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Scl - Sacoil Holdings Limited - Sacoil Agrees Second Nigerian Short-term Oil And

Release Date: 01/03/2011 08:29:01      Code(s): SCL
SCL - SacOil Holdings Limited - SacOil agrees second Nigerian short-term Oil and
Gas production deal                                                             
SacOil Holdings Limited                                                         
Incorporated in the Republic of South Africa                                    
(Registration number: 1993/000460/06)                                           
Share code: SCL ISIN code:ZAE000127460                                          
("SacOil" or "the Company")                                                     
SacOil agrees second Nigerian short-term Oil and Gas production deal            
The Board of SacOil is pleased to announce that the joint venture between SacOil
and Energy Equity Resources Limited ("EER") (collectively the "Joint Venture")  
has concluded a second farm-out agreement, in this instance with Transnational  
Corporation of Nigeria PLC of Nigeria ("Transcorp") relating to OPL 281,        
Nigeria.                                                                        
1. Highlights                                                                   
* Subject to consent by Nigerian National Petroleum Corporation ("NNPC") and the
Honourable Minister of Petroleum Resources (on behalf of the Federal Government 
of Nigeria ("FGN")),the Joint Ventureshall acquire 40 per cent of Transcorp`s   
100 per cent participating interest in the Production Sharing Contract ("PSC")  
for OPL 281. SacOil`s direct interest in OPL281 will be 20 per cent.            
* SacOil has paid to the Federal Government of Nigeria ("FGN"), on behalf of the
Joint Venture and Transcorp, an outstanding signature bonus amount of US$8.75   
million. SacOil has also paid US$3.75 million to Transcorp as the first tranche 
farm-in fee. SacOil payments are secured by, inter alia, corporate guarantees   
from Transcorp.                                                                 
* Transcorp shall proceed to negotiate and execute a PSC with the NNPC -        
Concession holder on behalf of the FGN.                                         
* The Joint Venture together with Transcorp have agreed to pursue an accelerated
development plan (subject to NNPC and DPR approval) for hydrocarbons on OPL 281.
* As its entry cost, the Joint Venture shall pay a further farm-in fee of US$7.5
million to Transcorp upon NNPC and Ministerial consents for the farm-in process;
the Joint Venture shall also carry the recoverable cost commitment to fund the  
minimum work programme (which will be defined under the PSC for OPL 281). This  
is estimated to cost US$30.0 million in the first phase. A final farm-in fee of 
US$12.5 million is payable upon commerciality of the project.                   
* This agreement is the second significant oil and gas deal entered into by the 
Joint Venture.                                                                  
2. Introduction                                                                 
SacOil is pleased to announce that it has signed a farm-in agreement with       
Transcorp to acquire a 20 per cent participating interest in OPL 281 and under  
the OPL281PSC ("The Acquisition"). OPL 281 is located onshore in the western    
delta region of Nigeria and adjacent to the widely publicised Shell divestment  
block OML 42.                                                                   
SacOil`s Nigerian partner, EER 281 Nigeria Limited, a wholly owned Nigerian     
subsidiary of EER, has also executed the same farm-in agreement to acquire an   
additional 20 per cent Participating Interest in OPL 281 and under the OPL 281  
PSC, with Transcorp retaining the remaining 60 per cent. SacOil`s interest shall
be held directly through a wholly owned Nigerian subsidiary.                    
3. Background to OPL 281                                                        
OPL 281 was awarded to Transcorp during the FGNmini bid round in 2006. Transcorp
paid all but US$8.75 million of US$30 million signature bonus. The outstanding  
signature bonus has now been paid by SacOil, on behalf of the Joint Venture and 
Transcorp.                                                                      
Previous operator, Royal Dutch Shell, had discovery wells Obote-1 drilled in    
1970 and Ekoro-1 drilled in 1967 on OPL 281. 3D Seismic obtained by Shell       
1991/92 covers the entire block.                                                
4. Rationale for the Acquisition                                                
The Joint Venture commissioned an independent competent person report by TRACS  
International ("TRACS") which analysed discovery contingent resources of 250    
MMBOE. TRACS analysis shows Obote-1 encountered hydrocarbons at four levels     
between 8 720 ft and                                                            
12 350 ft, while Ekoro-1 found eight hydrocarbon sands between                  
8 260 ft and 10 761 ft respectively. It has discovered but undeveloped oil      
assets with an estimated recoverable contingent resource for the block of 100   
million barrels of oil equivalent (P50 as reported by TRACS, and a peak         
production potential rate of 30 000 barrels of oil per day.                     
5. Condition precedent to the Acquisition                                       
The Acquisition is subject to the following conditions precedent:               
* consent to the PSC for OPL 281 being settled and executed between Transcorp   
and the NNPC (concession holder); and                                           
* consent to the Acquisition being granted by the NNPC and the Honourable       
Minister of Petroleum Resources of the FGN.                                     
6. Consideration                                                                
* The initial farm-in fee of US$12.5 million, in respect of the Acquisition, has
been paid by SacOil in two tranches - US$8.75 million to the FGN and US$3.75    
million to Transcorp;                                                           
* A further farm-in fee to Transcorp of US$7.5 million upon receipt of NNPC and 
Ministerial consent for the farm-in;                                            
* A final farm-in fee to Transcorp of US$12.5 million when the project has      
reached first oil;                                                              
* The Joint Venture will carry 100 per cent of the minimum work programme cost  
as defined by the PSC for OPL 281.                                              
The effective date of the Acquisition is 28 February 2011.                      
