Wrap Text
Reviewed interim results for the six months ended 31 August 2013
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 interim results
for the six months ended 31 August 2013
SacOil Holdings Limited is pleased to announce its results for the six months ended 31 August 2013
OVERVIEW
SacOil is an independent African oil and gas company, dual-listed on the JSE and AIM, and has business
operations that are focused across the African continent. Currently, the Group operates in the following
jurisdictions: the Democratic Republic of Congo ("DRC"); the Republic of Malawi; the Republic of
Botswana; and the Federal Republic of Nigeria. Further, the Company continues to evaluate opportunities
to secure high-impact acreage in other established and prolific hydrocarbon basins in Africa.
OPERATIONS
Shareholders are referred to the announcement issued on SENS and RNS on 8 November 2013, in which
the Company communicated a detailed update on its asset-level operations. The operational highlights
for the period under review include:
- DRC, Block III: 2D seismic data acquisition currently being planned and expected to commence within
the next dry season in Q1 2014;
- Nigeria, OPL 233: Execution of 2013 work programme and 3D seismic data acquisition currently
underway;
- Nigeria, OPL 281: Re-interpretation of seismic and well data;
- Malawi, Block 1: Planning of environmental and social impact assessment; and
- Botswana: Granting of licences 123, 124 and 125.
FINANCIAL REVIEW
For the six months ended 31 August 2013, the Group reported a profit of R27,0 million (2012: loss of
R11,8 million) primarily arising from an increase in investment income earned and decreases in finance and
operating costs, relative to the corresponding prior period.
Other income for the period under review comprised foreign exchange gains amounting to R43,7 million
(2012: R38,9 million) arising on the remeasurement of the following US Dollar denominated balances:
- the loans receivable from Energy Equity Resources (Norway) Limited ("EERNL");
– the Block III contingent consideration; and
– the cash collateral deposited with Ecobank.
The 21% overall decrease in other income is primarily attributable to the once-off profit on disposal of
the 6,67% interest in Block III and the once-off break fee received from a third party in the corresponding
prior period.
Other operating costs decreased by 50% to R11,5 million (2012: R23,2 million) during the period under
review. The reduction is primarily attributable to decreases in corporate, remuneration, consulting, legal
and travel and accommodation costs.
Investment income for the period under review comprised:
- interest income from loans of R34,2 million (2012: R18,9 million);
- interest earned on cash and cash equivalents of R0,2 million (2012: R0,4 million); and
- imputed interest income of R12,5 million (2012: R7,9 million) arising from the unwinding of the time
value discount applied to the contingent consideration for Block III.
Investment income increased by R19,7 million relative to the corresponding prior period, reflective of an
increase in the amounts advanced to EERNL, the compounding effect of the interest accruals and the
impact of the weak Rand.
The Group's finance costs of R10,5 million (2012: R21,5 million) relate to interest on the two US$1 million
loans acquired from Gairloch Limited ("Gairloch") during September 2012 and October 2012, to fund
working capital requirements of the Group and work programme commitments for OPL 233. During the
period under review the Group incurred further interest charges amounting to R32,6 million on the Gairloch
novated loan. This interest has been capitalised to the OPL 233 exploration and evaluation asset, as it
relates to a qualifying asset.
Taxation decreased by 13% to R41,7 million (2012: R48,1 million). Taxation was comparatively higher in
the corresponding prior period as a result of the once-off capital gains tax incurred on the disposal of the
6,67% interest in Block III.
Exploration and evaluation assets increased by R43,8 million to R206,7 million (28 February 2013:
R162,9 million) during the period under review as a result of the Group capitalising exploration expenditures
amounting to R11,2 million and borrowing costs totalling R32,6 million in relation to OPL 233.
Other financial assets, under non-current assets, comprise:
– the US Dollar denominated contingent consideration for Block III of R221,9 million (28 February 2013:
R181,5 million);
– the US Dollar denominated long-term loan due from EERNL of R123,5 million (28 February 2013:
R93,5 million);
– the proceeds receivable on the sale of the Greenhills plant of R4,9 million (28 February 2013: R4,7 million);
– the advance payment against future services of R59,5 million (28 February 2013: R56,7 million); and
– the loan due from DIG Oil (Proprietary) Limited.
The overall increase of 20% in other financial assets, under non-current assets, is primarily a result of
foreign exchange gains and interest amounting to R70,4 million on the contingent consideration and on
the loan due from EERNL.
