Wrap Text
Reviewed interim results for the six months ended 31 August 2014
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 2014
HIGHLIGHTS
- Cementing of Board and executive team
- Transition from development to production initiated
- Acquisition of 20% interest in Nigeria's OPL 233 completed; seismic survey initiated
- Completion of satellite imagery survey for Botswana assets and ESIA initiation in Malawi
- Strategic entry into Egypt through 100% acquisition of Lagia Oil Field
- Active review of capital structure and funding options
Dr Thabo Kgogo, Chief Executive of SacOil, commented: "We attained a number of milestones
during this period with the support of a new Board and re-energised executive team.
In particular, the acquisition of Lagia Oil Field in Egypt marks our transition from
a development to a production company supported by a reserve base able to deliver
production and cash flow in the near term. This transformational transaction also
provides us with greater access to the capital markets as we roll out our strategy to
build a substantial pan-African exploration and production business.
Looking ahead, our funding situation remains a top priority and we will continue to work
towards the successful resolution of the loan situation with EERNL but also actively
review alternative options, including rebalancing of our portfolio. The completion of
the forensic investigation and resolution of the matters raised will remain a priority
of the Board."
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 9 October 2014,
in which the Company communicated a detailed update on its asset-level operations.
FINANCIAL REVIEW
The Group reported a decrease of 23% in profit after tax to R20.7 million for the
six months ended 31 August 2014 compared to R27.0 million for the corresponding prior
comparative period. Although the Group's investment income increased by 64%, the
resultant increase was off-set by foreign exchange losses on the Group's financial assets
coupled with higher other operating costs.
The increase in investment income is attributable to the compounding effect of the
interest accruals on the loan advanced to Energy Equity Resources (Norway) Limited
("EERNL"). Furthermore, the loan now attracts interest of 32% compared to 30% for the
corresponding prior comparative period, following the renegotiation of the loan
repayment terms (refer to note 13). The composition of investment income is disclosed
in note 4.
Other operating costs, as disclosed in note 3, increased by 305% to R46.6 million
(2013: R11.5 million) during the period under review. The Group impaired its financial
assets by R19.7 million (2013: nil). The increase is also reflective of the Group's
investment in business development activities.
The Group's foreign exchange losses for the six months total R7.2 million (2013:
R43.7 million foreign exchange gains). The US dollar / Rand exchange rate was less
volatile during the six months under review compared to the corresponding prior
comparative period when it fluctuated between R8.8398/US$1 and R10.3016/US$1 at the
beginning and end of the reporting period, respectively.
The Group extinguished all its debt in January 2014, resulting in the elimination of
borrowing costs (2013: R10.5 million).
Exploration and evaluation assets increased by R29.2 million to R296.0 million
(28 February 2014: R266.8 million) as a result of the Group capitalising the seismic
survey costs relating to OPL 233.
Other financial assets, as disclosed in note 8, increased by R35.2 million to
R691.1 million (28 February 2014: R655.9 million). The net movement comprises:
- An increase in interest of R73.4 million on the EERNL loan (R59.4 million),
contingent consideration (R10.7 million) and other financial assets (R3.3 million);
- A part repayment of the EERNL loan of R10.6 million;
- An impairment charge of R19.7 million against the EERNL loan; and
- Foreign exchange losses totalling R7.9 million.
Cash and cash equivalents comprise the translated US$10 million cash collateral held
as security for the performance bond on OPL 233 of R106.7 million (28 February 2014:
R108.1 million) and cash deposits amounting to R214.0 million (28 February 2014:
R273.5 million). The decrease in cash is reflective of the Group's investment in the
OPL 233 seismic survey, business development activities and normal operating costs.
Other financial liabilities, as disclosed in note 10, decreased by R20.9 million,
reflecting the settlement of the amounts owed to Nigdel United Oil Company, the
operator of OPL 233.
GOING CONCERN
The Board continues to explore funding and other alternatives available to the Group
to 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 as detailed in note 14.