7. Funding                                                                      
SacOil intends to fund the Acquisition from the following available sources:    
* proceeds received from a general issue of SacOil shares for cash. On 17       
February 2011 the Public Investment Corporation invested R70 million            
(approximately US$10 million) in the Company; and                               
* The completion, on 18 February 2010, of a 12-month convertible loan note      
facility from Renaissance BJM Securities (Proprietary) Limited in an amount of  
US$30.9 million.                                                                
8. 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 and diluted loss, headline and diluted headline   
loss, net asset value and net tangible 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 after adjusted for the           
Acquisition by SacOil, through a wholly owned Nigerian subsidiary, of a 20 per  
cent working interest in the OPL 233 licence in Nigeria ("the OPL 233           
Acquisition") which was announced on 7 December 2010 and the issue of 46 666 666
SacOil shares to PIC for cash amounting to R70 million ("Issue for Cash") which 
was announced on 21 February 2011, had the Acquisition occurred on 1 March 2010 
for income statement purposes and on 31 August 2010 for balance sheet purposes. 
The unaudited pro forma financial effects set out below are the responsibility  
of the directors 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 Acquisition: 
Before   After the   After the Change                      
                                OPL 233     OPL 233       %                     
                            Acquisition Acquisition,                            
                          and the Issue   the Issue                             
for Cash    for Cash                             
                                            and the                             
                                        Acquisition                             
Loss and diluted                                                                
loss per SacOil                                                                 
share (cents)       (2.21)        (2.70)      (2.78)      (2.96)                
Headline and diluted                                                            
headline loss per                                                               
SacOil share                                                                    
(cents)             (2.21)        (2.70)      (2.78)      (2.96)                
Net asset value                                                                 
per SacOil share                                                                
(cents)             13.39         29.94       29.86       (0.27)                
Net tangible asset                                                              
value per SacOil                                                                
share (cents)       13.39          3.94     (27.54)     (798.98)                
Weighted average                                                                
number of SacOil                                                                
shares in issue                                                                 
(`000)            314 800       361 467     361 467                             
Number of SacOil                                                                
shares in issue                                                                 
(`000)            321 635       368 302     368 302                             
Notes:                                                                          
1. The "Before" basic loss, diluted loss, headline loss and diluted headline    
loss per share have been extracted without adjustment from the unaudited,       
published results of SacOil for the six months ended 31 August 2010. The        
"Before" net asset value and tangible net asset value per share have been       
calculated from the financial information presented in the unaudited, published 
results of SacOil for the six months ended 31 August 2010.                      
2. The "After the OPL 233 Acquisition and the Issue for Cash" assumes:          
a. payment by SacOil of 50 per cent of the US$0.3 million upon execution of the 
OPL 233 Farm in agreement, converted at 6.87 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 OPL 233 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;                                                
d. the payment of transaction costs in respect of the OPL 233 Acquisition of    
R300 000;                                                                       
e. the issue of the 46 666 666 new SacOil Shares at 150 cents per SacOil share; 
and                                                                             
f. the payment of transaction costs in respect of the Issue for Cash of R2 500  
000.                                                                            
3. The "After the OPL 233 Acquisition, the Issue for Cash and the Acquisition"  
assumes:                                                                        
a. the adjustments detailed in note 2 above;                                    
b. payment by SacOil of 50 per cent of the initial amounts of US$8.75 million,  
US$3.75 million and US$7.5 million in respect of the OPL 281 farm-in agreement, 
converted at 7.12 to US$1, being the closing rate on 24 February 2011, which has
been capitalised in terms of IFRS 6: Exploration for and Evaluation of Mineral  
Resources;                                                                      
c. a long-term obligation of US$12.5 million, converted at R7.12 to US$1, in    
respect of the further farm-in fee and which has been capitalised in terms of   
IFRS 6: Exploration for and Evaluation of Mineral Resources; and                
d. the payment of transaction costs in respect of the OPL 281 Acquisition of    
R300 000.                                                                       
No income adjustment has been made in respect of the increased positive cash    
balance resulting from the Issue for Cash as the proceeds of the Issues for Cash
will be utilised for working capital.                                           
9. Future prospects for SacOil in Nigeria                                       
The Acquisition marks the second farm-in transaction for the Joint Venture and  
is another significant milestone in the continued development and growth of     
SacOil. The Joint Venture continues to seek further near term production assets 
in Nigeria with a view to progress on its near term production strategy.        
10. 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 the implementation of the Acquisition.                 
Bryanston                                                                       
1 March 2011                                                                    
Sponsor                                                                         
BDO Corporate Finance                                                           
Corporate Adviser                                                               
Renaissance BJM Securities (Proprietary) Limited                                
Contacts                                                                        
SacOil                                                                          
Robin Vela, Chief Executive Officer                                             
Tel: +27 (0) 11 575 7232                                                        
The Riverbed Agency                                                             
Raphala Mogase                                                                  
Tel: +27 (0) 11 783 7903                                                        
About SacOil                                                                    
SacOil is listed on the JSE Limited ("JSE") under the Oil and Gas sub-sector and
has a current market capitalisation of approximately R1.22 billion              
(approximately GBP105 million). The Company is also in the process of finalising
its application for an Admission to the AIM market of the London Stock Exchange,
resulting in a dual listing, with its primary listing remaining on the JSE.     
SacOil`s core strategy is to become a leading independent African upstream oil  
and gas company with a balanced portfolio of Pan-African assets. SacOil`s       
interests are in all phases of the upstream cycle - exploration, appraisal and  
near production and are currently in the DRC and Nigeria.                       
On 7 December 2010 the Company announced its first near production deal with    
Nigdel United Oil Company Limited to acquire a 20 per cent working interest in  
the OPL 233 licence. Oil concession block 233 is located immediately off the    
coast of the central delta region of Nigeria and adjacent to the giant Apoi     
field (>600mmbbls).                                                             
Date: 01/03/2011 08:29:00 Supplied by www.sharenet.co.za                     
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information disseminated through SENS.                                          



                                        
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