Other financial assets, under current assets, comprise:
– the US Dollar denominated short-term loan due from EERNL of R150,7 million (28 February 2013:
R83,9 million); and
– the proceeds receivable on the sale of the Greenhills plant of R1,0 million (28 February 2013: R0,9 million).
The R66,9 million overall increase in other financial assets, under current assets, is primarily the result of
foreign exchange gains and interest on the short-term loan due from EERNL.
Cash and cash equivalents comprise the revalued US$10 million cash collateral held as security for the
performance bond on OPL 233 of R103,2 million (28 February 2013: R89,1 million) and cash deposits
amounting to R0,3 million (28 February 2013: R4,9 million). The 10% increase in cash and cash equivalents
is primarily attributable to foreign exchange gains resulting from the weaker Rand.
Other financial liabilities comprise the three loans owed to Gairloch totalling R235,1 million (28 February
2013: R129,0 million), operating costs owed to Nidgel United Oil Company amounting to R9,8 million
(28 February 2013: R2,4 million), EERNL's 50% share of the cash collateral of R51,5 million (28 February
2013: R44,2 million) and makewhole costs owed to Yorkville under the Standby Equity Distribution
Agreement totalling R0,4 million (28 February 2013: nil). The 69% increase in other financial liabilities
is primarily attributable to foreign exchange losses and interest on the Gairloch loans amounting to
R106,1 million, foreign exchange losses amounting to R7,3 million on EERNL's share of the cash collateral,
and foreign exchange losses and additional costs relating to the amounts owed to Nigdel totalling
R7,4 million.
GOING CONCERN
The Board is satisfied that the planned recapitalisation of the Company, as referred to in the General
Meeting Circular to SacOil shareholders dated 7 November 2013, will ensure that the Group has adequate
resources to continue operating for the next 12 months. The Group interim financial statements presented
have been prepared on a going concern basis.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 August 2013
Restated*
Reviewed Reviewed
Six months Six months
to 31 August to 31 August
2013 2012
Notes R R
Other income 43 737 699 55 213 642
Other operating costs (11 501 668) (23 198 827)
Operating profit 4 32 236 031 32 014 815
Investment income 5 46 927 405 27 203 337
Finance costs (10 474 963) (21 517 167)
Profit before taxation 68 688 473 37 700 985
Taxation (41 712 659) (48 072 518)
Profit/(loss) for the period from continuing operations 26 975 814 (10 371 533)
Discontinued operation
Loss for the period from discontinued operation 7 – (1 414 628)
Profit/(loss) for the period 26 975 814 (11 786 161)
Total comprehensive profit/(loss) for the period 26 975 814 (11 786 161)
Profit/(loss) attributable to:
Equity holders of the parent 26 284 839 (12 472 750)
Non-controlling interest 690 975 686 589
26 975 814 (11 786 161)
Total comprehensive profit/(loss) attributable to:
Equity holders of the parent 26 284 839 (12 472 750)
Non-controlling interest 690 975 686 589
26 975 814 (11 786 161)
Earnings/(loss) per share from continuing operations
Basic (cents) 8 2,76 (1,43)
Diluted (cents) 8 2,76 (1,43)
Earnings/(loss) per share from continuing and
discontinued operations
Basic (cents) 8 2,76 (1,62)
Diluted (cents) 8 2,76 (1,61)
* Due to a change in accounting policy, certain amounts shown here do not correspond to the 2012 interim results
and reflect adjustments made as detailed in note 3.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 August 2013
Reviewed Audited
31 August 28 February
2013 2013
Notes R R
ASSETS
Non-current assets
Property, plant and equipment 253 773 317 008
Exploration and evaluation assets 9 206 659 432 162 859 167
Other intangible assets 130 949 161 760
Other financial assets 10 445 099 456 371 719 195
Total non-current assets 652 143 610 535 057 130
Current assets
Other financial assets 10 151 707 934 84 803 036
Trade and other receivables 3 672 368 3 665 149
Cash and cash equivalents 11 103 580 730 94 032 416
Total current assets 258 961 032 182 500 601
Total assets 911 104 642 717 557 731
EQUITY AND LIABILITIES
Shareholders' equity
Stated capital 534 172 123 534 172 123
Reserves 6 001 847 26 681 469
Accumulated loss (172 735 613) (219 700 074)
