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Sacoil Holdings Limited - Summarised Audited Results For The Year Ended 28 February 2014

Release Date: 28/05/2014 15:30:00      Code(s): SCL     
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 together with its subsidiaries "the Group")

SUMMARISED AUDITED RESULTS 
for the year ended 28 February 2014


Highlights:
- Board and subcommittees reconstituted
- Lifting of JSE and AIM suspension
- R336.6 million raised through Rights Issue
- R238.5 million Gairloch loans converted to equity
- Company is debt free
- New shareholder structure
- Acquisition of three exploration licences in Botswana
- Commencement of OPL 233 3D seismic survey
- Signing of OPL 281 Production-sharing Contract
- Signing of a Memorandum of Understanding to pursue gas opportunities in Mozambique
- Appointment of new Chief Executive Officer


OVERVIEW
The Group's income and financial assets are predominantly denominated in US Dollars. 
The weakening of the Rand, and the resulting increase in foreign exchange gains and 
foreign income receivable, significantly underpinned the financial results of the Group. 
In addition to the increase in income, the Group's operating costs decreased by 43% 
primarily due to a reduction in the impairment of the Group's financial assets. 
Consequently, for the year ended 28 February 2014, the Group reported a profit before 
taxation of R64.7 million (2013: loss of 29.3 million). 

FINANCIAL PERFORMANCE
Other income
Other income comprises foreign exchange gains totalling R47.4 million 
(2013: R32.1 million) which arose on translation of the US Dollar denominated cash 
collateral, the contingent consideration receivable and loans advanced to Energy 
Equity Resources (Norway) Limited ("EERNL") and DIG Oil (Proprietary) Limited ("DIG"). 

In the prior financial year other income included profit of R71.7 million on disposal 
of exploration and evaluation assets, foreign exchange gains totalling R32.1 million, 
the break fee received from a third party of R7.9 million and various other income 
items totalling R11.5 million.

Other operating costs
The decrease in other operating costs is a combination of improved cost management 
given the liquidity challenges faced by the Group during the 2014 financial year and 
the reduction in the impairment of the Group's financial assets.

Investment income
Interest receivable from EERNL contributed R103.0 million (2013: R37.6 million) 
towards investment income. The Group's cash and cash equivalents generated interest 
income totalling R0.9 million (2013: R0.8 million). Interest accruing to the Group 
as a result of the unwinding of the time value discount applied to the Group's 
financial assets contributed a further R26.7 million (2013: R8.5 million). The Group's 
financial assets in this regard are the contingent consideration receivable, the advance 
payment against future services and the deferred consideration on disposal of the 
Greenhills Plant. 

The increase in investment income is primarily attributable to the weakening of the 
Rand and default interest on the loan to EERNL at 2% per annum (compounded) from 
1 June 2013, over and above the contractual interest rate of 30% per annum on loans 
advanced to EERNL. No additional loans were advanced to EERNL during the financial 
year under review.

Finance costs
The Group's finance costs for the year under review total R91.9 million 
(2013: R64.0 million). Finance costs totalling R40.9 million (2013: R35.1 million) 
incurred on specific borrowings from Gairloch Limited ("Gairloch") and the Public 
Investment Corporation (SOC) Limited ("PIC") have been capitalised to the OPL 233 
exploration and evaluation ("E&E") asset, which is a qualifying asset in terms of IFRS. 
A further R38.1 million (2013: R5.1 million) is recoverable from EERNL under the terms 
of the loan agreement with EERNL and has been capitalised to the EERNL loan receivable. 
The remaining finance costs of R12.9 million (2013: R23.8 million) in the statement of 
comprehensive income include interest totalling R11.6 million (2013: R5.1 million) on 
Gairloch loans utilised for the Group's working capital requirements, and debt-raising 
fees and interest paid on the loan from the PIC totalling R0.8 million (2013: RNil). 
These loans were equity and cash settled in January 2014. Finance costs in the prior 
year also included R18.7 million relating to the discounting of financial assets.

The increase in finance costs is primarily attributable to the Gairloch loan which 
attracted interest for a period of seven months in the current year, relative to 
one month in the prior financial year. This loan was equity-settled in January 2014.

