Wrap Text
SCL - SACOIL Holdings Limited - SACOIL agrees first Nigerian short term Oil and
Gas production deal and cautionary announcement
SACOIL Holdings Limited
Incorporated in the Republic of South Africa (Registration number:
1993/000460/06)
Share code: SCL ISIN code: ZAE000127460
("SacOil" or "the Company")
SacOil agrees first Nigerian short term Oil and Gas production deal and
cautionary announcement
The board of SacOil is pleased to announce that the joint venture between SacOil
and Equity Energy Resources Limited ("EER") (collectively the "Joint Venture")
has concluded its first near production deal. The highlights being:
* SacOil acquires a 20 per cent. direct interest in Nigerian oil and gas
field OPL 233.
* Production is expected to commence mid 2013 at a potential rate of 10,000
bbls oil per day.
* The Joint Venture will receive an inflated economic interest allowing the
recovery of exploration costs until 100 mmbbls of cumulative crude oil
production.
* As its entry cost, the Joint Venture will pay a farm-in fee of US$8.0
million and carry the recoverable cost commitment to fund the minimum work
programme.
* This agreement is the first significant oil and gas deal entered into by
the Joint Venture.
Introduction
SacOil is pleased to announce that it has signed a farm-in agreement with Nigdel
United Oil Company Limited ("NIGDEL") to acquire a 20 per cent. working interest
in the OPL233 licence located immediately off the coast of the central delta
region of Nigeria and adjacent to the giant Apoi field (>600mmbbls).
SacOil`s Nigerian partner, EER 233 Nigeria Limited, a wholly owned Nigerian
subsidiary of EER, has farmed into an additional 20 per cent. of the OPL233
licence, with NIGDEL retaining the remaining 60 per cent. SacOil`s interest will
be held directly through a wholly owned Nigerian subsidiary. SacOil and EER`s
collective 40 per cent. interest is referred to as the Acquisition.
Background to OPL 233
OPL 233 was awarded to NIGDEL during the Federal Government of Nigeria bid round
in 2006 and a Production Sharing Contract was executed with Nigerian National
Petroleum Corporation on the 7th May 2007 with an exploration period of 5 years.
Previous operator, Royal Dutch Shell, acquired a sparse grid of 2D seismic and
drilled one exploration well (Olobia-1) in 1986. Evaluation of the well logs
indicated 124ft of net oil and 90ft of gas and condensate in the Olobia-1 well.
As the licence area is only 125 sq.km, only one phase of 3D acquisition will be
required.
Rationale for the Acquisition
SacOil commissioned an independent competent person report by TRACS
International which analysed the Olobia-1 discovery well on OPL233 and
attributed to SacOil`s direct interest, a P50 contingent resource valuation of
4.1 mmBOE and a net present valuation (using a 10 per cent. discount rate) to
SacOil at an assumed market price of US$70 per barrel of US$53.4 million.
Significant exploration upside has been identified on existing 2D seismic data.
However, the planned 3D OBC seismic survey will be performed over zones of
interest to better quantify resource sizes.
Condition precedent to the Acquisition
The Acquisition is subject to consent to the farm-in agreement by the Federal
Government of Nigeria.
Consideration
A farm-in fee of US$8.0 million, in respect of the Acquisition, will be paid by
the Joint Venture in 2 tranches - US$0.3 million upon execution of agreements
with NIGDEL and US$7.8 million upon receipt of Federal Government of Nigeria
consent for the farm in. The Joint Venture will carry 100 per cent. of the
minimum work programme cost until First Oil production and will have control on
financial, technical and operational decision making. The estimated cost of 100
per cent. of the minimum work programme is approximately US$50.0 million.
The Joint Venture will recover all costs from cost oil and:
* during the cost recovery period have 80:20 of profit oil split;
* will receive 50:50 profit oil split after cost recovery and until
100mmbbls cumulative crude oil production; and
* will receive 40:60 profit oil split after 100mmbbls cumulative crude oil
production.
First Oil production is estimated to commence mid 2013 at a production rate of
7,200 bbls per day building up to 10,000 bbls per day (given facilities which
are constrained) for the P90 and P10 cases respectively.
The effective date of the Acquisition is 30 November 2010.