REPORTABLE IRREGULARITY
The Board of SacOil recently engaged Ernst & Young Inc. to carry out a forensic
investigation on specific historical transactions of the Company between 1 August 2011 and
30 November 2011 relating to the Company's unsuccessful attempt to acquire interests in
Block I and II in the DRC, amongst other matters.
Based on matters raised in the preliminary forensic report, Ernst & Young Inc., the
Company's external auditors, have reported to the Independent Regulatory Board for
Auditors that they have reason to believe that Reportable Irregularities committed by
previous members of management took place. These Reportable Irregularities relate to
matters which do not affect the current condensed consolidated interim financial statements.
The directors do not expect that future losses will arise from the matters raised.
The forensic investigation represents a key step taken by the Board to address historical
governance issues.
Shareholders will be kept informed of progress made regarding this matter.
CHANGE IN DIRECTORATE
On 1 June 2014 the new CEO, Dr Thabo Kgogo, joined SacOil and was appointed to the Board.
On 11 August 2014 Bradley Cerff was appointed to the Board as an Executive Director.
OUTLOOK
Good progress has been made across the existing portfolio of exploration and appraisal
assets during the period.
The acquisition of the Lagia Oil Field in Egypt completed in October 2014 marks an
inflexion point in SacOil's investment profile with the Company transitioning from a pure
exploration play to an exploration and production business with cash-generating assets.
SacOil is now focusing on its funding situation and will assess various alternatives
to ensure that an adequate capital structure is in place to deliver on its stated
strategy. This may include a combination of portfolio rebalancing, rationalisation of
assets and alternative funding options which are being continually assessed. The
resolution of the US$18 million loan due to SacOil by EERNL is a top priority which
is anticipated to be resolved before the end of the financial year.
Longer term, SacOil will continue to execute on ongoing projects in the Democratic
Republic of Congo, Malawi, Botswana and Nigeria which are all expected to yield
significant future milestones and value for the Group. The partnership announced in
March 2014 between SacOil, the Public Investment Corporation of South Africa and the
Instituto De Gestao Das Participacoes Do Estado in Mozambique regarding the
investigation of gas opportunities and future distribution of gas in southern Africa
also offers exciting prospects.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Reviewed
Six months Six months
to 31 August to 31 August
2014 2013
Note R R
Other income - 43 737 699
Other operating costs (46 575 517) (11 501 668)
Operating (loss)/profit 3 (46 575 517) 32 236 031
Investment income 4 77 001 921 46 927 405
Finance costs (646) (10 474 963)
Profit before taxation 30 425 758 68 688 473
Taxation (9 756 554) (41 712 659)
Profit for the period 20 669 204 26 975 814
Total comprehensive income for the period 20 669 204 26 975 814
Profit/(loss) attributable to:
Equity holders of the parent 22 320 598 26 284 839
Non-controlling interest (1 651 394) 690 975
20 669 204 26 975 814
Total comprehensive income/(loss) attributable to:
Equity holders of the parent 22 320 598 26 284 839
Non-controlling interest (1 651 394) 690 975
20 669 204 26 975 814
Earnings per share
Basic (cents) 6 0.72 2.76
Diluted (cents) 6 0.72 2.76
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
Six months Twelve months
to 31 August to 28 February
2014 2014
Note R R
ASSETS
Non-current assets
Property, plant and equipment 216 164 247 207
Exploration and evaluation assets 7 296 012 868 266 809 536
Other intangible assets 130 172 175 476
Other financial assets 8 461 698 405 433 344 048
Total non-current assets 758 057 609 700 576 267
Current assets
Other financial assets 8 229 396 582 222 542 359
Trade and other receivables 4 549 486 649 764
Cash and cash equivalents 9 320 705 723 381 579 766
Total current assets 554 651 791 604 771 889
Total assets 1 312 709 400 1 305 348 156
EQUITY AND LIABILITIES
Shareholders' equity
Stated capital 1 109 977 054 1 109 977 054
Reserves 6 001 847 6 001 847
Accumulated loss (157 105 558) (179 426 156)
Equity attributable to equity holders of parent 958 873 343 936 552 745
Non-controlling interest 10 567 082 12 218 476
Total shareholders' equity 969 440 425 948 771 221