FINANCIAL POSITION
Exploration and evaluation assets
The Group invested R62.6 million (2013: R7.5 million) in OPL 233 for the seismic 
acquisition phase of the work programme. Furthermore, the Group capitalised 
R40.9 million (2013: R35.1 million) of borrowing costs attributable to specific 
Gairloch borrowings. The Group also acquired exploration licences in Botswana for 
R0.4 million (2013: R0.9 million acquisition of Malawi licence). 

Other financial assets
The Group's other financial assets include the contingent consideration receivable 
from Total E&P RDC ("Total") pursuant to the farm-out of Block III, loans advanced to 
EERNL and DIG, the advance payment against future services and the deferred 
consideration on disposal of the Greenhills Plant.

Interest receivable for the year from EERNL increased other financial assets by 
R103.0 million (2013: R37.6 million). Interest on specific Gairloch borrowings also 
increased other financial assets by R38.1 million (2013: R5.1 million). This interest 
is recoverable from EERNL under the terms of the loan agreement. During the financial 
year under review, EERNL paid R13.8 million (2013: R25.8 million) towards the 
settlement of the loan outstanding. An impairment provision of R37.9 million (2013: RNil) 
relating to part of the short-term interest receivables off-sets these increases.

Foreign exchange gains contributed R105.4 million (2013: R25.1 million) to the increase 
in other financial assets. These gains arose on the translation of the US Dollar 
denominated contingent consideration receivable and the loans advanced to EERNL and DIG. 

Interest arising from the unwinding of the time value discount applied to financial 
assets contributed R26.7 million (2013: R8.5 million) to the increase in other 
financial assets. 

An impairment loss of R22.1 million (2013: R129.9 million) arising from the write-down 
of future expected cash flows from the contingent consideration receivable also off-set 
the increases noted above. The write-down was necessitated by a change in timelines 
affecting the receipt of the contingent consideration and is reflective of the time 
value of money.

Cash and cash equivalents
A Rights Offer that was undertaken to recapitalise the Company closed at the end of 
January 2014. Total cash of R336.6 million was raised representing 59% subscription to 
the Rights Offer. At 28 February 2014 cash and cash equivalents include R273.3 million 
of these funds after the settlement of the PIC loan (R47.9 million) and the Group's 
accumulated short-term liabilities (R15.4 million). 

Cash and cash equivalents also include the historical OPL 233 performance bond cash 
collateral of R108.1 million (2013: R89.1 million) (US$10 million) which has been 
revalued by R19.0 million (2013: R6.5 million), net of interest income. 

Total shareholders' equity
The Rights Offer proceeds noted above contributed R336.6 million towards the increase 
in equity. The equity settlement of the Gairloch loans contributed a further 
R238.5 million. SacOil also raised R0.7 million by way of a general issue for cash 
during the financial year under review. 

The Group's profit for the year increased shareholders' equity by a further R9.5 million.

Deferred tax liability
Deferred tax arises from the estimated future contingent consideration receivable and 
various temporary differences on transactions of the Group. The increase in the 
contingent consideration by R40 million (2013: decrease of R81.8 million) resulted in 
a deferred tax change of R16 million (2013: credit of R32.7 million). A further charge 
of R3.9 million (2013: RNil) arose from the Group's transactions with connected parties 
and impairment provisions.

Other financial liabilities
The decrease in other financial liabilities reflects the equity settlement of the 
Gairloch loans totalling R238.5 million (2013: R129.0 million), off-set by increases 
in the amounts due to EERNL for its equivalent share of the cash collateral and 
Nigdel United Oil Company Limited ("Nigdel") for OPL 233 work programme costs. The 
amounts due to EERNL increased by foreign exchange losses totalling R9.7 million 
(2013: R3.3 million), reflective of the weakening of the Rand against the US Dollar. 
The amounts due to Nigdel increased by R17.9 million (2013: R2.4 million) representing 
SacOil's share of OPL 233 seismic costs at the reporting date.

Current tax payable
The Group experienced significant liquidity challenges during the 2014 financial year 
and was unable to settle foreign taxes payable. As a result taxes attributable to 
disposals by the Group of exploration and evaluation assets and the declaration of 
dividends in prior financial years remained outstanding and continued to accrue 
interest during the 2014 financial year. Interest on taxes outstanding amounts to 
R21.4 million (2013: R36.9 million). Foreign exchange losses total R47.5 million 
(2013: RNil). The foreign taxes are denominated in US Dollars.

