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Scl - Sacoil Holdings Limited - Sacoil Agrees First Nigerian Short Term Oil And

Release Date: 07/12/2010 10:45:02      Code(s): SCL
SCL - SACOIL Holdings Limited - SACOIL agrees first Nigerian short term Oil and 
Gas production deal and cautionary announcement                                 
SACOIL Holdings Limited                                                         
Incorporated in the Republic of South Africa (Registration number:              
Share code: SCL                       ISIN code: ZAE000127460                   
("SacOil" or "the Company")                                                     
SacOil agrees first Nigerian short term Oil and Gas production deal and         
cautionary announcement                                                         
The board of SacOil is pleased to announce that the joint venture between SacOil
and Equity Energy Resources Limited ("EER") (collectively the "Joint Venture")  
has concluded its first near production deal. The highlights being:             
*    SacOil acquires a 20 per cent. direct interest in Nigerian oil and gas     
    field OPL 233.                                                              
*    Production is expected to commence mid 2013 at a potential rate of 10,000  
bbls oil per day.                                                           
*    The Joint Venture will receive an inflated economic interest allowing the  
    recovery of exploration costs until 100 mmbbls of cumulative crude oil      
*    As its entry cost, the Joint Venture will pay a farm-in fee of US$8.0      
    million and carry the recoverable cost commitment to fund the minimum work  
*    This agreement is the first significant oil and gas deal entered into by   
the Joint Venture.                                                          
SacOil is pleased to announce that it has signed a farm-in agreement with Nigdel
United Oil Company Limited ("NIGDEL") to acquire a 20 per cent. working interest
in the OPL233 licence located immediately off the coast of the central delta    
region of Nigeria and adjacent to the giant Apoi field (>600mmbbls).            
SacOil`s Nigerian partner, EER 233 Nigeria Limited, a wholly owned Nigerian     
subsidiary of EER, has farmed into an additional 20 per cent. of the OPL233     
licence, with NIGDEL retaining the remaining 60 per cent. SacOil`s interest will
be held directly through a wholly owned Nigerian subsidiary. SacOil and EER`s   
collective 40 per cent. interest is referred to as the Acquisition.             
Background to OPL 233                                                           
OPL 233 was awarded to NIGDEL during the Federal Government of Nigeria bid round
in 2006 and a Production Sharing Contract was executed with Nigerian National   
Petroleum Corporation on the 7th May 2007 with an exploration period of 5 years.
Previous operator, Royal Dutch Shell, acquired a sparse grid of 2D seismic and  
drilled one exploration well (Olobia-1) in 1986. Evaluation of the well logs    
indicated 124ft of net oil and 90ft of gas and condensate in the Olobia-1 well. 
As the licence area is only 125 sq.km, only one phase of 3D acquisition will be 
Rationale for the Acquisition                                                   
SacOil commissioned an independent competent person report by TRACS             
International which analysed the Olobia-1 discovery well on OPL233 and          
attributed to SacOil`s direct interest, a P50 contingent resource valuation of  
4.1 mmBOE and a net present valuation (using a 10 per cent. discount rate) to   
SacOil at an assumed market price of US$70 per barrel of US$53.4 million.       
Significant exploration upside has been identified on existing 2D seismic data. 
However, the planned 3D OBC seismic survey will be performed over zones of      
interest to better quantify resource sizes.                                     
Condition precedent to the Acquisition                                          
The Acquisition is subject to consent to the farm-in agreement by the Federal   
Government of Nigeria.                                                          
A farm-in fee of US$8.0 million, in respect of the Acquisition, will be paid by 
the Joint Venture in 2 tranches - US$0.3 million upon execution of agreements   
with NIGDEL and US$7.8 million upon receipt of Federal Government of Nigeria    
consent for the farm in.  The Joint Venture will carry 100 per cent. of the     
minimum work programme cost until First Oil production and will have control on 
financial, technical and operational decision making. The estimated cost of 100 
per cent. of the minimum work programme is approximately US$50.0 million.       
The Joint Venture will recover all costs from cost oil and:                     
*    during the cost recovery period have 80:20 of profit oil split;            
*    will receive 50:50 profit oil split after cost recovery and  until         
    100mmbbls cumulative crude oil production; and                              
*    will receive 40:60 profit oil split after 100mmbbls cumulative crude oil   
First Oil production is estimated to commence mid 2013 at a production rate of  
7,200 bbls per day building up to 10,000 bbls per day (given facilities which   
are constrained) for the P90 and P10 cases respectively.                        
The effective date of the Acquisition is 30 November 2010.                      