Liabilities
Non-current liabilities
Deferred tax liability 93 820 127 92 498 394
Total non-current liabilities 93 820 127 92 498 394
Current liabilities
Other financial liabilities 10 53 242 500 74 167 311
Share-based payment liability 1 066 000 -
Current tax payable 183 250 024 176856 253
Trade and other payables 11 890 324 13054 977
Total current liabilities 249 448 848 264078 541
Total liabilities 343 268 975 356576 935
Total equity and liabilities 1 312 709 400 1 305348 156
Number of shares in issue 3 086 169 261 3 086 169 261
Net asset value per share (cents) 31.41 30.74
Net tangible asset value per share (cents) 21.82 22.10
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 August 2014
Total equity
attributable
Share-based to equity Non-
Stated payment Accumulated holders of controlling Total
capital reserve loss the parent interest equity
R R R R R R
Balance at 28 February 2014 1 109 977 054 6 001 847 (179 426 156) 936 552 745 12 218 476 948 771 221
Changes in equity:
Profit/(loss) for the period - - 22 320 598 22 320 598 (1 651 394) 20 669 204
Total comprehensive income/(loss)
for the period - - 22 320 598 22 320 598 (1 651 394) 20 669 204
Total changes - - 22 320 598 22 320 598 (1 651 394) 20 669 204
Balance at 31 August 2014 1 109 977 054 6 001 847 (157 105 558) 958 873 343 10 567 082 969 440 425
For the six months ended 31 August 2013
Balance at 28 February 2013 534 172 123 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 income for the period - - 26 284 839 26 284 839 690 975 26 975 814
Share options lapsed - (20 679 622) 20 679 622 - - -
Total changes - (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 (172 735 613) 367 438 357 22 989 130 390 427 487
CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Reviewed
Six months Six months
to 31 August to 31 August
2014 2013
R R
Cash flows from operating activities
Cash used in operations (24 114 839) (8 739 666)
Interest income 3 528 096 217 185
Tax received - 32 412
Net cash used in operating activities (20 586 743) (8 490 069)
Cash flows from investing activities
Purchase of exploration and evaluation assets (29 233 332) (4 210 593)
Purchase of property, plant and equipment (28 986) -
Receipts from loans and receivables 10 607 190 4 303 501
Net cash (used in)/from investing activities (18 655 128) 92 908
Cash flows from financing activities
(Repayment of)/proceeds from other financial liabilities (20 220 311) 3 288 700
Net cash (used in)/from financing activities (20 220 311) 3 288 700
Total movement in cash and cash equivalents
for the period (59 462 182) (5 108 461)
Foreign exchange (losses)/gains on cash and
cash equivalents (1 411 861) 14 656 775
Cash and cash equivalents at the beginning of the period 381 579 766 94 032 416
Cash and cash equivalents at the end of the period 320 705 723 103 580 730
NOTES
1 BASIS OF PREPARATION
The consolidated condensed interim financial statements of the Group, comprising
SacOil Holdings Limited and its subsidiaries (together "the Group"), for the six months
ended 31 August 2014, 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 of 2008 (as amended).
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 2014.
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 2014.
The following new IFRS and/or IFRICs were effective for the first time for this interim
period from 1 January 2014:
- Amendments to IFRS 10, IFRS 12 and IAS 27, Investment Entities
- Amendments to IAS 32, Off-setting Financial Assets and Financial Liabilities
- Amendments to IAS 36, Recoverable Amount Disclosures for Non-financial Assets
- Amendments to IAS 39, Novation of Derivatives and Continuation of Hedge Accounting
The above standards did not have an impact on the Group's results.
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
18 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 AUDITOR'S REVIEW REPORT
The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standard, IAS 34, Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and the requirements of
the Companies Act of South Africa. The accounting policies applied in the preparation of
these interim financial statements are in terms of International Financial Reporting
Standards and are consistent with those applied in the previous annual financial statements.
These interim condensed consolidated financial statements for the period ended 31 August 2014
have been reviewed by Ernst & Young Inc. who expressed an unmodified review conclusion.