Equity attributable to equity holders of parent 367 438 357 341 153 518
Non-controlling interest 22 989 130 22 298 155
Total shareholders' equity 390 427 487 363 451 673
Liabilities
Non-current liabilities
Deferred tax liability 88 755 267 72 588 101
Total non-current liabilities 88 755 267 72 588 101
Current liabilities
Other financial liabilities 12 296 808 352 175 574 827
Current tax payable 119 540 560 93 962 655
Trade and other payables 15 572 976 11 980 475
Total current liabilities 431 921 888 281 517 957
Total liabilities 520 677 155 354 106 058
Total equity and liabilities 911 104 642 717 557 731
Number of shares in issue 953 340 791 953 340 791
Net asset value per share (cents) 40,95 38,12
Net tangible asset value per share (cents) 19,26 21,02
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 August 2013 Reviewed Reviewed
Six months Six months
to 31 August to 31 August
2013 2012
R R
Cash flows from operating activities
Cash used in operations (8 739 666) (122 076 336)
Interest income 217 185 354 795
Tax paid 32 412 –
Net cash used in operating activities (8 490 069) (121 721 541)
Cash flows from investing activities
Purchase of exploration and evaluation assets (4 210 593) –
Sale of exploration and evaluation assets – 75 997 000
Receipts from loans and receivables 4 303 501 –
Net cash from investing activities 92 908 75 997 000
Cash flows from financing activities
Proceeds from other financial liabilities 3 288 700 148 382 917
Dividends paid to non-controlling interest – (24 573 794)
Net cash from financing activities 3 288 700 123 809 123
Total movement in cash and cash equivalents for the period (5 108 461) 78 084 582
Foreign exchange gains on cash and cash equivalents 14 656 775 6 259 400
Cash and cash equivalents at the beginning of the period 94 032 416 10 774 298
Cash and cash equivalents at the end of the period 103 580 730 95 118 280
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total equity
Share-based Restated* attributable to Non-
Stated Revaluation payment Total Accumulated equity holders controlling Total
capital reserve reserve reserves loss of the parent interest (NCI) equity
For the six months ended 31 August 2013 R R R R R R R R
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 for the period – – – – 26 284 839 26 284 839 690 975 26 975 814
Total comprehensive profit for the period – – – – 26 284 839 26 284 839 690 975 26 975 814
Share options lapsed – – (20 679 622) (20 679 622) 20 679 622 – –
Total changes – – (20 679 622) (20 679 622) 46 964 461 26 284 839 690 975 26 975 814
Balance at 31 August 2013 534 172 123 – 6 001 847 6 001 847 (172 735 613) 367 438 357 22 989 130 390 427 487
For the six months ended 31 August 2012
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)/profit for the period – – – – (12 472 750) (12 472 750) 686 589 (11 786 161)
Total comprehensive profit/(loss)
for the period – – – – (12 472 750) (12 472 750) 686 589 (11 786 161)
Issue of shares 36 771 700 – – – – 36 771 700 – 36 771 700
Acquisition of non-controlling interest – – – – 24 693 273 24 693 273 (49 267 068) (24 573 795)
Dividends – – – – – – (24 573 794) (24 573 794)
Total changes 36 771 700 – – – 12 220 523 48 992 223 (73 154 273) (24 162 050)
Balance at 31 August 2012 522 956 123 1 810 947 27 932 584 29 743 531 (176 381 968) 376 317 686 36 789 560 413 107 246
* Due to a change in accounting policy, certain amounts shown here do not correspond to the 2012 interim results and reflect adjustments made as detailed in note 3.
1. Basis of preparation
The consolidated condensed interim financial statements of the Group, comprised SacOil Holdings Limited and its subsidiaries
(together "the Group"), for the six months ended 31 August 2013, have been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards
Board ("IASB"), the preparation and disclosure requirements of IAS 34: Interim Financial Reporting, the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee, the Financial Pronouncements as issued by the Financial Reporting
Standards Council, the Listings Requirements of the JSE Limited and in the manner required by the South African Companies Act,
No. 71, 2008. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in
accordance with IFRS, as issued by the IASB, have been omitted or condensed as is normal practice.
