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SCL - SacOil Holdings Limited - Reviewed provisional results for the year ended

Release Date: 24/05/2011 15:32:02      Code(s): SCL
SCL - SacOil Holdings Limited - Reviewed provisional results for the year ended 
28 February 2011                                                                
SacOil Holdings Limited                                                         
(Incorporated in the Republic of South Africa)                                  
(Registration number 1993/000460/06)                                            
JSE share code: SCL      AIM share code: SAC                                    
ISIN: ZAE000127460                                                              
("SacOil" or "the Company" or "the Group")                                      
Reviewed provisional results for the year ended 28 February 2011                
Consolidated Statement of Comprehensive Income                                  
                                                  Reviewed           Reviewed   
Group              Group   
                                                 12 months          12 months   
                                            to 28 February     to 28 February   
                                                      2011               2010   
R`000              R`000   
Revenue                                              35 143             31 724  
Cost of sales                                      (23 615)           (20 210)  
Gross profit                                         11 528             11 514  
Operating costs                                     (7 329)            (5 774)  
Profit from manganese operations                      4 199              5 740  
Corporate head office costs                         (4 021)            (1 953)  
Corporate action costs                             (24 680)            (2 417)  
Corporate costs                                    (28 701)            (4 370)  
Investment income                                     1 271                731  
Interest paid                                          (17)               (13)  
Net finance income                                    1 254                718  
Impairment of loans receivable                            -            (3 016)  
Share-based payment expense                         (4 179)                  -  
Fair value loss on revaluation of monetary                                      
investment                                            (105)                  -  
Exchange differences on revaluation of                                          
foreign loans receivable                            (2 124)                  -  
Other profit and loss items                         (6 408)            (3 016)  
Loss for the year before tax                       (29 656)              (929)  
Income tax                                             (95)                895  
Loss for the year                                  (29 751)               (34)  
Other comprehensive income                                                      
Fair value gain on revaluation of property,                                     
plant and equipment                                       -              3 195  
Reversal of fair value gain on revaluation                                      
of property, plant and equipment                      (340)                  -  
Income tax on other comprehensive income                 95              (895)  
Other comprehensive income for the year net                                     
of income tax                                         (245)              2 301  
Total comprehensive (loss)/income for the                                       
year net of income tax                             (29 996)              2 267  
Weighted average number of shares (`000)            449 629            313 292  
(Loss)/Earnings per share (cents)                    (6,67)               0,72  
Diluted (loss)/earnings per share (cents)            (6,21)               0,72  
Headline (loss)/earnings per share (cents)           (6,62)               0,95  
Diluted headline (loss)/earnings per share (cents)   (6,16)               0,95  
Reconciliation of headline (loss)/earnings:                                     
(Loss)/Earnings attributable to shareholders       (29 996)              2 267  
Impairment loss on revaluation of financial                                     
assets held for sale                                      -              3 016  
Fair value gain on revaluation of property,                                     
plant and equipment net of tax                            -            (2 301)  
Reversal of fair value gain on revaluation                                      
of property, plant and equipment                        245                  -  
Headline (loss)/earnings                           (29 751)              2 982  
Headline (loss)/earnings per share (cents)           (6,62)               0,95  
Diluted headline (loss)/earnings per share (cents)   (6,16)               0,95  
Consolidated Statement of Financial Position                                    
Non-current assets                                  447 173              8 535  
Property, plant and equipment                         6 644              7 640  
Intangible assets                                   394 642                  -  
Deferred tax asset                                      800                895  
Loan receivable                                      45 087                  -  
Current assets                                       38 038             40 942  
Loan receivable                                      11 413             27 867  
Inventory                                             2 408              2 305  
Trade accounts receivable                             5 034              3 558  
Sundry accounts receivable                            1 283                214  
Cash and cash equivalents                            17 900              6 998  
Total assets                                        485 211             49 476  