They have been prepared under the supervision of the Group's Financial Director:
Tariro Mudzimuirema CA (SA).
The unqualified review report includes an Emphasis of Matter Paragraph on material
uncertainties relating to the going concern of the entity.
The report also includes an "Other Legal and Regulatory Requirements" paragraph with respect
to reportable irregularities which were reported in terms of section 45 of the Auditing
Profession Act to the Independent Regulatory Board for Auditors (IRBA). The reportable
irregularities are based on the further analysis by the external auditors of the preliminary
findings of a forensic investigation into the historical conduct of the affairs of the
Company, which investigation was instituted by the Company on the instruction of the board.
The board is considering the section 45 report to the IRBA in relation to the reportable
irregularities, with a view to take such action as is appropriate.
A copy of the auditor's review report is available for inspection at the Company's registered
office together with the financial statements identified in the auditor's report.
31 August 2014 31 August 2013
R R
3 OPERATING (LOSS)/PROFIT
Foreign exchange (losses)/gains (7 243 168) 43 737 699
Provision for impairment of financial asset (note 8) (19 736 842) -
Corporate costs (1 533 726) (1 496 983)
Auditor's remuneration (1 017 750) (140 926)
Employee benefit expense (8 780 907) (5 171 965)
Accounting fees (34 400) (20 000)
Consulting fees (2 084 710) (759 620)
Legal fees (485 718) (947 065)
Travel and accommodation (1 627 679) (691 390)
Depreciation (105 334) (94 046)
Property, plant and equipment (60 030) (63 235)
Other intangible assets (45 304) (30 811)
Rentals - premises (497 871) (561 303)
Broker's fees (545 863) (744 998)
31 August 2014 31 August 2013
R R
4 INVESTMENT INCOME
Interest receivable - loans 59 430 348 34 225 495
Interest received - cash and cash equivalents 3 528 096 217 185
Imputed interest on financial assets 14 043 477 12 484 725
77 001 921 46 927 405
5 SEGMENTAL REPORTING
The Group operates in five geographical locations which form the basis of the information
evaluated by the Group's chief operating 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
R R R R R R
For the six months ended 31 August 2014
Other income - - - - - -
Investment income 109 10 718 172 - - 66 283 640 77 001 921
Finance costs - (621) - - (25) (646)
Other operating expenses (1 003 951) (1 627 639) - (491 032) (43 452 895) (46 575 517)
Taxation (11) (14 602 884) - - 4 846 341 (9 756 554)
Profit/(loss) for the period (1 003 853) (5 512 972) - (491 032) 27 677 061 20 669 204
Segment assets
- non-current 220 393 305 303 726 387 866 740 386 548 232 684 629 758 057 609
- current 106 732 672 38 425 476 - - 409 493 643 554 651 791
Segment liabilities
- non-current - (91 744 045) - - (2 076 082) (93 820 127)
- current (53 242 500) (146 310 390) - (222 400) (49 673 558) (249 448 848)
For the six months ended 31 August 2013
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
- current 103 235 757 67 931 - - 155 657 344 258 961 032
Segment liabilities
- non-current - (88 755 267) - - - (88 755 267)
- current (51 508 000) (94 037 825) - - (286 376 063) (431 921 888)
31 August 2014 31 August 2013
R R
6 EARNINGS PER SHARE
Basic (cents) 0.72 2.76
Diluted (cents) 0.72 2.76
Profit for the period used in the calculation of
the basic and diluted earnings per share 22 320 598 26 284 839
Weighted average number of ordinary shares used
in the calculation of basic earnings per share 3 086 169 261 953 340 791
Issued shares at the beginning of the reporting
period 3 086 169 261 953 340 791
Effect of shares issued during the reporting period
(weighted) - -
Add: Dilutive share options 2 325 710 -
Weighted average number of ordinary shares used in
the calculation of diluted earnings per share 3 088 494 971 953 340 791
Headline earnings per share
Basic (cents) 0.72 2.76
Diluted (cents) 0.72 2.76
Reconciliation of headline earnings
Profit for the period 22 320 598 26 284 839
Headline earnings for the period 22 320 598 26 284 839
7 EXPLORATION AND EVALUATION ASSETS
At 28 February At 31 August 28 February At 31 August
2013 Additions 2013 Additions 2014 Additions Disposals 2014
Block III DRC 74 366 275 - 74 366 275 - 74 366 275 - - 74 366 275
OPL 281 Nigeria 44 072 922 - 44 072 922 - 44 072 922 - - 44 072 922
OPL 233 Nigeria 43 523 230 43 413 717 86 936 947 60 150 104 147 087 051 29 233 332 - 176 320 383
Botswana - 386 548 386 548 - 386 548 - - 386 548
Malawi 896 740 - 896 740 - 896 740 - (30 000) 866 740
162 859 167 43 800 265 206 659 432 60 150 104 266 809 536 29 233 332 (30 000) 296 012 868
OPL 233
No borrowing costs have been capitalised during the period under review (August 2013:
R32.6 million), as the Group settled the debt previously incurred to finance OPL 233,
in January 2014. Exploration expenditures totalling R29.3 million (August 2013:
R10.8 million) have been capitalised, primarily relating to the seismic survey.