Principal accounting policies
The same accounting policies, presentation and methods of computation have been followed in these consolidated condensed
interim financial statements of the Group as those applied in the preparation of the Group's annual financial statements for the year
ended 28 February 2013, except for the change in accounting policy detailed in note 3. The adoption of the following standards,
which became effective during the period under review, had no material impact on the results, except for the disclosures required
by these standards:
– IFRS 10: Consolidated Financial Statements;
– IFRS 11: Joint Arrangements;
– IFRS 12: Disclosure if Interests in Other Entities; and
– IFRS 13: Fair Value Measurement.
All of the Group's financial instruments are held at amortised cost. The fair values thereof would be influenced by numerous factors
the most significant of which include credit risk, other forms of non-performance risk (for financial liabilities), and interest rate risk.
Management is of the opinion that, taking into account the value of collateral, as well as payment options, the fair value of the financial
instruments is expected to approximate the carrying value thereof.
The consolidated condensed interim financial statements of the Group should be read in conjunction with the Group's consolidated
annual financial statements for the year ended 28 February 2013.
Notes to oil and gas disclosure
In accordance with AIM Guidelines, Bradley Cerff is the qualified person that has reviewed the technical information contained in
this news release. Bradley has over 16 years' experience in the oil and gas industry with a Masters Degree in Science and Business
Administration focused on Foreign Direct Investment in the African oil and gas industry. He is also a member of the Society of
Petroleum Engineers.
2. Auditors' review report
The consolidated condensed interim financial statements of the Group for the six months ended 31 August 2013 have been reviewed
by Ernst & Young Inc. A copy of the auditors' unqualified review opinion, which includes an emphasis of matter paragraph for the
going concern matters noted in note 16, is available for inspection at the registered office of the Company.
These consolidated condensed interim financial statements have been prepared under the supervision of the interim Finance
Director, Tariro Mudzimuirema (Chartered Accountant).
3. Change in accounting policy
During the period ended 31 August 2012, the Group capitalised costs paid by Total on behalf of Semliki Energy SPRL, a subsidiary
within the Group, in terms of a cost carry arrangement under the farm-in agreement for Block III. These costs increased the Block III
exploration and evaluation asset resulting in a corresponding increase in liabilities representing the amounts owed to Total. To align
its accounting practices with comparable companies in the industry, the Group decided not to capitalise these costs but rather
to use the requirements of IAS 37: Provisions, Contingent Liabilities and Contingent Assets, and only recognise the liability and
corresponding asset on the occurrence of the contingent event (refer to note 13). As a result of the change in accounting policy, the
following adjustments were made to the Group consolidated condensed interim financial statements:
Adjustments
As of and for the period ended 31 August 2012 R
Decrease in exploration and evaluation assets (20 638 362)
Decrease in long-term borrowings (20 638 362)
Decrease in deferred tax liability (3 320 451)
Increase in non-controlling interest 3 146 188
Decrease in taxation (3 320 451)
Decrease in loss for the period (3 320 451)
Decrease in loss per share (cents) (0,02)
Decrease in diluted loss per share (cents) (0,02)
31 August 31 August
2013 2012
4. Operating profit R R
Profit on sale of exploration and evaluation assets – 40 926 877
Loss on re-measurement of financial assets – (31 621 739)
Foreign exchange gains 43 737 699 38 945 883
Break fee received – 6 962 621
Impairment of property, plant and equipment – (1 456 572)
Corporate costs (1 496 983) (3 012 342)
Auditors' remuneration (140 926) (2 315 189)
Employee benefit expense (5 171 965) (6 251 827)
Accounting fees (20 000) (388 375)
Consulting fees (759 620) (2 109 224)
Legal fees (947 065) (2 373 166)
Travel and accommodation (691 390) (1 793 602)
Depreciation (94 046) (373 271)
Property, plant and equipment (63 235) (373 271)
Other intangible assets (30 811) –
Rentals – premises (561 303) (492 313)
Brokers' fees (744 998) (838 488)
31 August 31 August
2013 2012
5. Investment income
Interest receivable – loans 34 225 495 18 904 637
Interest received – cash and cash equivalents 217 185 354 795
Imputed interest on financial assets 12 484 725 7 943 905
46 927 405 27 203 337
6. 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.