EQUITY AND LIABILITIES                                                          
Equity attributable to equity holders               307 818             43 332  
Stated capital                                      374 029             83 726  
Share-based payment reserve                          27 933             23 754  
Revaluation reserves                                  2 056              2 301  
Accumulated loss                                   (96 200)           (66 449)  
Non-controlling interest                            161 179                  -  
Total equity                                        468 997             43 332  
Non-current liabilities                                 946                934  
Liability under instalment sale agreement                 -                108  
Provision for environmental rehabilitation              946                826  
Current liabilities                                  15 268              5 211  
Trade accounts payable                                5 833              1 330  
Liability under instalment sale agreement                89                138  
Deferred tax liability                                  800                895  
Loans payable                                         8 259              2 503  
Sundry accounts payable                                 287                346  
Total equity and liabilities                        485 211             49 477  
Number of shares in issue (`000)                    674 090            313 292  
Net asset value per share (cents)                     69,57              13,83  
Net tangible asset value per share (cents)            11,03              13,83  
Consolidated Statement of Cash Flows                                            
Cash (utilised in)/generated from operations       (26 278)              2 146  
Cash generated from/(utilised in) movements                                     
in working capital                                      786            (2 421)  
Cash utilised in operating activities              (25 492)              (275)  
Investment income                                     1 062                731  
Interest paid                                          (17)               (13)  
Net cash flows from operating activities           (24 447)                443  
Net cash flows from investing activities           (54 475)              (263)  
Net cash flows from financing activities             89 824               (38)  
Net decrease in cash and cash equivalents            10 902                142  
Cash and cash equivalents at beginning of the year    6 998              6 856  
Cash and cash equivalents at end of the year         17 900              6 998  
Consolidated Statement of Changes in Equity                                     
Stated capital                                                                  
Opening balance                                      83 726             83 726  
Shares issued for cash                              132 803                  -  
Shares issued to acquire assets                     154 997                  -  
Shares issued to repay loan                           2 503                  -  
Closing balance                                     374 029             83 726  
Accumulated loss                                                                
Opening balance                                    (66 449)           (66 415)  
Total comprehensive (loss)/profit for the year     (29 996)              2 267  
Transfer to revaluation reserves net of tax             245            (2 301)  
Closing balance                                    (96 200)           (66 449)  
Revaluation reserves                                                            
Opening balance                                       2 301                  -  
Revaluation reserves net of deferred tax                  -              2 301  
Transfer of revaluation reserves to other                                       
comprehensive income net of tax                       (245)                  -  
Closing balance                                       2 056              2 301  
Share-based payment reserve                                                     
Opening balance                                      23 754             23 754  
Share-based payment expense                           4 179                  -  
Closing balance                                      27 933             23 754  
1. Basis of preparation                                                         
The annual financial statements of the Group for the year ended 28 February 2011
have been prepared in accordance with the Group`s accounting policies, which    
comply with International Financial Reporting Standards, IAS 34, as well as the 
AC 500 standards as issued by the Accounting Practices Board or its successor,  
the Listings Requirements of the JSE Limited and the Companies Act of South     
Africa and are consistent with those of the previous period. These financial    
statements have been prepared on a going concern basis.                         
All monetary information and figures presented in these financial statements are
stated in thousands of Rand (R`000), unless otherwise indicated.                
2. Auditors` review report                                                      
The provisional financial statements have been reviewed by the Group`s auditors,
BDO South Africa Inc. Their unmodified review opinion is available for          
inspection at the Company`s registered office.                                  
3. Comments on the results                                                      
The Group reported a headline loss of 6,62 (2010: earnings of 0,95) cents per   
share. The headline loss includes a loss of 6,38 cents per share directly       
attributable to corporate actions during the period under review as well as a   
loss of 1,15 cents per share from other profit and loss items.                  
A net asset value of 69,57 (2010: 13,83) cents per share and a tangible net     
asset value of 11,03 (2010: 13,83) cents per share were reported.               