The Group's current tax charge for the year is R14.0 million (2013: RNil). The Group's 
profit for the year was primarily driven by foreign exchange gains on transactions 
with non-connected parties and interest receivable from EERNL.

CASH FLOWS 
Cash totalling R39.1 million (2013: R24.7 million) was used to fund the Group's 
working capital requirements, including but not limited to remuneration (R13.5 million), 
consulting fees (R2.1 million), legal fees (R1.9 million), corporate costs 
(R7.4 million), audit fees (R2.0 million), rentals (R1.1 million), travel and 
accommodation (R1.4 million), and broker fees (R0.9 million).

The Group's investment of R63.2 million in the Botswana licences, OPL 233 seismic costs, 
property, plant and equipment and intangible assets, off-set by the cash inflows from the 
Group's loans and receivables of R14.8 million (primarily the part payment of 
R13.8 million of the EERNL loan), resulted in net cash used in investing activities of 
R48.4 million (2013: R0.9 million).

The Rights Offer proceeds of R336.6 million, together with the increase in the amounts 
owed to Nigdel and EERNL, resulted in net cash from financial activities of 
R355.9 million (2013: R101.5 million).


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                  2014           2013
                                                   Note              R              R
Other income                                                47 350 527    123 222 360 
Other operating costs                                     (100 247 072)  (175 626 093)
Loss from operations                                       (52 896 545)   (52 403 733)
Investment income                                          130 555 693     46 940 839 
Finance costs                                              (12 931 875)   (23 837 213)
Profit/(loss) before taxation                               64 727 273    (29 300 107)
Taxation                                                   (55 212 656)   (40 785 309)
Profit/(loss) for the year                                   9 514 617    (70 085 416)

Discontinued operation
Loss from discontinued operation                                     -     (1 526 959)
Profit/(loss) for the year                                   9 514 617    (71 612 375)

Other comprehensive loss:          
Items that will not be reclassified to profit or loss 
  in subsequent periods:          
Release of revaluation reserve on impairment of 
  property, plant and equipment                                      -     (1 045 359)
          
Items that may be reclassified to profit or loss 
  in subsequent periods:                                             -              - 
Other comprehensive loss for the year, net of taxation               -     (1 045 359)
Total comprehensive income/(loss) for the year               9 514 617    (72 657 734)
          
Profit/(loss) attributable to:
Equity holders of the parent                                19 594 296    (55 627 404)
Non-controlling interest                                   (10 079 679)   (15 984 971)
Profit/(loss) for the year                                   9 514 617    (71 612 375)
          
Total comprehensive income/(loss) attributable to:
Equity holders of the parent                                19 594 296    (56 672 763)
Non-controlling interest                                   (10 079 679)   (15 984 971)
Total comprehensive income/(loss) for the year               9 514 617    (72 657 734)
          
Earnings/(loss) per share           
Basic (cents)                                         4           1.37          (6.10)
Diluted (cents)                                       4           1.36          (6.09)
          
          
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                  2014           2013
                                                   Note              R              R
ASSETS
Non-current assets
Property, plant and equipment                                  247 207        317 008 
Exploration and evaluation assets                          266 809 536    162 859 167 
Other intangible assets                                        175 476        161 760 
Other financial assets                                     433 344 048    371 719 195 
Total non-current assets                                   700 576 267    535 057 130 
          
Current assets          
Other financial assets                                     222 542 359     84 803 036 
Trade and other receivables                                    649 764      3 665 149 
Cash and cash equivalents                                  381 579 766     94 032 416 
Total current assets                                       604 771 889    182 500 601 
Total assets                                             1 305 348 156    717 557 731 
          
EQUITY AND LIABILITIES          
Shareholders' equity          
Stated capital                                        6  1 109 977 054    534 172 123 
Reserves                                                     6 001 847     26 681 469 
Accumulated loss                                          (179 426 156)  (219 700 074)
Equity attributable to equity holders of parent            936 552 745    341 153 518 
Non-controlling interest                                    12 218 476     22 298 155 
Total shareholders' equity                                 948 771 221    363 451 673 
          
Liabilities          
Non-current liabilities          
Deferred tax liability                                      92 498 394     72 588 101 
Total non-current liabilities                               92 498 394     72 588 101 
          
