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SCL - SacOil Holdings Limited - SacOil agrees second Nigerian short-term Oil and
Gas production deal
SacOil Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1993/000460/06)
Share code: SCL ISIN code:ZAE000127460
("SacOil" or "the Company")
SacOil agrees second Nigerian short-term Oil and Gas production deal
The Board of SacOil is pleased to announce that the joint venture between SacOil
and Energy Equity Resources Limited ("EER") (collectively the "Joint Venture")
has concluded a second farm-out agreement, in this instance with Transnational
Corporation of Nigeria PLC of Nigeria ("Transcorp") relating to OPL 281,
Nigeria.
1. Highlights
* Subject to consent by Nigerian National Petroleum Corporation ("NNPC") and the
Honourable Minister of Petroleum Resources (on behalf of the Federal Government
of Nigeria ("FGN")),the Joint Ventureshall acquire 40 per cent of Transcorp`s
100 per cent participating interest in the Production Sharing Contract ("PSC")
for OPL 281. SacOil`s direct interest in OPL281 will be 20 per cent.
* SacOil has paid to the Federal Government of Nigeria ("FGN"), on behalf of the
Joint Venture and Transcorp, an outstanding signature bonus amount of US$8.75
million. SacOil has also paid US$3.75 million to Transcorp as the first tranche
farm-in fee. SacOil payments are secured by, inter alia, corporate guarantees
from Transcorp.
* Transcorp shall proceed to negotiate and execute a PSC with the NNPC -
Concession holder on behalf of the FGN.
* The Joint Venture together with Transcorp have agreed to pursue an accelerated
development plan (subject to NNPC and DPR approval) for hydrocarbons on OPL 281.
* As its entry cost, the Joint Venture shall pay a further farm-in fee of US$7.5
million to Transcorp upon NNPC and Ministerial consents for the farm-in process;
the Joint Venture shall also carry the recoverable cost commitment to fund the
minimum work programme (which will be defined under the PSC for OPL 281). This
is estimated to cost US$30.0 million in the first phase. A final farm-in fee of
US$12.5 million is payable upon commerciality of the project.
* This agreement is the second significant oil and gas deal entered into by the
Joint Venture.
2. Introduction
SacOil is pleased to announce that it has signed a farm-in agreement with
Transcorp to acquire a 20 per cent participating interest in OPL 281 and under
the OPL281PSC ("The Acquisition"). OPL 281 is located onshore in the western
delta region of Nigeria and adjacent to the widely publicised Shell divestment
block OML 42.
SacOil`s Nigerian partner, EER 281 Nigeria Limited, a wholly owned Nigerian
subsidiary of EER, has also executed the same farm-in agreement to acquire an
additional 20 per cent Participating Interest in OPL 281 and under the OPL 281
PSC, with Transcorp retaining the remaining 60 per cent. SacOil`s interest shall
be held directly through a wholly owned Nigerian subsidiary.
3. Background to OPL 281
OPL 281 was awarded to Transcorp during the FGNmini bid round in 2006. Transcorp
paid all but US$8.75 million of US$30 million signature bonus. The outstanding
signature bonus has now been paid by SacOil, on behalf of the Joint Venture and
Transcorp.
Previous operator, Royal Dutch Shell, had discovery wells Obote-1 drilled in
1970 and Ekoro-1 drilled in 1967 on OPL 281. 3D Seismic obtained by Shell
1991/92 covers the entire block.
4. Rationale for the Acquisition
The Joint Venture commissioned an independent competent person report by TRACS
International ("TRACS") which analysed discovery contingent resources of 250
MMBOE. TRACS analysis shows Obote-1 encountered hydrocarbons at four levels
between 8 720 ft and
12 350 ft, while Ekoro-1 found eight hydrocarbon sands between
8 260 ft and 10 761 ft respectively. It has discovered but undeveloped oil
assets with an estimated recoverable contingent resource for the block of 100
million barrels of oil equivalent (P50 as reported by TRACS, and a peak
production potential rate of 30 000 barrels of oil per day.
5. Condition precedent to the Acquisition
The Acquisition is subject to the following conditions precedent:
* consent to the PSC for OPL 281 being settled and executed between Transcorp
and the NNPC (concession holder); and
* consent to the Acquisition being granted by the NNPC and the Honourable
Minister of Petroleum Resources of the FGN.
6. Consideration
* The initial farm-in fee of US$12.5 million, in respect of the Acquisition, has
been paid by SacOil in two tranches - US$8.75 million to the FGN and US$3.75
million to Transcorp;
* A further farm-in fee to Transcorp of US$7.5 million upon receipt of NNPC and
Ministerial consent for the farm-in;
* A final farm-in fee to Transcorp of US$12.5 million when the project has
reached first oil;
* The Joint Venture will carry 100 per cent of the minimum work programme cost
as defined by the PSC for OPL 281.
The effective date of the Acquisition is 28 February 2011.
7. Funding
SacOil intends to fund the Acquisition from the following available sources:
* proceeds received from a general issue of SacOil shares for cash. On 17
February 2011 the Public Investment Corporation invested R70 million
(approximately US$10 million) in the Company; and
* The completion, on 18 February 2010, of a 12-month convertible loan note
facility from Renaissance BJM Securities (Proprietary) Limited in an amount of
US$30.9 million.
8. Pro forma financial effects of the Acquisition
The table below sets out the unaudited pro forma financial effects of the
Acquisition on SacOil`s basic and diluted loss, headline and diluted headline
loss, net asset value and net tangible asset value per SacOil share.
