Wrap Text
Reviewed Condensed Consolidated Interim Results for the six months ended 31 August 2015
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 together with its subsidiaries "the Group")
REVIEWED CONDENSED CONSOLIDATED INTERIM RESULTS
for the six months ended 31 August 2015
HIGHLIGHTS:
- Refund of $10 million on expiry of the OPL 233 performance bond
- Lagia: Commencement of installation of steam facilities
- Agreement reached on the settlement of the EERNL loans
- Completion of exit from OPL 233
Dr Thabo Kgogo, Chief Executive Officer of SacOil commented: "During the period, we continued
to execute the Group's revised strategy to rationalise its portfolio of assets with the exit
from OPL 233 in May 2015. This marked a significant improvement in the Group's financial stability
due to the reduction in commitments and the refund of the $10 million cash collateral which
previously secured the OPL 233 performance bond. The cash resources of the Group of R196 million
(at 31 August 2015) are now available to facilitate the growth of its operations and to expand
the Group's footprint on the African continent. Furthermore, the conclusion of a settlement
agreement with Energy Equity Resources Norway Limited ("EERNL") in March 2015 reflects the
restructuring of the loans advanced to the EERNL Group relating to OPL 281 and OPL 233.
The transformation of SacOil into a production company remains the priority of the Board.
In this regard, significant progress has been made in advancing the Lagia development
activities to ensure that we reach the targeted production of 1 000 bbl/d by the end of
the 2016 financial year.
We look forward to an exciting run to the end of the financial year. Our key priorities for
the next six months are the completion of the Lagia development activities and the advancement
of our other exploration assets. The SacOil board and management team continue to vigorously
defend the claims from Transcorp and Nigdel in relation to OPL 281 and OPL 233, respectively,
and we remain committed to recovering all amounts owed by Transcorp and Nigdel and to institute
the requisite counterclaims accordingly. On 28 August 2015, SacOil filed a notice for arbitration
with the Nigerian Chartered Institute of Arbitrators, Nigeria Branch to recover farm-in and
related fees plus contractual interest thereon from Transcorp. Arbitrators have now been
appointed for both matters and SacOil awaits confirmation of the commencement of arbitration
proceedings.
With respect to advancing our exploration assets, we look forward to initiating the technical
and commercial pre-feasibility studies of a transnational terrestrial gas pipeline and
distribution facility that will carry natural gas from Mozambique's Rovuma fields into
South Africa. Furthermore as announced to shareholders on 9 November 2015, we are excited to
be part of the Bioko Oil Terminal Project in Equatorial Guinea. Through this project, the
Government of Equatorial Guinea aims to establish a premium oil and petroleum storage facility
in West and Central Africa, a major transit point for global oil and gas deliveries.
The Group will continue to pursue other oil and gas opportunities on the continent and in
doing so will focus on its funding situation to ensure that an adequate capital structure
is in place to deliver on the new strategy. Again, we reiterate our strategy of acquiring
cash generative assets to underpin the long-term growth of the Company."
OPERATIONS
Operations for the past six months have primarily focused on the execution of the development
plan for the Lagia Oil Field. Shareholders are referred to the announcement issued on SENS
and RNS on 17 September 2015 regarding the installation of steam facilities for a thermal
recovery process on the existing production wells and plan to drill a minimum of five additional
thermal wells with the intent of further enhancing existing production and the recovery of oil
from the field. Shareholders are further referred to the announcement dated 16 November 2015
regarding the commencement of drilling operations at the field. Shareholders will be kept
informed as the development activities progress.
FINANCIAL REVIEW
On 26 March 2015, the Group concluded a settlement agreement with EERNL which terms incorporated
an interest freeze on the outstanding loans from 30 November 2014. This reduced investment income
from R77.0 million in the prior comparative period to R23.1 million for the period under review,
as a significant portion of the Group's interest income was attributable to the loans advanced
to EERNL. Furthermore, the continued operational delays affecting Block III due to the civil
unrest in the DRC have resulted in the deferral of the expected receipt of the contingent
consideration by a year. The consequence of this deferral is the impairment of the contingent
consideration receivable by an amount of R26.1 million (2014: nil) which is reflective of the
time value of money. This impairment is included in "other operating costs". The financial
impact of these two events, partially offset by an increase in foreign exchange gains included
in "other income", significantly affected the profit after tax for the period which decreased
by 87% from R20.6 million at 31 August 2014 to R2.8 million at 31 August 2015. Foreign exchange
gains for the period on the Group's US Dollar denominated financial assets totalled R57.5 million
(2014: foreign exchange losses of R7.2 million).