For the six months ended 31 August 2013
South
Nigeria DRC Malawi Botswana Africa Consolidated
R R R R R R
Other income – 27 078 912 – – 16 658 787 43 737 699
Investment income 211 077 9 693 141 – – 37 023 187 46 927 405
Finance costs – – – – (10 474 963) (10 474 963)
Other operating expenses (17 793) – – (8 241) (11 475 634) (11 501 668)
Taxation 32 413 (34 612 756) – – (7 132 316) (41 712 659)
Profit/(loss) for the period 225 697 2 159 297 – (8 241) 24 599 061 26 975 814
Segment assets – non-current 131 009 869 324 724 643 896 740 386 548 195 125 810 652 143 610
Segment assets – current 103 235 757 67 931 – – 155 657 344 258 961 032
Segment liabilities – non-current – (88 755 267) – – – (88 755 267)
Segment liabilities – current (51 508 000) (94 037 825) – – (286 376 063) (431 921 888)
For the six months ended 31 August 2012
Restated* South
Nigeria DRC Malawi Botswana Africa Consolidated
R R R R R R
Other income – 33 615 107 – – 21 598 535 55 213 642
Investment income 294 337 7 943 905 – – 18 965 095 27 203 337
Finance costs (21 194 404) – – – (322 763) (21 517 167)
Other operating expenses (1 368 139) – – – (21 830 688) (23 198 827)
Taxation – (43 157 759) – – (4 914 759) (48 072 518)
(Loss)/profit for the period from
continuing operations (22 268 206) (1 598 747) – – 13 495 420 (10 371 533)
Loss from discontinued operation
(note 7) – – – – (1 414 628) (1 414 628)
(Loss)/profit for the period (22 268 206) (1 598 747) – – 12 080 792 (11 786 161)
Segment assets – non-current 44 953 555 348 420 250 – – 81 384 007 474 757 812
Segment assets – current 84 638 853 8 699 856 – – 175 104 978 268 443 687
Segment liabilities – non-current – (103 166 818) – – – (103 166 818)
Segment liabilities – current (42 166 500) (55 542 551) – – (134 214 940) (231 923 991)
* Due to a change in accounting policy, certain amounts shown here do not correspond to the 2012 interim results and
reflect adjustments made as detailed in note 3.
7. Discontinued operation
The Board committed to a plan to sell the Greenhills manganese processing plant ("the Plant") early in 2012 following a
strategic decision to focus the Group's efforts and resources on the core oil and gas business. The Plant was therefore
classified as held for sale at 31 August 2012. The Plant was subsequently sold on 1 October 2012 and met the criteria of
a discontinued operation in terms of IFRS 5.32 at 28 February 2013.
31 August 2012
Results of discontinued operation R
Revenue 9 113 711
Cost of sales (7 328 296)
Gross profit 1 785 415
Operating expenses (3 200 043)
Loss for the period (1 414 628)
Basic loss per share (cents) (0,18)
Diluted loss per share (cents) (0,18)
The Plant was sold for R7 million payable as follows: R
1 October 2013 1 000 000
1 October 2014 2 000 000
1 October 2015 2 000 000
1 October 2016 2 000 000
Total consideration 7 000 000
At 31 August 2013 the present value of these future cash receipts is R5 925 154 (28 February 2013: R5 647 200) and is
included under other financial assets.
