shareholders in general meeting on 21 November 2008.                            
On 18 June 2010 the President and Prime Minister of the                         
DRC signed Presidential Ordinance 10/042 approving the                          
Block 3 Production Sharing Agreement. The Ordinance was                         
gazetted in the Journal Officiel de la Republique                               
Democratique du Congo on 22 June 2010.                                          
On 18 June 2010 the President and Prime Minister of the                         
DRC further signed Presidential Ordinance 10/043 ordering                       
an amendment of the Block 3 Production Sharing Agreement                        
(the "Amendment").The Ordinance was gazetted in the                             
Journal Officiel de la Republique Democratique du Congo on                      
22 June 2010.                                                                   
The signature and publication of Ordinance 10/042                               
perfected the rights of SacOil (Pty) Limited under the                          
Block 3 Production Sharing Agreement subject to compliance                      
with the provisions of the Amendment.                                           
SacOil (Pty) Limited signed the Amendment on 13 July 2010.                      
Signature of the Amendment by the other parties to the                          
Block 3 Production Sharing Agreement is pending. The                            
Amendment varies certain commercial terms of the Block 3                        
Production Sharing Agreement and inter alia requires                            
SacOil (Pty) Limited to effect payment to the DRC                               
Government of an additional signature bonus amount of USD2                      
000 000 on execution of the Amendment (the "Block 3                             
Payment").                                                                      
The Initial Sale of Shares Agreement and the Initial                            
Agreement of Assignment lapsed on 31 May 2010 due to the                        
fact that the conditions precedent were not timeously                           
fulfilled.                                                                      
On 22 July 2010 (the "Execution Date") SacOil entered into                      
a Sale of Shares and Claims Agreement (the "Sale                                
Agreement") with Encha, Columbia and Moosa (collectively                        
referred to as the "Vendors"). In terms of the Sale                             
Agreement SacOil will acquire from the Vendors 50 per cent                      
of the entire issued share capital of, and all claims of                        
the Vendors against, SacOil (Pty) Limited, subject to the                       
fulfilment or waiver of the conditions precedent set out                        
in the Sale Agreement. The consideration due by SacOil                          
under the Sale Agreement is the amount of R439 857 600 to                       
be settled by the issue to the Vendors of 209 456 000                           
SacOil ordinary shares at an issue price of 210 cents per                       
share.                                                                          
Pursuant to the implementation of the transaction                               
contemplated in the Sale Agreement, the remaining 50 per                        
cent interest in SacOil (Pty) Limited will be held by DIG,                      
one of the Initial Vendors.SacOil and DIG intend to                             
conclude a Shareholders` Agreement regulating their                             
relationship as shareholders of SacOil (Pty) Limited.                           
Pending execution of the Shareholders` Agreement SacOil                         
and DIG concluded a Shareholder Undertaking on the                              
Execution Date addressing certain elements of the                               
shareholder relationship, including the repayment of                            
shareholder loans.                                                              
On the Execution Date SacOil and DIG concluded Loan                             
Agreements with SacOil (Pty) Limited in terms of which the                      
shareholders will advance monies to SacOil (Pty) Limited                        
to fund the payment of the Block 3 Payment in order to                          
secure the Block 3 Rights.                                                      
On 18 June 2010, the President and the Prime Minister of                        
the DRC signed Presidential Ordinance 10/041 approving an                       
alternative production sharing agreement in respect of                          
Block 1 concluded with third parties, notwithstanding the                       
fact that the Block 1 Production Sharing Agreement has not                      
been cancelled. On the Execution Date SacOil and DIG                            
concluded an Agreement of Assignment pursuant to which DIG                      
shall assign to SacOil 35 per cent of the economic                              
interest of DIG under the Block 1 Production Sharing                            
Agreement and all current and future claims of any nature                       
whatsoever that DIG has, or may have in the future,                             
against the DRC Government in relation to the Block 1                           
Production Sharing Agreement in the event that the                              
relevant Presidential Ordinance is not issued (the "Block                       
1 Interest").The effective consideration for the                                
acquisition of the Block 1 Interest is the Rand equivalent                      
of the amount of USD 811 364 having reference to: (i) a                         
cession by SacOil to DIG of SacOil`s right to receive                           
payment from SacOil (Pty) Limited of the Rand equivalent                        
of USD1 000 000 previously loaned and advanced to SacOil                        
(Pty) Limited as reflected in an Agreement of Cession                           
concluded between SacOil and DIG on the Execution Date,                         
and (ii) an agreed interest payment of the Rand equivalent                      
of USD188 637 due and payable by DIG to SacOil on monies                        
previously loaned and advanced by SacOil to DIG as                              
reflected in an Amended and Restated Loan Agreement                             
concluded between SacOil and DIG on the Execution Date.                         