Production rates at the Lagia Oil Field have remained low due to the development activities
currently underway. As previously reported, the next phase of the activities includes the
installation of steam facilities for a thermal recovery process on the existing production
wells and the drilling of a minimum of five additional thermal wells with the intent to further
enhance production and the recovery of oil. Consequently, oil revenue for the period is
minimal at R3.0 million (2014: nil).
Excluding the impairment of the contingent consideration of R26.1 million (2014: nil),
the Group's other operating costs decreased by 27%. There were no exchange losses incurred
during the period (2014: R7.2 million) and no provision was raised for the impairment of the
EERNL loans (2014: R19.7 million). The decrease was however offset by increases in operational
costs to support the execution of the Group's revised strategy. The Group's other operating
expenses are disclosed in note 3.
Oil and gas properties increased by R23.9 million due to additions of steaming and other
equipment totalling R6.5 million (28 February 2015: R7.3 million), foreign exchange gains
of R18.5 million (28 February 2015: R5.8 million) on translation of foreign operations net
of depletion of R1.1 million (28 February 2015: R0.3 million). Movements in the Group's
oil and gas properties are also provided in note 7.
Other financial assets (current and non-current), as disclosed in note 8, increased by
R15.5 million to R692.9 million (28 February 2015: R677.4 million). The net movement comprises:
- interest of R17.9 million on the contingent consideration (R12.4 million), advance payment
against future services (R3.4 million) and other financial assets (R2.1 million);
- foreign exchange gains totalling R84.8 million on the US Dollar denominated contingent
consideration and loan due from EERNL;
- an impairment charge of R26.1 million on the contingent consideration; and
- a part repayment of the EERNL loan of R61.1 million from EERNL's 50% share of the cash
collateral received on 5 June 2015 (see note 9).
Movements in the Group's cash and cash equivalents are provided in the cash flow statement.
The restriction on the cash collateral (see note 9) was lifted on 2 May 2015 upon the expiry
of the OPL 233 performance bond.
The decrease in other financial liabilities corresponds with the offset of EERNL's indebtedness
to SacOil as disclosed in note 11. The liability was initially recognised to account for EERNL's
50% share of the cash collateral held in the bank account of SacOil's wholly owned subsidiary,
SacOil 233 Nigeria Limited, on behalf of EERNL.
Movements in the Group's exploration and evaluations assets, other intangible assets, property,
plant and equipment, inventories, trade and other receivables and trade and other payables were
not significant for the period under review.
EXIT FROM OPL 233 AND OPL 281
OPL 233
Pursuant to the Board's decision to investigate the termination of the Group's participation
in OPL 233 in Nigeria, SacOil officially notified Nigdel of its decision to terminate on
19 May 2015. Pursuant to the exit SacOil will not have future commitments and obligations
associated with the appraisal of OPL 233 (2014: R386.2 million). Furthermore, the farm-in fee
which would have been payable to Nigdel and the transaction fee which would have been payable
to EERNL of US$10.6 million and US$2.5 million, respectively, are no longer due and payable.
The termination of the Group's participation in OPL 233 does not represent an exit from Nigeria,
as the country has significant oil and gas opportunities which the Group will continue to
investigate. Instead, this is reflective of portfolio rationalisation undertaken by the Group to
focus on cash generative assets.
At 31 August 2015, OPL 233 remains classified as held for sale pending the conclusion of the
recovery process initiated by SacOil under the terms of the Farm-in Agreement with Nigdel.
As previously communicated to shareholders in the annual report for the financial year ended
28 February 2015, Nigdel has also initiated arbitration and court proceedings to dispute the
terms of SacOil's exit from the asset. The directors of SacOil remain confident that their claim
against Nigdel is valid. Disclosures relating to the non-current asset held for sale are
provided in note 10.
OPL 281
As disclosed in the annual report for the year ended 28 February 2015, Transcorp, the operator
of OPL 281, instituted action in the High Court of Lagos State on 18 June 2015 against SacOil 281
Nigeria Limited ("SacOil 281") and EER 281 Nigeria Limited ("EER 281") for the wrongful
termination of the Farm-out and Participation Agreement and is seeking special damages for the
wrongful termination. In support of its action Transcorp claims that SacOil 281 and EER 281 are
not entitled to any refund or repayment, in particular the $8.75 million (signature bonus) and
$3.75 million (initial fee). The Group is defending the action instituted by Transcorp.