The Company`s chemical manganese processing plant, the Greenhills plant,        
increased sales by 11 per cent. Profit from the manganese operations equated to 
R4,2 million (2010: R5,7 million) before tax. The management team continues to  
manage costs strictly and perform regular reviews of costs and selling prices to
ensure that margins are maintained. The decrease in profit is mainly due to     
increased costs to maintain and upgrade the plant during the period under       
review. Sales and production levels were maintained and the Company expects this
to continue during the ensuing reporting period.                                
Corporate action costs of R24,7 million is directly attributable to corporate   
actions taken by the Group during the period under review. These costs include  
advisory and professional fees paid in relation to, inter alia;                 
- the successful restructuring of the Group`s investment in the Block III       
rights, Albertine Graben ("Block III") in the Democratic Republic of the Congo  
("DRC") ("Block III Rights");                                                   
- the Group`s investment in oil prospecting licenses OPL233 and OPL281 in       
- the successful raising of R133,0 million in equity; and                       
- the Company`s successful admission to the AIM Market of the London Stock      
Exchange plc ("AIM") on 8 April 2011.                                           
Included in other profit and loss items for the period is R4,2 million in       
relation to share-based payment expenses recognised in terms of IFRS 2 - Share- 
based Payments, as well as exchange differences recognised of R2,7 million in   
relation to the revaluation of foreign loans receivable at year-end.            
4. Overview of foreign business interests                                       
The Group is party to transactions pertaining to Block III in the DRC and OPL281
and OPL233 in Nigeria ("the Transactions").                                     
4.1 Democratic Republic of the Congo                                            
Block III                                                                       
SacOil owns 50 per cent of the issued capital of Semliki Energy SPRL            
("Semliki"), a company incorporated in the DRC which, in turn, holds the oil    
concession rights pertaining to Block III.                                      
A Presidential Ordinance approving the Block III Production Sharing Agreement   
has been issued to Semliki, whereby Semliki has the right to apply (after       
fulfilling certain contractual obligations) for an exploration permit.          
On 31 March 2011, Semliki successfully concluded a farm-in agreement with Total 
E&P RDC ("Total") pursuant to which Total acquired a 60 per cent undivided      
interest ("the Block III Interest") in, and became the operator of, Block III.  
Refer to paragraph 10 below for details of the transaction.                     
4.2 Nigeria                                                                     
Blocks OPL233 and OPL281                                                        
Subsidiaries of the Company have entered into farm-in agreements in relation to 
oil concession Blocks OPL281 and OPL233 in Nigeria. Oil concession Block OPL233 
is located in the shallow water area of the Niger Delta of discovered but       
undeveloped oil assets. Oil concession Block OPL281 is an onshore block covering
some 138 km2, and is located in the western delta region of Nigeria             
approximately 25 km due east from the Forcados terminal.                        
Energy Equity Resources Limited ("EER") Joint Venture                           
In the important Nigerian oil and gas market, SacOil has formed a joint venture 
with the established oil and gas company, EER, to acquire and/or develop oil and
gas assets in Nigeria as announced by the Company on 12 October 2010. This joint
venture facilitates the acquisition by the Company of interests in oil and gas  
assets in Nigeria, including those relinquished and disposed of by international
oil companies in compliance with Nigeria`s indigenisation legislation.          
Shareholders are referred to previous SENS announcements, the first of which was
made on 12 October 2010 and the last of which was made on 4 March 2011, and to  
the Company`s Appendix to AIM Announcement dated 8 March 2011, for further      
details of the Transactions. These documents can also be found on               
5. Admission to AIM                                                             
On 8 April 2011 SacOil announced the commencement of trading in its shares on   
AIM after an introduction by the Company`s Nominated Adviser and joint broker   
finnCap Limited and joint broker Renaissance Capital Limited ("the Admission"). 
The Company remains listed on the Main Board of the JSE Limited.                
6. Board and management                                                         
On 11 April the board of directors announced the appointment of Messrs John     
Bentley and Bill Guest as non-executive directors of the Company with effect 1  
May 2011. The board believes that their wealth of global experience and skills, 
combined with their extensive operational experience, will be a significant     
asset to the Company. Their appointment will further enhance the Company`s      
vision to become a Pan-African upstream oil and gas company.                    