8. Earnings/(loss) per share 31 August 2013 31 August 2012
From continuing and discontinued operations
Basic (cents) 2,76 (1,62)
Diluted (cents) 2,76 (1,61)
From discontinued operation
Basic (cents) – (0,18)
Diluted (cents) – (0,18)
From continuing operations
Basic (cents) 2,76 (1,43)
Diluted (cents) 2,76 (1,43)
Profit/(loss) for the period used in the calculation of the basic and diluted R R
earnings/(loss) per share from continuing and discontinued operations 26 284 839 (12 472 750)
Loss for the period from discontinued operations – 1 414 628
Profit/(loss) used in the calculation of basic and diluted earnings/(loss) per share
from continuing operations 26 284 839 (11 058 122)
Weighted average number of ordinary shares used in the calculation of basic
earnings/(loss) per share 953 340 791 771 061 757
Add: Dilutive share options – 1 350 251
Weighted average number of ordinary shares used in the calculation of
diluted earnings/(loss) per share 953 340 791 772 412 008
Headline earnings/(loss) per share
Basic (cents) 2,76 (2,60)
Diluted (cents) 2,76 (2,60)
Reconciliation of headline earnings/(loss) R R
Profit/(loss) for the period from continuing and discontinued operations 26 284 839 (12 472 750)
Adjust for:
Impairment of property, plant and equipment – 1 456 572
Profit on sale of exploration and evaluation assets attributable to
equity holders of the parent – (9 060 997)
Headline earnings/(loss) for the period 26 284 839 (20 077 175)
9. Exploration and evaluation assets
For the six months ended 31 August 2013
Restated*
At At At At
February Adjust- 31 August February August
2012 ments Disposals 2012 Additions 2013 Additions 2013
R R R R R R R R
Block III DRC 101 381 633 – (27 015 358) 74 366 275 – 74 366 275 – 74 366 275
OPL 281 Nigeria 47 712 172 (3 639 250) – 44 072 922 – 44 072 922 – 44 072 922
OPL 233 Nigeria 3 962 528 (3 081 896) – 880 632 42 642 598 43 523 230 43 413 717 86 936 947
Botswana – – – – – – 386 548 386 548
Malawi – – – – 896 740 896 740 – 896 740
153 056 333 (6 721 146) (27 015 358) 119 319 829 43 539 338 162 859 167 43 800 265 206 659 432
* Due to a change in accounting policy, certain amounts shown here do not correspond to the 2012 interim results and
reflect adjustments made as detailed in note 3.
OPL 233
During the period under review the Group capitalised borrowing costs totalling R32,6 million (2012: nil) and incurred further exploration
expenditures totalling R10,8 million (2012: nil).
Botswana
During the period under review the Group acquired three exploration licences in Botswana for R0,4 million.
Block III
During the corresponding prior period, Semliki SPRL, a subsidiary of SacOil, sold to Total RDC a 6,67% interest in Block III resulting
in the derecognition of R27,0 million of exploration and evaluation assets.
Adjustments
Adjustments to the OPL 281 and OPL 233 assets in the corresponding prior period relate to promoter fees. These fees will now be
recovered from EERNL and are included in amounts due from EERNL under current other financial assets (note 10).
31 August 28 February
2013 2013
10. Other financial assets R R
Non-current:
Contingent consideration 221 888 167 181 470 254
Deferred consideration on disposal of Greenhills Plant 4 933 216 4 701 795
Loan due from DIG 35 314 943 35 315 725
Advance payment against future services 59 508 337 56 716 754
Loan due from EER 123 454 793 93 514 667
445 099 456 371 719 195
Current:
Loan due from EER 150 715 996 83 857 631
Deferred consideration on disposal of Greenhills Plant 991 938 945 405
151 707 934 84 803 036
Total 596 807 390 456 522 231
11. Cash and cash equivalents
Cash and cash equivalents comprise:
Bank balances 344 973 4 677 192
Short-term deposits – 215 368
344 973 4 892 560
Restricted cash 103 235 757 89 139 856
103 580 730 94 032 416
Restricted cash comprises the cash collateral of US$10 million (28 February 2013: US$10 million) paid to Ecobank to
secure the performance bond on OPL 233. The cash is held in the bank account of SacOil's wholly owned subsidiary,
SacOil 233 Nigeria Limited. The remainder of the performance bond is secured by a first ranking legal charge over SacOil's
investment in SacOil 233 Nigeria Limited.
12. Other financial liabilities
Gairloch Limited 235 084 090 128 978 015
Energy Equity Resources (Norway) Limited 51 508 000 44 199 000
Yorkville Advisors LLP 429 742 –
Nigdel United Oil Company Limited 9 786 520 2 397 812
296 808 352 175 574 827
31 August 31 August
13. Contingent assets and liabilities 2013 2012
Commitments R R
Exploration and evaluation assets – work programme commitments 413 938 891 –
Work programme commitments will be funded from the proceeds
of the rights offer. Details of the rights offer are provided in note 15.
31 August 28 February
2013 2013
Contingent liabilities R R
Performance bond on OPL 233 issued by Ecobank in respect of
OPL 233 exploration activities 154 524 000 132 597 000
Cost carry arrangement with Total 32 861 257 20 411 689
Farm-in and transaction fees on receipt of title to OPL 233 134 950 960 115 801 380
Farm-in and transaction fees on receipt of title to OPL 281 149 373 200 128 177 100
471 709 417 396 987 169
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 R103,2 million ($10 million) (28 February 2013: R89,1 million (US$10 million)) cash
collateral as disclosed in note 11. 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 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
31 August 2013, Total had incurred R32,9 million (28 February 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 (refer to note 3).