The directors of SacOil remain confident that their claim against Transcorp is valid.
FORENSIC INVESTIGATION
As previously communicated to shareholders, the Board engaged Ernst & Young Inc. ("EY") to
carry out an investigation of specific historical transactions of the Group between 1 August 2011
and 30 November 2011 relating to the Group's unsuccessful attempt to acquire interests in
Blocks I and II in the DRC, amongst other matters. The forensic investigation was finalised
during September 2015. The Board met on 29 September 2015 to consider the findings in the final
report ("the Report") issued by EY which confirmed the occurrence of certain irregularities
committed by previous management. The Board has now engaged lawyers to evaluate and respond
to the recommendations provided in the Report. The evaluation of the recommendations is
currently ongoing. The Board is also in the process of informing the relevant regulatory
authorities of irregularities identified in the Report.
OUTLOOK
Good progress has been made in advancing the Lagia operations. Management will continue to
focus on the completion of the development activities at the Lagia Oil Field which will see
the Group achieve the targeted production of 1 000 bbl/d. Management also remains focused on
defending the legal actions instituted by its previous partners Nigdel and Transcorp and will
keep shareholders informed of progress in this regard.
The Group will continue to pursue other oil and gas opportunities on the continent and in
doing so will focus on its funding situation to ensure that an adequate capital structure is
in place to deliver on the new strategy.
GOING CONCERN
The Board has performed an assessment of the Group's operations relative to available cash
resources and is confident that the Group is able to continue operating for the next 12 months.
The Group interim financial statements presented have been prepared on a going concern basis.
CHANGE IN DIRECTORATE
Gontse Moseneke resigned from the Board of SacOil on 1 October 2015.
ABOUT SACOIL
SacOil is a South African based independent African oil and gas company, dual-listed on the
JSE and AIM, with business operations in Egypt, the Democratic Republic of Congo ("DRC"),
the Republic of Malawi and the Republic of Botswana. SacOil also operated in Nigeria until
19 May 2015. The Company has partnered with the Public Investment Corporation SOC Limited
and the Instituto de Gestao das Participacoes do Estado on a project that entails the
construction of a gas pipeline from Mozambique to South Africa and the distribution and
marketing of gas in southern Africa. The Company continues to evaluate opportunities to
secure high impact acreage in other established and prolific hydrocarbon basins in Africa.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Reviewed
Six months Six months
to 31 August to 31 August
2015 2014
Notes R R
Revenue 3 001 496 -
Cost of sales (7 179 407) -
Gross loss (4 177 911) -
Other income 60 720 459 -
Other operating costs (59 921 946) (46 575 517)
Operating loss 3 (3 379 398) (46 575 517)
Investment income 4 23 073 720 77 001 921
Finance costs - (646)
Profit before taxation 19 694 322 30 425 758
Taxation (16 921 224) (9 756 554)
Profit for the period 2 773 098 20 669 204
Other comprehensive income:
Items that may be reclassified to profit or loss
in subsequent periods:
Exchange differences on translation of foreign operations 25 271 170 -
Other comprehensive income for the year net of taxation 25 271 170 -
Total comprehensive income for the period 28 044 268 20 669 204
Profit/(loss) attributable to:
Equity holders of the parent 10 558 602 22 320 598
Non-controlling interest (7 785 504) (1 651 394)
2 773 098 20 669 204
Total comprehensive income/(loss) attributable to:
Equity holders of the parent 35 829 772 22 320 598
Non-controlling interest (7 785 504) (1 651 394)
28 044 268 20 669 204
Earnings per share
Basic (cents) 6 0.32 0.72
Diluted (cents) 6 0.32 0.72
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
Six months Twelve months
to 31 August to 28 February
2015 2015
Notes R R
ASSETS
Non-current assets
Exploration and evaluation assets 76 384 686 75 949 565
Oil and gas properties 7 146 814 251 122 869 708
Other financial assets 8 307 312 583 345 753 287
Other intangible assets 67 204 953 61 095 540
Property, plant and equipment 1 103 205 344 706
Total non-current assets 598 819 678 606 012 806
Current assets
Other financial assets 8 385 635 047 331 641 018
Inventories 9 869 895 6 641 663
Trade and other receivables 2 465 289 7 152 505