The Company also appointed Mr Bradley Cerff as Vice President - Commercial with 
effect from 9 May 2011. Mr Cerff has a MSc degree and an MBA degree.            
Mr Cerff has extensive knowledge of geophysical, geological, engineering        
techniques and applications for oil and gas prospect and field evaluation. He   
also has extensive experience in oil and gas financial analysis, planning and   
modelling. His strong technical background in supervising and conducting oil and
gas field evaluations will be an asset to the Company. Mr Cerff will be         
responsible for evaluation of new upstream opportunities as well as             
coordinating, organising and managing the Company`s portfolio of assets.        
7. Litigation update                                                            
The Company previously reported on the application instituted by Identiguard    
International (Proprietary) Limited ("Identiguard") against SacOil (Proprietary)
Limited, an entity in which the Company owns 50 per cent of the issued share    
capital. Identiguard obtained a judgment against the DRC Government. In partial 
execution of that judgment, Identiguard sought to attach the payment of the     
supplementary signature bonus (US$2,0 million) under the Block III Production   
Sharing Agreement that was concluded between SacOil (Proprietary) Limited and   
the DRC Government. Despite SacOil (Proprietary) Limited`s opposition to the    
application, the South Gauteng High Court has now delivered judgment in favour  
of Identiguard and authorised the notice of attachment. The South Gauteng High  
Court also ordered SacOil (Proprietary) Limited to pay the costs of the         
application. The South Gauteng High Court dismissed an application by SacOil    
(Proprietary) Limited to file an affidavit to place further information before  
the Court. We are of the view that the inclusion of this affidavit could have   
had a material impact on the outcome of the matter.                             
SacOil (Proprietary) Limited has accordingly instructed its South African legal 
representatives, Deneys Reitz Inc, to apply for leave to appeal against the     
South Gauteng High Court judgment.                                              
8. Funding                                                                      
During the period under review the Company raised a total of R133,0 million in  
equity. As stated at Admission to AIM on 8 April 2011, the directors of SacOil  
have no reason to believe that the working capital available to the Company or  
the Group will be insufficient for at least 12 months from the date of its      
9. Dividends                                                                    
The board has resolved not to declare any dividend to shareholders for the      
period under review.                                                            
10. Post-balance sheet events                                                   
Block III                                                                       
10.1 Farm-in agreement with Total ("Total Agreement")                           
On 31 March 2011 Semliki and Total successfully concluded a farm-in agreement in
terms of which Semliki agreed to sell the Block III Interest to Total for an    
initial consideration of US$15,0 million. The agreement makes provision for     
Semliki to receive a bonus payment of US$58,0 million in the event that the     
Final Investment Decision ("FID") date is achieved and for a second bonus       
payment of US$50,0 million in the event that the First Oil Date is achieved.    
Total, in its capacity as operator of Block III, undertakes to use its          
reasonable endeavours to ensure that:                                           
- the FID date is achieved within three years of the date upon which all the    
conditions precedent are satisfied or waived ("Completion Date"); and           
- the First Oil Date is achieved within two years of the FID date. Total        
undertakes to carry Semliki`s 40 per cent share of costs incurred pursuant to   
the provisions of the Block III Production Sharing Agreement and the Block III  
Joint Operating Agreement, provided that Total is entitled to recover such costs
and interest thereon from Semliki`s entire share of cost oil and 80 per cent of 
Semliki`s share of profit oil under the Block III Joint Operating Agreement.    
Total further undertakes to effect payment of the Block III Cession Bonus to the
DRC Government within three business days of the Completion Date.               