Pro forma financial effects of the Acquisition                                  
The table below sets out the unaudited pro forma financial effects of the       
Acquisition on SacOil`s basic earnings per share, headline earnings per share,  
net asset value per share and tangible net asset value per SacOil share.        
The unaudited pro forma financial effects have been prepared to illustrate the  
impact of the Acquisition on the unaudited, published financial information of  
SacOil for the six months ended 31 August 2010, had the Acquisition occurred on 
1 March 2010 for income statement purposes and on 31 August 2010 for balance    
sheet purposes.                                                                 
The pro forma financial effects have been prepared using accounting policies    
that comply with International Financial Reporting Standards and that are       
consistent with those applied in the audited, published financial statements of 
SacOil for the year ended 28 February 2010.                                     
The unaudited pro forma financial effects set out below are the responsibility  
of the directors of SacOil and have been prepared for illustrative purposes only
and because of their nature may not fairly present the financial position,      
changes in equity, results of operations or cash flows of SacOil after the      
Before (1)     After       % Change                    
                         Actual         Pro forma                               
Earnings per share        (2.21)         (2.30)      (4.07)                     
Headlline loss per share  (2.21)         (2.30)      (4.07)                     
Net asset value per       13.39          13.30       (0.67)                     
share (cents)                                                                   
Net tangible asset value  13.39          (16.48)     (223.08)                   
per share (cents)                                                               
Weighted average number                                                         
of shares in issue        314 800                    314 800                    
Number of shares in       321 635                    321 635                    
issue (`000)                                                                    
1    The "Before" loss, headline loss, net asset value and net tangible asset   
    value per share has been extracted without adjustment from the unaudited,   
    published results of SacOil for the six months ended 31 August 2010. No     
adjustments have been made for transactions and share issues concluded      
    after 31 August 2010 as announced on 20 September 2010.                     
2    The "After" column assumes:                                                
    A    Payment by SacOil of 50 per cent. of the US$0.3 million upon execution 
of the farm-in agreement, converted at R6.87 to US$1, being the        
         closing rate on 3 December 2010, which has been capitalised in terms   
         of IFRS 6: Exploration for and Evaluation of Mineral Resources;        
    B    A short-term obligation of 50 per cent. of US$7.8 million, converted   
at R6.87 to US$1, in respect of that portion of the farm-in fee        
         payable upon receipt of consent from the Federal Government of Nigeria 
         for the farm-in and which have been capitalised in terms of IFRS 6:    
         Exploration for and Evaluation of Mineral Resources;                   
C    A long-term obligation of US$10.0 million, converted at R6.87 to US$1, 
         in respect of SacOil`s 20 per cent. share of the costs of the minimum  
         work programme and which have been capitalised in terms of IFRS 6:     
         Exploration for and Evaluation of Mineral Resources; and               
D    The payment of transaction costs of R300 000.                          
Future prospects for SacOil in Nigeria                                          
This agreement is the first for the Joint Venture and marks a significant       
milestone in the development of SacOil. The Joint Venture is actively pursuing  
other short term production situations in Nigeria with the view to progressing  
its near term production strategy.                                              
JSE requirements                                                                
The Acquisition is classified as a Category 2 transaction in terms of the JSE   
Listings Requirements and, accordingly, no further documentation or shareholder 
approval is required for implementation of the Acquisition.                     
Cautionary announcement                                                         
Further to announcements made on 25 June, 26 July, 3 September and 30 September 
2010, the Company is also considering various proposals and potential           
transactions. SacOil shareholders are advised to exercise caution when dealing  
in their SacOil securities until a further announcement is made in this regard. 
7 December 2010                                                                 
BDO Corporate Finance                                                           
Robin Vela, Chief Executive Officer                                             
Tel : +27 (0) 11 312 9330                                                       
Conduit PR (Public Relations)                                                   
Jonathan Charles / Jos Simson                                                   
Tel: +44 (0) 20 7429 6666                                                       
The Riverbed Agency                                                             
Raphala Mogase                                                                  
Tel: +27 (0) 11 783 7903                                                        
About SacOil                                                                    
SacOil is intent on becoming a leading independent indigenous upstream oil & gas
company with a balanced portfolio of Pan-African assets.                        
SacOil`s assets are in all phases of the upstream cycle - exploration, appraisal
and near production and are currently in the Democratic Republic of the Congo   
and Nigeria.                                                                    
The Company is listed on the JSE Limited under the Oil and Gas subsector and has
a current market capitalisation of approximately R1.2 billion (some GBP100m).   
The Company and is also seeking to dual list on the AIM market of the London    
Stock Exchange  early 2011.                                                     
Date: 07/12/2010 10:45:01 Supplied by www.sharenet.co.za                     
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information disseminated through SENS.                                          

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