Cash and cash equivalents 9 195 776 565 229 431 001
Total current assets 593 746 796 574 866 187
Asset held for sale 10 25 061 882 21 839 945
Total assets 1 217 628 356 1 202 718 938
EQUITY AND LIABILITIES
Shareholders' equity
Stated capital 1 216 503 883 1 216 503 883
Reserves 40 877 638 15 606 468
Accumulated loss (438 095 963) (448 654 565)
Equity attributable to equity holders of parent 819 285 558 783 455 786
Non-controlling interest (3 367 855) 4 417 649
Total shareholders' equity 815 917 703 787 873 435
Liabilities
Non-current liabilities
Deferred tax liability 104 032 206 97 146 476
Total non-current liabilities 104 032 206 97 146 476
Current liabilities
Other financial liabilities 11 - 57 888 500
Current tax payable 252 524 848 212 416 721
Trade and other payables 20 091 717 25 553 861
Total current liabilities 272 616 565 295 859 082
Total liabilities 376 648 771 393 005 558
Liabilities directly associated with asset
held for sale 10 25 061 882 21 839 945
Total equity and liabilities 1 217 628 356 1 202 718 938
Number of shares in issue 3 269 836 208 3 269 836 208
Net asset value per share (cents) 24.95 24.10
Net tangible asset value per share (cents) 22.62 21.77
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total equity
Foreign attributable Non-
currency Share-based to equity controlling
Stated translation payment Total Accumulated holders of interest Total
capital reserve reserve reserves loss the parent ("NCI") equity
R R R R R R R R
For the six months ended
31 August 2015
Balance at 28 February 2015 1 216 503 883 8 716 621 6 889 847 15 606 468 (448 654 565) 783 455 786 4 417 649 787 873 435
Changes in equity:
Profit/(loss) for the period - - - - 10 558 602 10 558 602 (7 785 504) 2 773 098
Other comprehensive income
for the period - 25 271 170 - 25 271 170 - 25 271 170 - 25 271 170
Total comprehensive income/
(loss) for the period - 25 271 170 - 25 271 170 10 558 602 35 829 772 (7 785 504) 28 044 268
Total changes - 25 271 170 - 25 271 170 10 558 602 35 829 772 (7 785 504) 28 044 268
Balance at 31 August 2015 1 216 503 883 33 987 791 6 889 847 40 877 638 (438 095 963) 819 285 558 (3 367 855) 815 917 703
For the six months ended
31 August 2014
Balance at 28 February 2014 1 109 977 054 - 6 001 847 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 6 001 847 (157 105 558) 958 873 343 10 567 082 969 440 425
CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Reviewed
Six months Six months
to 31 August to 31 August
2015 2014
R R
Cash flows from operating activities
Cash used in operations (40 467 306) (24 114 839)
Interest income 5 191 403 3 528 096
Net cash used in operating activities (35 275 903) (20 586 743)
Cash flows from investing activities
Purchase of exploration and evaluation assets (435 121) (29 233 332)
Purchase of property, plant and equipment (908 104) (28 986)
Purchase of oil and gas properties (6 474 274) -
Purchase of other intangible assets (204 103) -
Receipts from loans and receivables 61 091 500 10 607 190
Net cash from/(used in) investing activities 53 069 898 (18 655 128)
Cash flows from financing activities
Repayment of other financial liabilities (57 888 500) (20 220 311)
Net cash used in financing activities (57 888 500) (20 220 311)
Total movement in cash and cash equivalents
for the period (40 094 505) (59 462 182)
Foreign exchange gains/(losses) on cash
and cash equivalents 6 440 069 (1 411 861)
Cash and cash equivalents at the beginning
of the period 229 431 001 381 579 766
Cash and cash equivalents at the end of the period 195 776 565 320 705 723
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 2015, 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. 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 2015. The following improvements arising from the International Accounting
Standards Board's annual improvements projects and the amendment to IAS 19, effective
for financial periods beginning after 1 July 2014, were effective for the first time
during this interim period:
- Improvement to IFRS 1 - First-time Adoptions of IFRS
- Improvement to IFRS 2 - Share-based Payments
- Improvement to IFRS 3 - Business Combinations
- Improvement to IFRS 8 - Operating Segments
- Improvement to IFRS 13 - Fair Value
- Improvement to IAS 16 - Property, Plant and Equipment
- Amendment to IAS 19 - Employee Benefits
- Improvement to IAS 24 - Related Party Disclosures
- Improvement to IAS 40 - Investment Property
The above improvements and amendment did not have an impact on the Group's results.