The unaudited pro forma financial effects have been prepared to illustrate the
impact of the Acquisition on the unaudited, published financial information of
SacOil for the six months ended 31 August 2010 after adjusted for the
Acquisition by SacOil, through a wholly owned Nigerian subsidiary, of a 20 per
cent working interest in the OPL 233 licence in Nigeria ("the OPL 233
Acquisition") which was announced on 7 December 2010 and the issue of 46 666 666
SacOil shares to PIC for cash amounting to R70 million ("Issue for Cash") which
was announced on 21 February 2011, had the Acquisition occurred on 1 March 2010
for income statement purposes and on 31 August 2010 for balance sheet purposes.
The unaudited pro forma financial effects set out below are the responsibility
of the directors and have been prepared for illustrative purposes only and
because of their nature may not fairly present the financial position, changes
in equity, results of operations or cash flows of SacOil after the Acquisition:
Before After the After the Change
OPL 233 OPL 233 %
Acquisition Acquisition,
and the Issue the Issue
for Cash for Cash
and the
Acquisition
Loss and diluted
loss per SacOil
share (cents) (2.21) (2.70) (2.78) (2.96)
Headline and diluted
headline loss per
SacOil share
(cents) (2.21) (2.70) (2.78) (2.96)
Net asset value
per SacOil share
(cents) 13.39 29.94 29.86 (0.27)
Net tangible asset
value per SacOil
share (cents) 13.39 3.94 (27.54) (798.98)
Weighted average
number of SacOil
shares in issue
(`000) 314 800 361 467 361 467
Number of SacOil
shares in issue
(`000) 321 635 368 302 368 302
Notes:
1. The "Before" basic loss, diluted loss, headline loss and diluted headline
loss per share have been extracted without adjustment from the unaudited,
published results of SacOil for the six months ended 31 August 2010. The
"Before" net asset value and tangible net asset value per share have been
calculated from the financial information presented in the unaudited, published
results of SacOil for the six months ended 31 August 2010.
2. The "After the OPL 233 Acquisition and the Issue for Cash" assumes:
a. payment by SacOil of 50 per cent of the US$0.3 million upon execution of the
OPL 233 Farm in agreement, converted at 6.87 to US$1, being the closing rate on
3 December 2010, which has been capitalised in terms of IFRS 6: Exploration for
and Evaluation of Mineral Resources;
b. a short-term obligation of 50 per cent of US$7.8 million, converted at R6.87
to US$1, in respect of that portion of the OPL 233 farm-in fee payable upon
receipt of consent from the Federal Government of Nigeria for the farm-in and
which have been capitalised in terms of IFRS 6: Exploration for and Evaluation
of Mineral Resources;
c. a long-term obligation of US$10.0 million, converted at R6.87 to US$1, in
respect of SacOil`s 20 per cent share of the costs of the minimum work programme
and which have been capitalised in terms of IFRS 6: Exploration for and
Evaluation of Mineral Resources;
d. the payment of transaction costs in respect of the OPL 233 Acquisition of
R300 000;
e. the issue of the 46 666 666 new SacOil Shares at 150 cents per SacOil share;
and
f. the payment of transaction costs in respect of the Issue for Cash of R2 500
000.
3. The "After the OPL 233 Acquisition, the Issue for Cash and the Acquisition"
assumes:
a. the adjustments detailed in note 2 above;
b. payment by SacOil of 50 per cent of the initial amounts of US$8.75 million,
US$3.75 million and US$7.5 million in respect of the OPL 281 farm-in agreement,
converted at 7.12 to US$1, being the closing rate on 24 February 2011, which has
been capitalised in terms of IFRS 6: Exploration for and Evaluation of Mineral
Resources;
c. a long-term obligation of US$12.5 million, converted at R7.12 to US$1, in
respect of the further farm-in fee and which has been capitalised in terms of
IFRS 6: Exploration for and Evaluation of Mineral Resources; and
d. the payment of transaction costs in respect of the OPL 281 Acquisition of
R300 000.
No income adjustment has been made in respect of the increased positive cash
balance resulting from the Issue for Cash as the proceeds of the Issues for Cash
will be utilised for working capital.
9. Future prospects for SacOil in Nigeria
The Acquisition marks the second farm-in transaction for the Joint Venture and
is another significant milestone in the continued development and growth of
SacOil. The Joint Venture continues to seek further near term production assets
in Nigeria with a view to progress on its near term production strategy.
10. JSE requirements
The Acquisition is classified as a Category 2 transaction in terms of the JSE
Listings Requirements and, accordingly, no further documentation or shareholder
approval is required for the implementation of the Acquisition.
Bryanston
1 March 2011
Sponsor
BDO Corporate Finance
Corporate Adviser
Renaissance BJM Securities (Proprietary) Limited
Contacts
SacOil
Robin Vela, Chief Executive Officer
Tel: +27 (0) 11 575 7232
The Riverbed Agency
Raphala Mogase
Tel: +27 (0) 11 783 7903
About SacOil
SacOil is listed on the JSE Limited ("JSE") under the Oil and Gas sub-sector and
has a current market capitalisation of approximately R1.22 billion
(approximately GBP105 million). The Company is also in the process of finalising
its application for an Admission to the AIM market of the London Stock Exchange,
resulting in a dual listing, with its primary listing remaining on the JSE.
SacOil`s core strategy is to become a leading independent African upstream oil
and gas company with a balanced portfolio of Pan-African assets. SacOil`s
interests are in all phases of the upstream cycle - exploration, appraisal and
near production and are currently in the DRC and Nigeria.
On 7 December 2010 the Company announced its first near production deal with
Nigdel United Oil Company Limited to acquire a 20 per cent working interest in
the OPL 233 licence. Oil concession block 233 is located immediately off the
coast of the central delta region of Nigeria and adjacent to the giant Apoi
field (>600mmbbls).
Date: 01/03/2011 08:29:00 Supplied by www.sharenet.co.za
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