DIG has agreed to repay a total of the Rand equivalent of                       
USD1 637 501 (inclusive of interest of the Rand equivalent                      
of USD188 637) previously loaned and advanced to DIG and                        
SacOil (Pty) Limited in respect of signature bonuses paid                       
in respect of the Block 1 and 3 Production Sharing                              
Agreements. This repayment obligation is secured by a                           
cession and pledge of 10 per cent of DIG`s shares in                            
SacOil (Pty) Limited.                                                           
The parties to the Original Transaction have also entered                       
into various agreements restructuring the original loan                         
and security arrangements pertaining to the Original                            
Transaction to take account of the Restructure. These                           
agreements include a Cancellation Agreement in terms of                         
which, inter alia, the security arrangements pertaining to                      
the Original Transaction have been cancelled.                                   
The effective date of the Restructure will be on or before                      
30 September 2010.                                                              
3. Rationale                                                                    
The Restructure as detailed above is intended to pursue a                       
strategy that will transform SacOil into a pan-African                          
controlled, oil and gas focused company with exploration                        
and, in time, oil and gas near producing and producing                          
assets in Africa.                                                               
There is intense international interest in African oil and                      
gas resources, particularly given the increase in the oil                       
price in the recent past, and the perception that many of                       
the world`s major oil fields outside Africa have "topped                        
out" and will now face an extended decline in production.                       
The Albertine Graben area, where the Oil Concessions are                        
located, straddles Lake Albert, which is situated on the                        
border between the DRC and Uganda. A number of wells have                       
been drilled in the Ugandan blocks and have in many                             
instances yielded payable resources of oil.                                     
4. Competent Persons Updated Report                                             
The Competent Person`s Report provided by United Kingdom                        
based Bayphase Limited on Block 3, was updated on 23 July                       
2010 ("Updated CPR"), taking into account all further                           
recent work on the Albertine Graben since the previous                          
report dated 11 July 2008. The Updated CPR reflects a net                       
present value of the prospective resources (using the cash                      
flow method and based on a projected oil price of                               
$70/barrel and on an export only premise) of $397.8                             
million for SacOil (Pty) Limited`s interest in the Block 3                      
Rights.                                                                         
5. Conditions precedent                                                         
The Restructure is subject to, inter alia, the fulfilment                       
or waiver of the following conditions precedent, by no                          
later than 30 September 2010;                                                   
approval of the Restructure by SacOil shareholders at a                         
general meeting; and                                                            
granting of all necessary regulatory approvals for the                          
Restructure, including a listing of the new shares to be                        
issued by the JSE Limited ("JSE").                                              
6. Specific issue of shares for cash                                            
On 16 July 2010 Metropolitan Asset Managers signed an                           
irrevocable undertaking to subscribe for 46 000 000 new                         
SacOil shares at an issue price of 50 cents per share                           
("the Specific Issue of Shares for Cash"). The proceeds                         
from the Specific Issue of Shares for Cash will be                              
utilised to fund transaction costs and committed and                            
future exploration costs.                                                       
7. Extension of Agreement                                                       
SacOil shareholders are furthermore referred to the                             
cautionary announcements dated 11 May 2010, 21 May 2010                         
and 25 June 2010, in which it was announced that SacOil                         
had concluded a Farm-out Agreement ("the Chaal Permit                           
Agreement") on 10 May 2010 in terms of which SacOil would,                      
subject to the fulfilment or waiver of the conditions                           
precedent set out in the Chaal Permit Agreement, acquire a                      
55 per cent participating interest (the "Chaal Interest")                       
in the gas exploration permit for the Chaal permit area                         
("the Chaal Gas Permit Transaction"). On 6 July 2010 the                        
parties to the Chaal Permit Agreement agreed to extend the                      
date for fulfilment or waiver of the stipulated conditions                      
precedent to the Chaal Permit Agreement until 31 January                        
2011. The Board is considering various options to expedite                      
the acquisition by the company of the Chaal Interest.                           