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 2015.
NOTES TO OIL AND GAS DISCLOSURE
In accordance with AIM Guidelines Bradley Cerff, Group Executive: Operations, is the
qualified person that has reviewed the technical information contained in this news
release. Bradley has 19 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 directors take full responsibility for the preparation of these consolidated condensed
interim financial statements of the Group for the six months ended 31 August 2015. They have
been prepared under the supervision of the Chief Finance Officer, Marius Damain Matroos
CA (SA). The consolidated condensed interim financial statements have been reviewed by
Ernst & Young Inc., the Group's auditors. A copy of the auditors' unqualified review
opinion is available for inspection at the registered office of the Company.
3 OPERATING LOSS
31 August 31 August
2015 2014
Notes R R
Impairment of financial assets 8 (26 082 765) -
Gain on remeasurement of asset held for sale 3 221 937 -
Foreign exchange gains/(losses) 57 498 522 (7 243 168)
Provision for impairment of financial assets - (19 736 842)
Corporate costs (2 146 633) (1 533 726)
Auditor's remuneration (1 320 813) (1 017 750)
Employee benefit expense (11 185 812) (8 780 907)
Accounting fees (25 000) (34 400)
Consulting fees (4 434 092) (2 084 710)
Legal fees (2 383 706) (485 718)
Travel and accommodation (2 679 415) (1 627 679)
Depreciation (4 100 114) (105 334)
Oil and gas assets 7 (1 104 215) -
Property, plant and equipment (149 605) (60 030)
Other intangible assets (2 846 294) (45 304)
Rentals - premises (1 046 968) (497 871)
Broker's fees (366 153) (545 863)
4 INVESTMENT INCOME
Interest receivable - loans - 59 430 348
Interest received - cash and cash equivalents 5 191 382 3 528 096
Imputed interest on financial assets 17 882 338 14 043 477
23 073 720 77 001 921
5 SEGMENTAL REPORTING
For the period under review the Group operated in six 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, Egypt, Nigeria, DRC, Botswana and Malawi. Operations in
South Africa relate to the general management, financing and administration of the Group.
South Africa Egypt Nigeria DRC Malawi Botswana Eliminations Consolidated
R R R R R R R R
For the six months ended
31 August 2015
Revenue - 3 001 496 - - - - - 3 001 496
Cost of sales - (7 179 407) - - - - - (7 179 407)
Gross loss - (4 177 911) - - - - - (4 177 911)
Other income 32 828 188 55 192 20 945 842 11 565 114 - - (4 673 877) 60 720 459
Investment income 10 296 772 - 382 949 12 393 999 - - - 23 073 720
Other operating expenses (29 386 523) (7 080 238) (749 438) (26 083 610) - (1 296 014) 4 673 877 (59 921 946)
Taxation 5 284 191 - (212) (22 205 203) - - - (16 921 224)
Profit/(loss) for the period 19 022 628 (11 202 957) 20 579 141 (24 329 700) - (1 296 014) - 2 773 098
Segment assets - non-current 384 868 684 213 938 488 - 334 446 786 1 196 742 821 669 (336 452 691) 598 819 678
Segment assets - current 396 746 936 22 329 432 126 734 660 47 935 768 - - - 593 746 796
Segment assets - asset held
for sale (note 10) - - 25 061 882 - - - - 25 061 882
Segment liabilities - non-current (1) (38 681 231) - (178 545 060) - (2 207 275) 115 401 361 (104 032 206)
Segment liabilities - current (53 131 310) (7 668 518) (132 857) (211 242 630) - (441 250) - (272 616 565)
Segment liabilities - liabilities
directly associated with asset
held for sale (note 10) (25 061 882) - - - - - - (25 061 882)
South Africa Nigeria DRC Malawi Botswana Consolidated
R R R R R R
For the six months ended 31 August 2014
Investment income 66 283 640 109 10 718 172 - - 77 001 921
Finance costs (25) - (621) - - (646)
Other operating expenses (43 452 895) (1 003 951) (1 627 639) - (491 032) (46 575 517)
Taxation 4 846 341 (11) (14 602 884) - - (9 756 554)
Profit/(loss) for the period 27 677 061 (1 003 853) (5 512 972) - (491 032) 20 669 204
Segment assets - non-current 232 684 629 220 393 305 303 726 387 866 740 386 548 758 057 609
Segment assets - current 409 493 643 106 732 672 38 425 476 - - 554 651 791
Segment liabilities - non-current (2 076 082) - (91 744 045) - - (93 820 127)
Segment liabilities - current (49 673 558) (53 242 500) (146 310 390) - (222 400) (249 448 848)
BUSINESS SEGMENTS
The operations of the Group comprise one class of business, being oil and gas exploration
and production. The activities currently undertaken in Mozambique related to the Mozambican
pipeline are not significant at this stage and have not been separately disclosed. These
activities therefore do not meet the recognition criteria for operating segments.