Current liabilities          
Other financial liabilities                                 74 167 311    175 574 827 
Current tax payable                                        176 856 253     93 962 655 
Trade and other payables                                    13 054 977     11 980 475 
Total current liabilities                                  264 078 541    281 517 957 
Total liabilities                                          356 576 935    354 106 058 
Total equity and liabilities                             1 305 348 156    717 557 731 
Number of shares in issue                                3 086 169 261    953 340 791 
Net asset value per share (cents)                                30.74          38.12
Net tangible asset value per share (cents)                       22.10          21.04
          

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY          
                                                                                                       Total equity
                                                                                                       attributable           Non-
                                  Stated                   Share-based                                    to equity    controlling   
                                 capital    Revaluation        payment          Total    Accumulated     holders of       interest          Total
                                 (Note 6)       reserve        reserve       reserves           loss     the parent         ("NCI")        equity
                                       R              R              R              R              R              R              R              R
Balance at 29 February 2012  486 184 423      1 810 947     27 932 584     29 743 531    (188 602 491)   327 325 463    109 943 833    437 269 296
Changes in equity:
Loss for the year                      -              -              -              -     (55 627 404)   (55 627 404)   (15 984 971)   (71 612 375)
Other comprehensive loss 
for the year                           -     (1 045 359)             -     (1 045 359)              -     (1 045 359)             -     (1 045 359)
Total comprehensive loss 
for the year                           -     (1 045 359)             -     (1 045 359)    (55 627 404)   (56 672 763)   (15 984 971)   (72 657 734)
Issue of shares               47 987 700              -              -              -               -     47 987 700              -     47 987 700 
Share options lapsed                   -              -     (1 251 115)    (1 251 115)      1 251 115              -              -              - 
Acquisition of non-
  controlling interest                 -              -              -              -      22 513 118     22 513 118    (47 086 913)   (24 573 795)
Transfer on disposal of assets         -      (765 588)              -       (765 588)        765 588              -              -              - 
Dividends                              -              -              -              -               -              -    (24 573 794)   (24 573 794)
Total changes                 47 987 700     (1 810 947)    (1 251 115)    (3 062 062)    (31 097 583)    13 828 055    (87 645 678)   (73 817 623)
Balance at 28 February 2013  534 172 123              -     26 681 469     26 681 469    (219 700 074)   341 153 518     22 298 155    363 451 673 
Changes in equity:           
Profit/(loss) for the year             -              -              -              -      19 594 296     19 594 296    (10 079 679)     9 514 617 
Total comprehensive income/          
(loss) for the year                    -              -              -              -      19 594 296     19 594 296    (10 079 679)     9 514 617 
Issue of shares              575 804 931              -              -              -               -    575 804 931              -    575 804 931
Share options lapsed                   -              -    (20 679 622)   (20 679 622)     20 679 622              -              -              - 
Total changes                575 804 931              -    (20 679 622)   (20 679 622)     40 273 918    595 399 227    (10 079 679)   585 319 548
Balance at 
  28 February 2014         1 109 977 054              -      6 001 847      6 001 847    (179 426 156)   936 552 745     12 218 476    948 771 221


CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                  2014           2013
                                                                     R              R
Cash flows from operating activities          
Cash used in operations                                    (39 133 285)   (24 692 023)
Interest income                                                889 724        843 988
Finance costs                                               (1 324 143)             - 
Tax received/(paid)                                             32 404        (33 714)
Net cash used in operating activities                      (39 535 300)   (23 881 749)
Cash flows from investing activities          
Purchase of property, plant and equipment                      (71 426)        (8 200)
Purchase of exploration and evaluation assets              (63 026 602)    (8 478 078)
Purchase of other intangible assets                            (86 956)      (184 869)
Sale of exploration and evaluation assets                            -     75 997 000
Decrease/(increase) in loans and receivables                14 793 124    (68 190 699)
Net cash used in investing activities                      (48 391 860)      (864 846)
Cash flows from financing activities          
Proceeds on share issue                                    337 273 662              - 
Proceeds from other financial liabilities                   18 670 494    150 617 203
Acquisition of non-controlling interest                              -    (24 573 795)
Dividends paid to NCI                                                -    (24 573 794)
Net cash from financing activities                         355 944 156    101 469 614
Total movement in cash and cash equivalents for the year   268 016 996     76 723 019
Foreign exchange gains on cash and cash equivalents         19 530 354      6 535 099
Cash and cash equivalents at the beginning of the year      94 032 416     10 774 298
Cash and cash equivalents at the end of the year           381 579 766     94 032 416