31 August 2014 28 February 2014
R R
8 OTHER FINANCIAL ASSETS
Non-current
Contingent consideration 229 360 113 221 493 152
Deferred consideration on disposal of Greenhills Plant 3 442 662 3 281 164
Advance payment against future services 65 459 171 62 388 430
Loan due from EER 163 436 459 146 181 302
461 698 405 433 344 048
Current
Loan due from EER 237 930 825 210 835 454
Loan due from DIG 47 097 098 47 694 469
Deferred consideration on disposal of Greenhills Plant 1 983 876 1 890 811
287 011 799 260 420 734
Less: Provision for impairment (57 615 217) (37 878 375)
229 396 582 222 542 359
Total 691 094 987 655 886 407
9 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise:
Bank balances 10 610 303 273 466 636
Short-term deposits 203 394 054 -
214 004 357 273 466 636
Restricted cash 106 701 366 108 113 130
320 705 723 381 579 766
Restricted cash comprises the cash collateral of US$10 million (February 2014: US$10 million)
paid to Ecobank to secure the US$25 million 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.
31 August 2014 28 February 2014
R R
10 OTHER FINANCIAL LIABILITIES
Energy Equity Resources (Norway) Limited 53 242 500 53 947 000
Nigdel United Oil Company Limited - 20 220 311
53 242 500 74 167 311
31 August 2014 31 August 2013
R R
11 CONTINGENT ASSETS AND LIABILITIES
Commitments
Exploration and evaluation assets - work programme
commitments 744 044 728 413 938 891
Exploration and evaluation activities will be funded from current cash resources and
funds from future capital-raising initiatives.
31 August 2014 28 February 2014
R R
Contingent liabilities
Performance bond on OPL 233 issued by Ecobank in
respect of OPL 233 exploration activities 159 727 500 161 841 000
Cost carry arrangement with Total 36 591 084 36 508 805
Farm-in and transaction fees on receipt of title
to OPL 233 139 495 350 141 341 140
Farm-in and transaction fees on receipt of title
to OPL 281 154 403 250 156 446 300
490 217 184 496 137 245
Performance bond
In April 2012, the Group posted a US$25 million performance bond to support the work
programme on OPL 233. This performance bond is secured by a R106.7 million (US$10 million)
(28 February 2014: R108.1 million (US$10 million)) cash collateral as disclosed in note 9.
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 2014, Total has incurred R36.6 million (28 February 2014: R36.5 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 R112.9 million (28 February 2014: R114.3 million (US$10.6 million)) is due
to Nigdel United Oil Company Limited ("Nigdel") following the formal approval by the Nigerian
Government of the assignment of title to SacOil 233 Nigeria Limited in relation to OPL 233.