8. Pro forma financial effects                                                  
Set out below are the pro forma financial effects of the                        
Restructure, the Specific Issue of Shares for Cash and the                      
Chaal Gas Permit Transaction (collectively "the                                 
Transactions") based on the published, preliminary                              
reviewed financial information of SacOil for the year                           
ended 28 February 2010. The board of directors of SacOil                        
("the Board") are responsible for the information provided                      
in respect of the unaudited pro forma financial effects.                        
The pro forma financial effects have been prepared for                          
illustrative purposes only to provide information about                         
how the Transactions would have impacted on the basic                           
earnings, diluted earnings, headline earnings, diluted                          
headline earnings, net asset value and net tangible asset                       
value of SacOil had the Transactions been concluded for                         
income statement purposes on 1 March 2009 and for balance                       
sheet purposes on 28 February 2010. Due to their nature                         
the pro forma financial effects may not give a fair                             
reflection of SacOil`s financial position, results of                           
operations or cash flows after the Transactions.                                
                                                   After                        
Before the         After Restructure                        
                Transactions 1 Restructure 2  Change (%)                        
Earnings and diluted                                                            
earnings per share (cents) 0.72         (0.98)   (236.1%)                       
Headline and diluted                                                            
headline earnings per                                                           
share (cents)              0.95         (0.85)   (189.5%)                       
Net asset value per                                                             
share (cents)             13.83          94.81     585.5%                       
Tangible net asset value                                                        
per share                 13.83           3.99    (71.1%)                       
Weighted average                                                                
number of shares in                                                             
issue (`000)            313 293        522 749      66.9%                       
Number of shares in                                                             
issue (`000)            313 293        522 749      66.9%                       
After                                                  
                      Specific                      After                       
              After   Issue of         After        Chaal                       
           Specific     Shares         Chaal          Gas                       
Issue of   for Cash           Gas       Permit                       
         Shares for     Change        Permit Transactions                       
             Cash 3        (%) Transaction 4    Change (%)                      
Earnings                                                                        
and diluted                                                                     
earnings                                                                        
per share                                                                       
(cents)         0.69     (4.2%)          0.08       (88.9%)                     
Headline                                                                        
and diluted                                                                     
headline                                                                        
earnings per                                                                    
share (cents)   0.89     (6.3%)          0.31       (67.4%)                     
Net asset                                                                       
value per                                                                       
share (cents)  18.31      32.4%         13.19        (4.6%)                     
Tangible net                                                                    
asset value                                                                     
per share      18.31      32.4%       (14.12)      (202.1%)                     
Weighted                                                                        
average                                                                         
number of                                                                       
shares in                                                                       
issue (`000) 359 293      14.7%       313 293         0.0%                      
Number of                                                                       
shares in                                                                       
issue (`000) 359 293      14.7%       313 293         0.0%                      
                                             After the                          
After the     Transaction                          
                        Transactions 5      Change (%)                          
Earnings and diluted                                                            
earnings per share (cents)       (1.22)        (269.4%)                         
Headline and diluted                                                            
headline earnings per                                                           
share (cents)                    (1.10)        (215.8%)                         
Net asset value per                                                             
share (cents)                     90.73          556.0%                         
Tangible net asset value                                                        
per share                        (7.79)        (156.3%)                         
Weighted average                                                                
number of shares in                                                             
issue (`000)                    568 749           81.5%                         
Number of shares in                                                             
issue (`000)                    568 749           81.5%                         
Notes:                                                                          
1. The "Before the Transactions" basic earnings, diluted                        
earnings, headline earnings and diluted headline earnings                       
per share have been extracted without adjustment from the                       
reviewed, provisional, published results of SacOil for the                      
year ended 28 February 2010. The "Before the Transactions"                      
net asset value and net tangible asset value per share                          
have been calculated from the financial information                             
presented in the reviewed, provisional, published results                       
of SacOil for the year ended 28 February 2010.                                  