1  Basis of preparation
   The consolidated annual financial statements of the Group for the year ended 
   28 February 2014 have been prepared in accordance with the Group's accounting 
   policies, which comply with the recognition and measurement criteria of 
   International Financial Reporting Standards, and the presentation and disclosure 
   requirements of IAS 34 - Interim Financial Reporting, the SAICA Financial Reporting 
   Guides as issued by the Accounting Practices Committee, the Financial Reporting 
   Pronouncements as issued by Financial Reporting Standards Council, the Listings 
   Requirements of the JSE Limited and the Companies Act of South Africa (No. 71 of 
   2008, as amended). The accounting policies applied in the preparation of the 
   results for the year ended 28 February 2014 are consistent with those adopted in 
   the financial statements for the year ended 28 February 2013, except as noted below.

   The Group has adopted the following new standards and amendments to standards, 
   including any consequential amendments to other standards: IFRS 10 - Consolidated 
   Financial Statements, IFRS 11 - Joint Arrangements, IFRS - 12 Disclosure of Interests 
   in Other Entities, IFRS 13 - Fair Value Measurement, and Presentation of other 
   comprehensive income (Amendments to IAS 1). Application of these standards has not 
   had a material impact on the measurement of assets and liabilities of the Group, 
   but has resulted in additional disclosures.

   These consolidated annual financial statements have been prepared on a going 
   concern basis. 

   All monetary information is presented in the functional currency of the Company, 
   being South African Rand.


2  Auditor's review report          
   The Group annual financial statements are the responsibility of the directors of 
   the Company. They have been prepared under the supervision of Tariro Mudzimuirema 
   CA (SA). These financial statements have been audited by Ernst & Young Inc., the 
   Group's auditors. The unqualified audit report includes an emphasis of matter 
   paragraph, which refers to the directors' disclosure in note 9 which indicates 
   conditions which give rise to a material uncertainty which may cast significant 
   doubt on the Company's ability to continue as a going concern. The audit report 
   is available for inspection at the Company's registered office and is available in 
   the integrated annual report, which is available on the Company's website.


3  Segmental reporting
   The Group operates in five geographical locations, which form the basis of the 
   information evaluated by the Group's chief decision-maker. For management purposes 
   the Group is organised and analysed by these locations. These locations are: 
   South Africa, Nigeria, DRC, Botswana and Malawi. Operations in South Africa relate 
   to the general management, financing and administration of the Group.          

                                 Nigeria            DRC         Malawi       Botswana   South Africa   Consolidated
   2014                                R              R              R              R              R              R
   Other income                9 722 354     12 441 074              -              -     25 187 099     47 350 527
   Investment income             872 310     20 499 497              -              -    109 183 886    130 555 693
   Finance costs                       -              -              -              -    (12 931 875)   (12 931 875)
   Other operating expenses     (199 450)   (22 149 316)             -        (10 381)   (77 887 925)  (100 247 072)
   Taxation                       32 404    (37 378 904)             -              -    (17 866 156)   (55 212 656)
   Profit/(loss) for the year 10 427 618    (26 587 649)             -        (10 381)    25 685 029      9 514 617 
          
   Segment assets
     - non-current           191 159 973    295 859 426        896 740        386 548    212 273 580    700 576 267 
     - current               108 144 436     38 929 675              -              -    457 697 778    604 771 889
   Segment liabilities
     - non-current                     -    (88 597 261)             -              -     (3 901 133)   (92 498 394)
     - current               (53 973 973)  (136 593 804)             -              -    (73 510 764)  (264 078 541)
          
                                 Nigeria            DRC         Malawi       Botswana   South Africa   Consolidated
   2013                                R              R              R              R              R              R
   Other income                        -     87 537 316              -              -     35 685 044    123 222 360 
   Investment income             742 237      8 510 118              -              -     37 688 484     46 940 839
   Finance costs                       -              -              -              -    (23 837 213)   (23 837 213)
   Other operating expenses   (1 577 049)  (130 320 152)             -              -    (43 728 892)  (175 626 093)
   Taxation                      (33 713)   (32 628 727)             -              -     (8 122 869)   (40 785 309)
   Loss for the year            (868 525)   (66 901 445)             -              -     (2 315 446)   (70 085 416)
          