The existence of the possible obligation to Nigdel will be confirmed by the occurrence of an
uncertain future event, being the verification of the award of title, which process is not
wholly within the control of SacOil. A transaction fee of R26.6 million (28 February 2014:
R27.0 million (US$2.5 million)) is also due to Energy Equity Resources (Norway) Limited
("EERNL") following the assignment of title to OPL 233, pursuant to the provisions of the
Master Joint Venture Agreement. The fee payable to EER will be off-set against the loan
receivable from EERNL, when the award of title has been verified, if this occurs prior to the
settlement of the loan.
OPL 281
A farm-in fee of R127.8 million (28 February 2014: R129.4 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 R26.6 million (28 February 2014: R27.0 million (US$2.5 million)) is due
to EERNL upon the assignment of title to OPL 281, pursuant to the provisions of the Master
Joint Venture Agreement.
12 DIVIDENDS
The Board has resolved not to declare any dividends to shareholders for the period under review.
13 SUBSEQUENT EVENTS
Acquisition of 100% interest in the Lagia oil field, onshore Sinai Peninsula, Egypt
Shareholders are referred to the announcement issued on SENS and RNS on 10 September 2014
wherein the Company announced that it had entered into a sale and purchase agreement dated
9 September 2014 (the "Agreement") to acquire a Cyprus-registered exploration and production
company, Mena International Petroleum Company Ltd ("MIP"), from Mena International Petroleum
Holdings Company Ltd (the "Seller"), a wholly-owned subsidiary of TSX Venture listed as Mena
Hydrocarbons Inc. (TSXV:MNH) ("Mena Hydrocarbons") (the "Acquisition"). MIP has a 100% interest
in the development lease for the Lagia oil field, covering an area of approximately 32 square
kilometres on the Sinai Peninsula in Egypt. The Lagia oil field is at a development stage with
heavy oil (16 - 18 degree API) in shallow reservoirs and light oil potential in deeper reservoirs.
The assets include existing production facilities and oil storage for 3 000 barrels of oil.
The completion of the Acquisition is expected to occur on or about 31 October 2014. The full
announcements are available on the SacOil website: www.sacoilholdings.com.
Loan advanced to EERNL
On 20 October 2014, the repayment of the loan due from EERNL was extended to 30 November 2014.
As part of the extension terms, EERNL agreed to pay interest of 32% on the outstanding loan and
to accept the interest on the non-cash component of the loan previously disputed. The loan is
secured by EERNL's shares in its subsidiary, EER233 Nigeria, which holds a 20% interest in
OPL 233. The loan has not been impaired in full as the value of the security exceeds the
carrying value of the loan.
14 GOING CONCERN
The Company continues to remain dependent on its ability to obtain sufficient funding to sustain
operations and complete its exploration projects. While the Company has been successful in
raising financing in the past, there can be no absolute assurance that it will be able to do so
in future. As noted in note 13, the repayment of the loan advanced to EERNL has been extended to
30 November 2014, whilst EERNL undergoes its own recapitalisation, which will enable it to settle
in full the loan owed to SacOil. Whilst this would be the best outcome for the Company, given the
implications of default by EERNL, it is difficult to determine with certainty the outcome of the
planned recapitalisation and, consequently, the settlement of the loan owed to SacOil. Should EERNL
default on 30 November 2014, the Company will acquire an additional 20% interest in OPL 233, being
the security provided for the debt, which will double SacOil's funding commitments for the OPL 233
asset. The disposal of this additional interest would not be expected to occur immediately upon
default given the seismic survey that is still under way. The cash flow projections to February 2016
include cash inflows from EERNL totalling R201.0 million (US$18.0 million).
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.
By order of the Board
Dr Thabo Kgogo
Chief Executive
Johannesburg
4 November 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:
Dr Thabo Kgogo (Chief Executive Officer), Tariro Mudzimuirema (Finance Director),
Bradley Cerff (Executive Director), Tito Mboweni**, Mzuvukile Maqetuka**, Stephanus Muller**,
Vusi Pikoli**, Ignatius Sehoole*, Gontse Moseneke*, Danladi Verheijen*, Titilola Akinleye*
* Non-executive Directors
** 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, a division of Nedbank Limited
AIM Nominated Adviser:
finnCap Limited
Investor Relations:
Instinctif Partners (London and Johannesburg)
Date: 04/11/2014 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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