10.2 Rationale                                                                  
Semliki has entered into the Total Agreement because SacOil has been seeking an 
operational partner to assist with the evaluation and exploration of the Block  
III rights. The board believes that engaging one of the super oil majors, such  
as Total, will give the Company access to the skills and technical expertise    
necessary to successfully advance the exploration of Block III. Not only does   
Total have the skills and expertise, but also the operational capacity to       
fulfill this role.                                                              
The implementation of the Total Agreement will significantly de-risk SacOil in  
respect of commercialising the Block III rights, executing the Block III Work   
Programme and the financial risk in relation to the funding of the operations of
Block III since Total will be the operator. The implementation of the agreement 
will also permit cash flow to be released from the transaction which can be     
utilised to fund the Company`s Nigerian activities.                             
In terms of the Total Agreement, Total, in its capacity as operator, will use   
its reasonable endeavors to ensure that one exploration well is drilled by the  
Block III Contractant before 31 December 2012 or by the earliest possible date  
thereafter. Total has the necessary infrastructure including pipelines in place 
to extract and supply crude oil.                                                
The DRC Minister of Hydrocarbons approved the transfer of the Block III Interest
to Total and the appointment of Total as the operator of Block III.             
10.3 Value to SacOil                                                            
The board is of the view that, due to the nature of the Total Agreement, it is  
not possible to accurately assess the accretion of value to SacOil pursuant to  
the Total Agreement; however, in evaluating the merits of the Total Agreement,  
the board has considered the following:                                         
- in aggregate, US$61,5 million will be paid by Total to SacOil by the First Oil
- it estimates the quantum of SacOil`s share of the Carried Costs in relation to
the exploration costs to be in the region of US$35,0 million;                   
- the directors believe the value of SacOil`s residual effective 12,5 per cent  
interest in the Block III Rights will be considerably higher with the assistance
of Total, in comparison to the value that its previous effective 42,5 per cent  
interest in the Block III Rights would have in the absence of the Total         
Agreement; and                                                                  
- the Competent Person`s Report dated 24 February 2011 produced by Bayphase     
Limited in relation to SacOil`s interest in Block III values the Total farm in  
to Block III to SacOil on a cost approach basis on completion as US$128,9       
11. Greenhills plant                                                            
The Greenhills plant continues to operate profitably. SacOil has progressed its 
stated strategic focus of targeting the acquisition of exploration, discovered  
but undeveloped, and/or previously producing but now shut in near-term producing
and production assets on the African continent. Because of the Company`s new    
strategic focus and the fact that the Greenhills plant has become a non-core    
asset of SacOil, the management team is currently exploring strategic           
alternatives for its manganese operations, one of which could be to dispose of  
the plant.                                                                      
12. Future direction                                                            
SacOil is intent on becoming a leading independent African upstream oil and 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 DRC and Nigeria. The board continues to seek other     
opportunities which have the potential to add value to the Group.               
By order of the board                                                           
Melinda Gous                                                                    
Fusion Corporate Secretarial Services                                           
(Proprietary) Limited                                                           
Company secretary                                                               
Tavistock (Public Relations UK)                                                 
Jos Simson/Ed Portman                                                           
Tel: +44 (0) 20 7429 6666                                                       
The Riverbed Agency (Public Relations SA)                                       
Raphala Mogase                                                                  
Tel: +27 (0) 11 783 7903                                                        
24 May 2011                                                                     
Directors: R Linnell* (Chairman), J Bentley*, C Bird, C de Beer (Finance        
Director), B Guest*, G Moseneke, R Vela (Chief Executive Officer)               
Registered office: 2 Floor, The Gabba, Dimension Data Campus,                   
57 Sloane Street, Bryanston, 2021, South Africa                                 
Registered postal address: Postnet Suite 211, Private Bag X75, Bryanston,       
2021, South Africa                                                              
Transfer secretaries: Link Market Services South Africa (Proprietary) Limited   
Nominated Adviser: finnCap Limited                                              
Auditors: BDO South Africa Inc.                                                 
Corporate legal advisers: Deneys Reitz Inc.                                     
Sponsor: Standard Bank Limited                                                  
Date: 24/05/2011 15:32:01 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
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howsoever arising, from the use of SENS or the use of, or reliance on,          
information disseminated through SENS.                                          

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