   Loss from discontinued operation                                                                      (1 526 959)
   Loss for the year                                                                                    (71 612 375)
   Segment assets
     - non-current            87 596 152    255 836 529        896 740              -    190 727 709    535 057 130
     - current                89 139 856         58 510              -              -     93 302 235    182 500 601
   Segment liabilities
     - non-current                     -    (72 588 101)             -              -              -    (72 588 101)
     - current               (44 199 000)   (75 592 235)             -              -   (161 726 722)  (281 517 957)

   Business segments
   The operations of the Group comprise one class of business, being oil and gas exploration and development.


                                                                  2014           2013
4  Earnings/(loss) per share                                         R              R
   From continuing and discontinued operations          
   Basic (cents)                                                  1.37          (6.10)
   Diluted (cents)                                                1.36          (6.09)
   From discontinued operation          
   Basic (cents)                                                     -          (0.17)
   Diluted (cents)                                                   -          (0.17)
   From continuing operations          
   Basic (cents)                                                  1.37          (5.93)
   Diluted (cents)                                                1.36          (5.93)
          
   Profit/(loss) for the year used in the calculation 
     of the basic and diluted earnings/(loss) per share 
     from continuing and discontinued operations            19 594 296    (55 627 404)
          
   Loss from discontinued operation                                  -      1 526 959
   Profit/(loss) used in the calculation of basic 
     and diluted earnings/(loss) per share from 
     continuing operations                                  19 594 296    (54 100 445)
          
   Weighted average number of ordinary shares used in 
     the calculation of basic earnings/(loss) per share  1 435 074 830    912 157 573 
   Issued shares at the beginning of the reporting 
     period                                                953 340 791    832 225 699 
   Effect of shares issued during the reporting period 
     (weighted)                                            481 734 039     79 931 874 
          
   Add: Dilutive share options                               1 618 673        540 006 
   Weighted average number of ordinary shares used in 
     the calculation of diluted earnings/(loss) 
     per share                                           1 436 693 503    912 697 579 
          
   Headline earnings/(loss) per share          
   Basic (cents)                                                  1.37          (8.10)
   Diluted (cents)                                                1.36          (8.10)
          
   Reconciliation of headline loss          
   Profit/(loss) for the year from continuing and 
     discontinued operations                                19 594 296    (55 627 404)
   Adjust for:          
   Profit on sale of exploration and evaluation assets 
     attributable to equity holders of the parent                    -    (18 290 947)
   Headline earnings/(loss)                                 19 594 296    (73 918 351)


5  Financial instruments by category          
                                Carrying       Carrying           Fair           Fair
                                   value          value          value          value
                                    2014           2013           2014           2013
   Group                               R              R              R              R
   Loans and receivables          
   Other financial assets    655 886 407    456 522 231    589 512 367    456 522 231 


6  Stated capital       
                                         Nature of           Number of         Stated
   Date              Issued to           issue                  shares        capital
   Balance at 
     1 March 2013                                          953 340 791    534 172 123 
   3 October 2013    N Gutta             General issue       2 777 777        691 244 
   29 January 2014   Various*            Specific issue  1 246 601 549    336 582 418 
   30 January 2014   Westglamry Limited  Specific issue    641 840 797    173 297 015 
   30 January 2014   Newdel Holdings 
                     Limited             Specific issue    241 608 347     65 234 254 
   Balance at 
     28 February 2014                                    3 086 169 261  1 109 977 054 

   * Shares issued to various shareholders under the terms of the Rights Offer that 
     closed on 27 January 2014. 1 219 302 642 (98%) of these shares were issued to 
     the Government Employees Pension Fund.          


7  Commitments and contingent liabilities          
                                                                     R              R
   Commitments                                                    2014           2013
   Exploration and evaluation assets - work programme 
     commitments - due within 12 months                    130 425 256    221 242 262 
   Exploration and evaluation assets - work programme 
     commitments - due within 13 to 48 months              642 206 667    243 379 394 
                                                           772 631 923    464 621 656 
          
   Exploration and evaluation commitments will be funded 
   through a combination of debt and equity funding.
          