REVENUE
The Group's reported revenue is generated from a single customer, the Egyptian General
Petroleum Corporation ("EGPC"), with respect to oil sales. This revenue is attributed to
the Egypt segment.
TAXATION - EGYPT
No income or deferred tax has been accrued by Mena as the Concession Agreement between
the EGPC, the Ministry of Petroleum and Mena provides that the EGPC is responsible for the
settlement of income tax on behalf of Mena, out of EGPC's share of petroleum produced.
The Group has elected the net presentation approach in accounting for this deemed income tax.
Under this approach Mena's revenue is not grossed up for income tax payable by EGPC on behalf
of Mena. Consequently no income or deferred tax is accrued.
6 EARNINGS PER SHARE
31 August 31 August
2015 2014
R R
Basic (cents) 0.32 0.72
Diluted (cents) 0.32 0.72
Profit for the period used in the calculation of the
basic and diluted earnings per share 10 558 602 22 320 598
Weighted average number of ordinary shares used in
the calculation of basic earnings per share 3 269 836 208 3 086 169 261
Issued shares at the beginning of the reporting
period 3 269 836 208 3 086 169 261
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 3 269 836 208 3 088 494 971
Headline earnings per share
Basic (cents) 0.25 0.72
Diluted (cents) 0.25 0.72
Reconciliation of headline earnings
Profit attributable to equity holders of the parent 10 558 602 22 320 598
Adjusted for:
Gain on remeasurement of asset held for sale (3 221 937) -
Tax effect of adjustment 902 142 -
Headline earnings for the period 8 238 807 22 320 598
7 OIL AND GAS PROPERTIES
R
Cost
At 1 March 2014 -
Acquisition of Mena (22 October 2014) 110 062 658
Additions 7 270 431
Translation of foreign operations 5 811 332
At 28 February 2015 123 144 421
At 1 March 2015 123 144 421
Additions 6 474 274
Translation of foreign operations 18 574 484
At 31 August 2015 148 193 179
Depletion and impairment
At 1 March 2014 -
Depletion (274 713)
At 28 February 2015 (274 713)
At 1 March 2015 (274 713)
Depletion (1 104 215)
At 31 August 2015 (1 378 928)
Net book value
At 28 February 2015 122 869 708
At 31 August 2015 146 814 251
8 OTHER FINANCIAL ASSETS
31 August 28 February
2015 2015
R R
Non-current
Contingent consideration (note 1) 260 080 511 237 675 984
Deferred consideration on disposal of Greenhills Plant 1 803 052 1 718 470
Advance payment against future services (note 2) - 68 627 273
Loan due from EERNL 45 429 020 37 731 560
307 312 583 345 753 287
Current
Loan due from EERNL 143 847 330 183 242 921
Loan due from DIG 58 278 826 51 036 906
Advance payment against future services (note 2) 72 005 089 -
Transcorp refund 253 401 978 220 824 802
Deferred consideration on disposal of Greenhills Plant 1 949 154 1 890 810
529 482 377 456 995 439
Less: Provision for impairment (note 3) (143 847 330) (125 354 421)
385 635 047 331 641 018
Total 692 947 630 677 394 305
Note 1 The Farm-in Agreement ("FIA") between Semliki and Total provides for a cash
payment by Total to Semliki upon the occurrence of certain future events
("contingent consideration"). As there is a contractual right to receive
cash from Total, Semliki has recognised a financial asset in its statement
of financial position. The asset was initially recognised at its fair value.