Farm-in and transaction fees
OPL 233
A farm-in fee of R109,2 million (28 February 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 SacOil 233 Nigeria Limited in
relation to OPL 233. A transaction fee of R25,8 million (28 February 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 R123,6 million (28 February 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 SacOil 281 Nigeria
Limited in relation to OPL 281. A transaction fee of R25,8 million (28 February 2013: R22,1 million) (US$2,5 million) is due
to Energy Equity Resources (Norway) Limited upon the receipt of title to OPL 281, pursuant to the provisions of the Master
Joint Venture Agreement.
14. Dividends
The Board has resolved not to declare any dividends to shareholders for the period under review.
15. Subsequent events
Equity settlement of the Gairloch Loans
Gairloch Limited ("Gairloch") exercised its rights under the three loans agreements, to require SacOil to equity settle loans
owed to Gairloch. On 12 September 2013 SacOil concluded an agreement with Gairloch for the conversion of debt to
equity in SacOil. Under the terms of this agreement debt totalling circa R238,5 million (US$24,1 million) will be converted
into 883 449 144 new SacOil ordinary shares at R0,27 (US$0,0272876) per share. The share issue price represents a 4,6%
discount to the volume weighted average traded price of the SacOil shares on the JSE over the 30 business days prior to
the date of the suspension. For details relating to the equity settlement of the Gairloch Loans, shareholders are referred
to the circular distributed to shareholders dated 7 November 2013. This circular is also available on the SacOil website:
www.sacoilholdings.com.
Rights Offer
As previously announced on 12 September 2013, the Company intends to raise additional capital of up to R570 million
by way of a renounceable rights offer of 2 111 111 111 SacOil shares ("Right Offer Shares") at an issue price of R0,27
per share (the "Rights Offer"). The Rights Offer will be supported by one of the Company's largest shareholders, the
Government Employees Pension Fund ("GEPF"), managed by the Public Investment Corporation (SOC) Limited ("PIC"),
to the extent of circa R329 million. The ratio of rights offered for existing SacOil shares will be in proportion to each
shareholder's respective shareholding in the Company. For details relating to Rights Offer, shareholders are referred to
the circular distributed to shareholders dated 7 November 2013. This circular is also available on the SacOil website:
www.sacoilholdings.com.
Bridge Loan Facility
On 27 September 2013, SacOil obtained a temporary overdraft facility of R15 million from Nedbank subject to the fulfilment
of certain conditions precedent, some of which have already been met. The outstanding conditions precedent will be
fulfilled on 6 December 2013, subject to SacOil shareholders approving the resolutions to give effect to the Whitewash
Resolution, the Specific Issue and Rights Offer, as defined in the circular posted to shareholders on 7 November 2013.
Loan advanced to EERNL
The short-term loan due from EERNL, as disclosed in note 10, became due and payable on 31 May 2013. As at the date of
the release of the interim results EERNL has not fulfilled its repayment obligations in respect of this loan. Discussions are in
progress to agree a repayment schedule for this overdue amount. The Company is also considering its position in respect
of the default provisions of the loan agreement underlying this receivable. The loan has not been impaired as the value
of the security provided exceeds the carrying value of the loan. The loan is secured by EERNL's shares in its subsidiary
EER233 Nigeria which holds a 20% interest in OPL 233, subject to government approval.
16. Going concern
As indicated in the General Meeting Circular to SacOil shareholders dated 7 November 2013 ("Circular"), the Board plans
to recapitalise the Company by way of a renounceable rights offer of R570 million, to be completed by 31 January 2014
("the Rights Offer"). The Board also plans to equity settle the Gairloch Loans by 31 January 2014 under the terms of
the Subscription and Settlement Agreement concluded with Gairloch on 12 September 2013 ("the Specific Issue").
The completion of both transactions is dependent upon future material uncertain events which are discussed below.
Furthermore, the Company's projected cash flows to 30 November 2014 include the following assumptions some of which
are subject to material uncertainties as discussed in further detail below:
- Cash inflow from the loan receivable from EERNL of R161,2 million (US$16,1 million);
- Cash inflow arising from rights issue proceeds amounting to R570,0 million;
- Cash outflows from farm-in fees payable to Nigdel and Transcorp totalling R226,0 million (US$22,6 million) the timing of
which is uncertain; and
- Settlement of the full debt payable to Gairloch by means of a conversion to capital rather than a settlement in cash.