2. The "After the Restructure" assumes:                                         
a. issue of the 209 456 000 Consideration Shares at an                          
assumed issue price of R2.10 per share which has been                           
determined based on the fair value of the oil concession                        
rights acquired. The cost of acquiring the oil concession                       
rights has been capitalised in terms of IFRS 6:                                 
Exploration for and Evaluation of Mineral Resources;                            
b. the set off of the loan advanced and payments to DIG in                      
the amount of US$811 364 converted at $1 - Rand                                 
("ZAR")7.619, being the closing rate at 21 July 2009, the                       
date of signature of the Restructure Agreements;                                
c. the payment of the Signature Bonus, per the Restructure                      
Agreements;                                                                     
d. transaction costs of R10 290 000 and the related tax                         
effects.                                                                        
3. The "After the Specific Issue of Shares for Cash"                            
assumes:                                                                        
a. issue of 46 000 000 new SacOil shares at 50 cents per                        
SacOil share in terms of the Specific Issue of Shares for                       
Cash; and                                                                       
b. share issue costs of R760 000, which have been set off                       
against stated capital and the related tax effects.                             
4. The After the Chaal Gas Permit Transaction" assumes:                         
a. payment of $5 000 000 to Falcan Chaal Petroleum Limited                      
and Societe de Maintenance d`Installations Petrolieres,                         
the vendors in respect of the Chaal Gas Permit                                  
Transaction, converted at $1 - ZAR7.5047, being the                             
closing rate at 11 May 2010, the date of signature of the                       
Chaal Gas Permit agreements, which has been capitalised in                      
terms of IFRS 6: Exploration for and Evaluation of Mineral                      
Resources;                                                                      
b. the assumption of a contractual obligation of up to                          
$6,400,000, converted at $1 - ZAR7.5047, as above, in                           
respect of committed drilling costs, which has been                             
capitalised in terms of IFRS 6: Exploration for and                             
Evaluation of Mineral Resources; and                                            
c. transaction costs of R2 805 000 and the related tax                          
effects.                                                                        
5. The "After the Transactions" assumes all of the                              
adjustments detailed in notes 2 to 4 above. The above                           
adjustments are once-off in nature.                                             
9. Documentation                                                                
Both the Restructure and the Chaal Gas Permit Transaction                       
are Category 1 transactions in terms of the JSE Listings                        
Requirements. In addition, as Encha directly and                                
indirectly controls approximately 56.71 per cent of the                         
issued shares in SacOil, the Restructure is also a related                      
party transaction.                                                              
A circular containing the information required in terms of                      
the JSE Listing Requirements and incorporating a notice                         
convening a SacOil general meeting to approve, inter alia,                      
the Restructure and the Chaal Gas Permit Transaction will                       
be posted to SacOil shareholders upon receiving the                             
appropriate regulatory approvals.                                               
A further announcement will be made giving the salient                          
dates of the Restructure and the Chaal Gas Permit                               
Transaction once the relevant regulatory approvals have                         
been given.                                                                     
10. Withdrawal of cautionary                                                    
Shareholders are advised that caution is no longer                              
required to be exercised when dealing in their securities.                      
Midrand                                                                         
26 July 2010                                                                    
Sponsor                                                                         
BDO Corporate Finance                                                           
Corporate legal advisor                                                         
Deneys Reitz Inc.                                                               
Corporate financial advisor                                                     
Lonsa (Proprietary) Limited                                                     
Independent expert                                                              
Moore Stephens (Jhb) Corporate Finance                                          
(Proprietary) Limited                                                           
Independent reporting accountants and auditors                                  
Moore Stephens MWM Inc                                                          
Date: 26/07/2010 17:28:01 Supplied by www.sharenet.co.za                     
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