Subsequently the financial asset meets the definition of a loan and
receivable, and is accounted for at amortised cost, taking into account
interest revenue and currency movements. At each reporting date the Group
revises its estimate of receipts from the financial asset in line with the
requirements of IAS 39. Included in the statement of comprehensive income at
31 August 2015 is an impairment loss of R26.1 million (28 February 2015:
R23.8 million) representing the write-down of future expected cash flows
from the contingent consideration for the Block III farm-outs in March 2011
and March 2012. The write-down which is reflective of the time value of
money arose as a result of the delays in activities on Block III due to
civil unrest in the area and in obtaining an extension to the operating
licence. Consequently, this defers the receipt of the contingent
consideration by a year. A deferred tax charge amounting to R9.0 million
(28 February 2015: R6.5 million) was recognised in the statement of
comprehensive income in relation to this asset. The assumptions used to
measure the contingent consideration are detailed below:
31 August 28 February
2015 2015
Probability of exploration success (single well) 26% 26%
Probability of at least one success from two wells 45% 45%
Probability of successful completion given
exploration success 89% 89%
Discount rate 10% 10%
First Investment Decision Date ("FID") 28 February 2021 28 February 2020
First Oil Date ("FOD") 28 February 2025 28 February 2024
Valuation date 31 August 2015 28 February 2015
First contingent consideration
FID $42 549 000 $42 549 000
FOD $36 680 000 $36 680 000
Second contingent consideration
FID $4 635 000 $4 635 000
FOD $6 660 000 $6 660 000
Note 2 The amount due represents Encha Energy's indebtedness to SacOil Holdings Limited
under the Acknowledgement of Debt Agreement concluded between the two parties on
28 February 2013. As the future value of this asset is R75.5 million, the financial
asset recognised at 31 August 2015 is R72.0 million (28 February 2015:
R68.6 million), representing the present value of this future receivable. Interest
amounting to R3.4 million (2014: R3.1 million) arising from the unwinding of the
discount applied to the future receivable on initial recognition has been included
in investment income (note 4). The receivable is due on 28 February 2016 and has
been classified as short term at 31 August 2015.
Note 3 The increase in the impairment provision of R18.5 million is attributable to foreign
exchange losses as the amount provided for is denominated in US Dollars.
9 CASH AND CASH EQUIVALENTS
31 August 28 February
2015 2015
R R
Cash and cash equivalents consist of:
Cash at banks and on hand 15 202 719 6 707 127
Short-term deposits 180 573 846 106 711 522
195 776 565 113 418 649
Restricted cash - 116 012 352
Cash and cash equivalents 195 776 565 229 431 001
The restricted cash of $10.0 million was received by the Group on 5 June 2015 following
the expiry of the performance bond and the Group's termination of its participation in
OPL 233. Half of the US$10 million receipt was treated as a part repayment of EERNL's
outstanding loan related to OPL 233 (see note 11). The remaining amount was treated as a
repayment of the loan advanced to the SacOil 233 Nigeria Limited in connection with the
OPL 233 activities.
10 NON-CURRENT ASSET HELD FOR SALE
31 August 2015
R
Asset held for sale
Exploration and evaluation assets - OPL 233 Nigeria 25 061 882
Liabilities directly associated with the asset held for sale
Nigdel (25 061 882)
Prior to classification as an asset held for sale OPL 233 was recognised as an exploration
and evaluation asset in the accounting records of the Company's subsidiary, SacOil 233
Nigeria Limited. SacOil 233 Nigeria Limited's obligations are funded by SacOil Holdings
Limited. The Nigdel liability associated with OPL 233 is therefore recognised by
SacOil Holdings Limited. This accounting basis is reflected in the Group's segment
reporting provided in note 5 where the asset falls within the Nigeria segment and the
liability in the South Africa segment.
11 OTHER FINANCIAL LIABILITIES
31 August 28 February
2015 2015
R R
EERNL - 57 888 500
- 57 888 500
The R57.9 million due to EERNL was offset against EERNL indebtedness to SacOil as
disclosed in note 9. The liability was initially recognised to account for EERNL's
50% share of the cash collateral held in the bank account of SacOil's wholly owned
subsidiary, SacOil 233 Nigeria Limited, on behalf of EERNL.
12 FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents, other financial liabilities and trade
and other payables approximate carrying values due to the short-term maturities of
these instruments. Other financial assets, the asset held for sale and liabilities
directly associated with assets held for sale are evaluated by the Group at measurement
date based on inputs such as interest and exchange rates, country-specific factors and
creditworthiness of debtors.