The features of these cash flows are further described below:
Rights Offer and equity settlement of Gairloch Loans
The resolutions required to give effect to the Rights Offer and Specific Issue are detailed in the Circular in the Notice of
General Meeting. It is imperative that SacOil obtains shareholder approval for both the Rights Offer and Specific Issue.
SacOil has prepared its working capital forecast on the basis that the Specific Issue and Rights Offer are approved by
shareholders, and that the Rights Offer is fully subscribed for.
Management has engaged with some of the Company's shareholders to determine the levels of support and appetite for
the Rights Offer. To date, the Company has obtained support for 58% of the Rights Offer value, representing an irrevocable
undertaking by the PIC to support the Rights Offer to the extent of circa R329 million. Although the outcome of the
shareholders' approval and the extent of the subscription to the Rights Offer cannot be determined with certainty at this
stage, the Board is reasonably confident that the approval of the Rights Offer will be successful. As detailed in the Circular
in Annexure 6, the Company has received irrevocable undertakings in favour of the resolutions required to give effect to the
Rights Offer and Specific Issue, from shareholders with a 23,9% total equity interest in SacOil. Subsequent to the issue of
the Circular, SacOil received a further irrevocable undertaking from the PIC, representing the GEPF a 16,6% shareholder
in SacOil, to vote in favour of the resolutions detailed in the Circular, excluding the Whitewash Resolution, as referred to
therein. The less certain element to this is the extent to which shareholders will follow their rights giving rise to the raising
of the full R570 million of capital. Furthermore, ongoing communications with various shareholders have demonstrated a
general understanding of the immediate need to convert the Gairloch Loans which continue to accrue onerous finance
charges. Again, the Board is reasonably confident that shareholders' approval for the equity settlement of the Gairloch
Loans will be obtained.
Loan receivable from EERNL
EERNL has not met its repayment obligations on the short-term loan repayment, which became due and payable on
31 May 2013. To date, EERNL has paid US$1 million of the US$12,5 million owed to SacOil at 31 May 2013
(31 August 2013: US$14,6 million). The Company is in discussions with EERNL to renegotiate payment terms and is also
considering its rights in terms of the default provisions underlying the loan agreement. It is uncertain at this stage whether
EERNL will meet its repayment obligations on or before the proposed repayment date. Should non-payment of the short-
term loan continue, SacOil will consider 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, through the disposal of this interest, to recover amounts
owed.
Farm-in and transaction fees
The payment of farm-in and transaction fees is dependent upon the receipt of title to OPL 233 and OPL 281. These fees
are payable within 30 days of the receipt of title. As at the date of the release of the interim results, the Company has been
unable to determine the likely timing of the receipt of title to both OPL 233 and OPL 281 as these are subject to regulatory
approvals not within the control of the Company. The Board's current plan is to fund these fees from the proceeds of the
Rights Offer. Should title be received prior to the completion of the Rights Offer, the Company would be unable to fund
these fees in the ordinary course of business. It is management's intention to renegotiate the timing of settlement of the
fees should title be received before funds are available.
These 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 is however confident that the Specific Issue and the Rights Offer will be approved
by the shareholders, and that through this action SacOil will have appropriately addressed the material uncertainties with
respect to going concern. It is on this basis that management has decided to prepare the financial statements on a going
concern basis. In the interim SacOil has secured an interim funding facility, as detailed under note 15, which will enable it
to pay for its daily operational costs and work programme commitments on OPL 233.
The financial statements are 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.
By order of the Board
Roger Rees
Chief Executive
Johannesburg
22 November 2013
CORPORATE INFORMATION
Registered office and physical address:
2nd Floor, The Gabba, Dimension Data Campus, 57 Sloane Street, 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
Email: info@sacoilholdings.com
Website: www.sacoilholdings.com
Directors:
Roger Rees (Chief Executive Officer), Tariro Mudzimuirema (Finance Director), Tito Mboweni**
Mzuvukile Maqetuka**, Stephanus Muller**, Vusi Pikoli**, Ignatius Sehoole*, Gontse Moseneke*
(*) Non-executive Director; (**) Independent 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
AIM Nominated Adviser finnCap Limited
Date: 22/11/2013 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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