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