Valuation techniques and assumptions applied to measure fair values:
31 August 2015 31 August 2015
Financial instrument Carrying value Fair value Valuation technique Significant inputs
Other financial assets (note 1) 692 947 630 574 859 154 Discounted cash flow model Weighted average cost of capital
Asset held for sale 25 061 882 21 784 598 Discounted cash flow model Weighted average cost of capital, Non-performance risk
Liabilities directly associated
with asset held for sale (25 061 882) (21 784 598) Discounted cash flow model Weighted average cost of capital, Non-performance risk
Note 1 In terms of SacOil's accounting policies and IAS 39 - Financial Instruments: Recognition and Measurement ("IAS 39") these financial instruments
are carried at amortised cost and not at fair value, given that SacOil intends to collect the cash flows from these instruments when they fall
due over the life of the instrument. While the fair value is significantly less than the carrying amount, this is a result of market rates
differing from the effective interest rate, which is not considered to be objective evidence of impairment for items carried at amortised cost
per IAS 39 as this does not impact the timing, amount or recoverability of expected future cash flows.
Fair value hierarchy:
The following table presents the Group's assets measured at fair value at the reporting date, or for which the fair value is disclosed at the
reporting date. The different levels have been defined as follows:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly
Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data
Level 1 Level 2 Level 3 Total
R R R R
Other financial assets - - 574 859 154 574 859 154
Asset held for sale - - 21 784 598 21 784 598
Liabilities directly associated
with asset held for sale - - (21 784 598) (21 784 598)
There were no transfers between levels during the period. The Group's own non-performance
risk at 31 August 2015 was assessed to be insignificant.
13 CONTINGENT ASSETS AND LIABILITIES
31 August 31 August
2015 2014
Commitments R R
Exploration and evaluation assets - work programme
commitments
- due within 12 months 54 510 935 155 438 242
- due within 13 to 48 months 25 649 134 588 606 486
80 160 069 744 044 728
Exploration and evaluation activities will be funded from current cash resources and
funds from future capital raising initiatives.
31 August 28 February
2015 2015
Contingent liabilities R R
Performance bond on OPL 233 issued by Ecobank in respect
of OPL 233 exploration activities (note 1) - 173 665 500
Cost carry arrangement with Total 112 636 035 96 612 847
112 636 035 270 278 347
Note 1 The performance bond issued by Ecobank in respect of the OPL 233 exploration
activities expired on 2 May 2015.
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 2015, Total has incurred R112.6 million (28 February 2015: R96.6 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.
14 RELATED PARTIES
31 August 31 August
2015 2014
Key management compensation R R
Non-executive directors:
Fees 1 550 000 1 290 000
Executive directors:
Salaries 4 590 226 2 465 000
Other key management:
Salaries 4 566 289 2 124 167
Total key management compensation 10 706 515 5 879 167
15 DIVIDENDS
The Board has resolved not to declare any dividends to shareholders for the period
under review.
On behalf of the Board
Tito Mboweni Dr Thabo Kgogo Marius Damain Matroos
Chairman Chief Executive Officer Chief Finance Officer
Johannesburg
24 November 2015
CORPORATE INFORMATION
Registered office and physical address: 1st Floor, 12 Culross Road, Bryanston, 2021
Postal address: PostNet Suite 211, Private Bag X75, Bryanston, 2021
Contact details: Tel: +27 (0) 10 591 2260; Fax: +27 (0) 10 591 2268
E-mail: info@sacoilholdings.com
Website: www.sacoilholdings.com
Directors: Dr Thabo Kgogo (Chief Executive Officer), Marius Damain Matroos (Chief Finance Officer),
Bradley Cerff (Executive Director), Tito Mboweni**, Mzuvukile Maqetuka**, Stephanus Muller**,
Vusi Pikoli**, Ignatius Sehoole**, Danladi Verheijen*, Titilola Akinleye*
(*) Non-executive Directors; (**) Independent Non-executive Directors
Gontse Moseneke resigned from the Board of SacOil on 1 October 2015.
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 Fulbright South Africa
Auditors: Ernst & Young Inc.
JSE Sponsor: PSG Capital Proprietary Limited
AIM Nominated Adviser: finnCap Limited
Date: 24/11/2015 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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