   Contingent liabilities
   Performance bond on OPL 233 issued by Ecobank 
     in respect of OPL 233 exploration activities          161 841 000    132 597 000 
   Cost carry arrangement with Total                        36 508 805     20 411 689 
   Farm-in and transaction fees on receipt of 
     title to OPL 233                                      141 341 140    115 801 380 
   Farm-in and transaction fees on receipt of 
     title to OPL 281                                      156 446 300    128 177 100 
   Total                                                   496 137 245    396 987 169 
          
   Performance bond
   In April 2012 the Group posted a $25 million performance bond to support the work 
   programme on OPL 233. This performance bond is secured by a cash collateral of 
   R108.1 million (2013: R89.1 million) ($10 million). The remainder of the performance 
   bond, disclosed as a contingent liability, is secured by a first-ranking legal 
   charge over SacOil's investment in SacOil 233 Nigeria Limited.

   Cost carry arrangement
   The farm-in agreement between Semliki and Total provides for a carry of costs by 
   Total on behalf of Semliki. Total will be entitled to recover these costs, being 
   Semliki's share of the production costs on Block III, plus interest, from future 
   oil revenues. The contingency becomes probable when production of oil commences 
   and will be raised in full at that point. At 28 February 2014 Total has incurred 
   R36.5 million (2013: R20.4 million) of costs on behalf of Semliki. Should this 
   liability be recognised, a corresponding increase in assets will be recognised, 
   which, together with existing exploration and evaluation assets, will be recognised 
   as development infrastructure assets.
          
   Farm-in and transaction fees
   OPL 233
   A farm-in fee of R114.3 million (2013: R93.7 million) (US$10.6 million) is due to 
   Nigdel United Oil Company Limited upon the formal approval by the Nigerian Government 
   of the assignment of title to OPL 233 to SacOil 233 Nigeria Limited. A transaction 
   fee of R27.0 million (2013: R22.1 million) (US$2.5 million) is due to Energy Equity 
   Resources (Norway) Limited upon the receipt of title to OPL 233, pursuant to the 
   provisions of the Master Joint Venture Agreement.
          
   OPL 281
   A farm-in fee of R129.4 million (2013: R106.1 million) (US$12 million) is due to 
   Transnational Corporation of Nigeria Limited upon the formal approval by the Nigerian 
   Government of the assignment of title to OPL 281 to SacOil 281 Nigeria Limited. A 
   transaction fee of R27.0 million (2013: R22.1 million) (US$2.5 million) is due to 
   Energy Equity Resources (Norway) Limited upon the receipt of title to OPL 233, 
   pursuant to the provisions of the Master Joint Venture Agreement.


8  Dividends
   The Board has resolved not to declare any dividends to shareholders for the period 
   under review.


9  Going concern
   The planned recapitalisation of the Company, as previously announced to shareholders, 
   was completed in January 2014. The Company converted all the Gairloch loans into 
   equity and is now debt free. Furthermore, the Company raised R336.6 million from 
   the R570 million Rights Offer, which will enable the Group to fund its operations 
   for the foreseeable future. Although the above transactions were a success a deficit 
   of R90 million remains in the Group's projected cash flows to June 2015, which is 
   indicative of part of the shortfall from the Rights Offer. To manage the Group's 
   non-performance risk in funding its assets and commitments, management is in early-
   stage discussions with financial institutions regarding the raising of equity and debt 
   funding to eliminate or manage the deficit. The likelihood of success of this 
   initiative remains uncertain at this stage.

   The cash flow projections to June 2015 also include cash inflows from EERNL totalling 
   R189.8 million (US$17.9 million). The loan owed to SacOil remains overdue since 
   31 May 2013. EERNL has requested a further extension of the loan to July 2014 
   whilst it undergoes its own recapitalisation, which will enable it to settle in 
   full the amounts owed to SacOil. It is difficult to determine with certainty the 
   outcome of the planned recapitalisation and, consequently, the settlement of the 
   loan owed to SacOil. The Board continues to assess the benefit of enforcing the 
   security provided by EERNL, being EERNL's shares in its subsidiary EER 233 Nigeria 
   Limited which owns a 20% interest in OPL 233.