Pro forma financial effects of the Acquisition
The table below sets out the unaudited pro forma financial effects of the
Acquisition on SacOil`s basic earnings per share, headline earnings per share,
net asset value per share and tangible net asset value per SacOil share.
The unaudited pro forma financial effects have been prepared to illustrate the
impact of the Acquisition on the unaudited, published financial information of
SacOil for the six months ended 31 August 2010, had the Acquisition occurred on
1 March 2010 for income statement purposes and on 31 August 2010 for balance
sheet purposes.
The pro forma financial effects have been prepared using accounting policies
that comply with International Financial Reporting Standards and that are
consistent with those applied in the audited, published financial statements of
SacOil for the year ended 28 February 2010.
The unaudited pro forma financial effects set out below are the responsibility
of the directors of SacOil and have been prepared for illustrative purposes only
and because of their nature may not fairly present the financial position,
changes in equity, results of operations or cash flows of SacOil after the
Acquisition.
Before (1) After % Change
(Squared)
Actual Pro forma
Earnings per share (2.21) (2.30) (4.07)
(cents)
Headlline loss per share (2.21) (2.30) (4.07)
(cents)
Net asset value per 13.39 13.30 (0.67)
share (cents)
Net tangible asset value 13.39 (16.48) (223.08)
per share (cents)
Weighted average number
of shares in issue 314 800 314 800
(`000)
Number of shares in 321 635 321 635
issue (`000)
Notes:
1 The "Before" loss, headline loss, net asset value and net tangible asset
value per share has been extracted without adjustment from the unaudited,
published results of SacOil for the six months ended 31 August 2010. No
adjustments have been made for transactions and share issues concluded
after 31 August 2010 as announced on 20 September 2010.
2 The "After" column assumes:
A Payment by SacOil of 50 per cent. of the US$0.3 million upon execution
of the farm-in agreement, converted at R6.87 to US$1, being the
closing rate on 3 December 2010, which has been capitalised in terms
of IFRS 6: Exploration for and Evaluation of Mineral Resources;
B A short-term obligation of 50 per cent. of US$7.8 million, converted
at R6.87 to US$1, in respect of that portion of the farm-in fee
payable upon receipt of consent from the Federal Government of Nigeria
for the farm-in and which have been capitalised in terms of IFRS 6:
Exploration for and Evaluation of Mineral Resources;
C A long-term obligation of US$10.0 million, converted at R6.87 to US$1,
in respect of SacOil`s 20 per cent. share of the costs of the minimum
work programme and which have been capitalised in terms of IFRS 6:
Exploration for and Evaluation of Mineral Resources; and
D The payment of transaction costs of R300 000.
Future prospects for SacOil in Nigeria
This agreement is the first for the Joint Venture and marks a significant
milestone in the development of SacOil. The Joint Venture is actively pursuing
other short term production situations in Nigeria with the view to progressing
its near term production strategy.
JSE requirements
The Acquisition is classified as a Category 2 transaction in terms of the JSE
Listings Requirements and, accordingly, no further documentation or shareholder
approval is required for implementation of the Acquisition.
Cautionary announcement
Further to announcements made on 25 June, 26 July, 3 September and 30 September
2010, the Company is also considering various proposals and potential
transactions. SacOil shareholders are advised to exercise caution when dealing
in their SacOil securities until a further announcement is made in this regard.
Midrand
7 December 2010
Sponsor
BDO Corporate Finance
Contacts
SacOil
Robin Vela, Chief Executive Officer
Tel : +27 (0) 11 312 9330
Conduit PR (Public Relations)
Jonathan Charles / Jos Simson
Tel: +44 (0) 20 7429 6666
The Riverbed Agency
Raphala Mogase
Tel: +27 (0) 11 783 7903
About SacOil
SacOil is intent on becoming a leading independent indigenous upstream oil & gas
company with a balanced portfolio of Pan-African assets.
SacOil`s assets are in all phases of the upstream cycle - exploration, appraisal
and near production and are currently in the Democratic Republic of the Congo
and Nigeria.
The Company is listed on the JSE Limited under the Oil and Gas subsector and has
a current market capitalisation of approximately R1.2 billion (some GBP100m).
The Company and is also seeking to dual list on the AIM market of the London
Stock Exchange early 2011.
Date: 07/12/2010 10:45:01 Supplied by www.sharenet.co.za
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