   The above conditions give rise to material uncertainties which may cast significant 
   doubt about the Company's ability to continue as a going concern, and therefore 
   that it may be unable to realise its assets and discharge its liabilities in the 
   normal course of business. The Board remains reasonably confident that it will 
   manage the material uncertainties that exist, as such the financial statements 
   have been prepared on the basis of accounting policies applicable to a going 
   concern. This basis presumes that funds will be available to finance future operations 
   and that the realisation of assets and settlement of liabilities, contingent 
   obligations and commitments will occur in the ordinary course of business.


10 Events after the reporting period
   The following event took place from the period 1 March 2014 to the date of this 
   report:

   On 31 March 2014, the Company, the Public Investment Corporation (SOC) Limited 
   ("PIC") and the Instituto De Gestao Das Participacoes Do Estado ("IGEPE") entered 
   into a Memorandum of Understanding ("MoU") intended to regulate the relationship 
   between the parties with regard to:

   - assuring the supply of natural gas and energy security, and opening up and growing 
     the industrial and domestic consumer market for natural gas across Mozambique;
   - establishing joint venture companies to, inter alia, build an onshore natural gas 
     central processing facility, a pipeline to link the gas fields in Mozambique with 
     potential customers in southern Africa (referred to as the "African Renaissance 
     Project" or "ARP") and to develop and grow the natural gas consumer market in 
     South Africa and other Southern African Development Community member states for 
     the supply and distribution of natural gas along the pipeline in Mozambique 
     (referred to as "Gas for the People Project" or "GPP"); and
   - establishing ancillary projects such as, but not limited to, a gas-to-liquid 
     plant and a combined cycle gas power plant.

   Importantly, both the ARP and GPP are long-term projects, and are subject to, 
   amongst other matters, feasibility studies, front-end engineering design, detail 
   engineering, market analysis, social impact studies, the conclusion of joint 
   venture agreements by 30 July 2014 or such later date as agreed to in writing by 
   the parties, and the raising of the funding required for the projects. The 
   feasibility studies are subject to the approval of the Boards of directors of each 
   of the PIC and SacOil and satisfaction of any other applicable approval processes 
   of these parties.

   On 10 March 2014, Transfer Holdings (Proprietary) Limited became a wholly-owned 
   subsidiary of SacOil following the acquisition of a further thirty per cent (30%) 
   interest.

   On 2 May 2014 Transnational Corporation of Nigeria PLC ("Transcorp") and the 
   Nigerian National Petroleum Corporation signed the Production-sharing Contract for 
   OPL 281. Transcorp, as operator of OPL 281, will now proceed to prepare and lodge 
   an application to seek the approval of the Nigerian Government for Transcorp to 
   assign a 20% participating interest to SacOil's wholly-owned subsidiary, 
   SacOil 281 Nigeria Limited.
          
By order of the Board          


Roger Rees          
Acting Chief Executive Officer

Johannesburg
28 May 2014
          
           
CORPORATE INFORMATION
Registered office and physical address:
2nd Floor, The Gabba
Dimension Data Campus
57 Sloane Street
Bryanston
2021

Postal address:
PostNet Suite 211
Private Bag X75
Bryanston
2021

Contact details:
Tel: +27 (0) 11 575 7232
Fax: +27 (0) 11 576 2258
E-mail: info@sacoilholdings.com
Website: www.sacoilholdings.com
          
Directors:           
Roger Rees (Acting Chief Executive Officer), Tariro Mudzimuirema (Interim Finance 
Director), Tito Mboweni (Chairman)*, Mzuvukile Maqetuka*, Gontse Moseneke**, 
Stephanus Muller*, Vusumzi Pikoli*, Ignatius Sehoole**, Danladi Verheijen**, 
Titilola Akinleye**
* Independent Non-executive directors ** Non-executive directors

Advisers
Company Secretary: Fusion Corporate Secretarial Services (Proprietary) Limited

Transfer Secretaries South Africa
Link Market Services South Africa (Proprietary) Limited

Transfer Secretaries United Kingdom
Computershare Investor Services (Jersey) Limited

Corporate Legal Advisers
Norton Rose Fullbright South Africa

Auditors
Ernst & Young Inc.

JSE Sponsor
Nedbank Capital, a division of Nedbank Limited

AIM Nominated Adviser
finnCap Limited          
          
          

Date: 28/05/2014 03:30:00 Supplied by www.sharenet.co.za                     
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