Wrap Text
Provisional Condensed Results
for the year ended 28 February 2018
EFORA ENERGY LIMITED
(Formerly SacOil Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1993/000460/06)
JSE share code: EEL
ISIN: ZAE000248258
("Efora" or "the Company" or "the Group")
PROVISIONAL CONDENSED RESULTS
for the year ended 28 February 2018
KEY FEATURES
Financial
First results of the Group to include the newly acquired Afric Oil ("AO") downstream business
R2.6 billion in revenue, up 125%, impacted by nine months of operations from AO
Loss after tax of R175.9 million, down 14%, impacted by:
- lower margins achieved at AO and Lagia;
- significant once-off items;
- higher net finance costs;
- reservoir characterisation studies which temporarily curtailed Lagia's production; and
- legal fees attributable to the ongoing of legacy litigation.
Loss per share of 42.34 cents, down 33%
Headline loss per share of 42.20 cents, down 45%
Operational
Upstream
- Successfully spudded a pilot well (Lagia #14) on the Lagia Oil Field, with total annual production
of 21 152 barrels
- Block III, DRC licence extension and ongoing review of seismic data
- Malawi and Botswana licences relinquished during the year
Midstream
- Nigeria crude contract resulting in off-take of 950 000 barrels of crude oil (50% attributable to Efora)
- Award of a two-year crude trading contract (post-period)
Downstream
- 222.3 million litres of petroleum products sold for the nine-month period
- Significant part of the turnaround plan implemented
All operations – no reportable HSE incidents
Business development
- Acquisition and integration of the AO downstream business
- Significant investment in business development in pursuit of the Group's expansion plan
Other
- Delisted from the Alternative Investment Market ("AIM") of the London Stock Exchange
- Consolidated the Company shares on the basis of 10 ordinary no par value shares for 1 ordinary no
par value share
- Rebranded and renamed the Company Efora Energy Limited ("Efora")
- Proposed rights issue of R600 million to raise funds to settle the Gemcorp loan and to provide
capital for the Group's expansion strategy and operations (post-period)
- Gemcorp loan extension to 31 August 2018 to align with the proposed rights issue (post-period)
- Judgement issued in litigation against Robin Vela (post-period)
Dr Thabo Kgogo, Chief Executive Officer of Efora commented:
"These results reflect a period of significant change, characterised by our efforts to build a stable
business capable of delivering sustainable, long-term growth. Clearly the headline figures of the
results emphasise that we are not there yet, however the acquisition of our downstream business
during the year represented a key milestone in our strategic development. That business, which has
not performed in line with our expectations to date, has undergone significant restructuring in
order to optimise financial and operational performance, and we are already seeing the benefits in
the current year which we anticipate will gain momentum as we move forward. Whilst the results are
the first in our form of Efora, in many ways they are the last in our previous form of SacOil,
as they do not reflect the significant progress that has been made throughout the year to optimise
the business and set in motion the catalysts for stability and growth. We are confident that the
coming year will enable us to leverage the platform that we continue to reinforce, to better align
our financial performance with the strategic progress that we have delivered in recent years."
FINANCIAL REVIEW
Group performance
The Group is reporting a loss after tax of R175.9 million (2017: 205.3 million), a basic loss per
share of 42.34 cents (2017: 62.80 cents) and a headline loss per share of 42.20 cents (2017: 76.49 cents)
for the year ended 28 February 2018 as it continues to optimise and integrate its newly acquired
downstream operations, the impact of which should be seen in the coming financial year when the
benefits of these activities are expected to be realised and fully reflected in the financial results.
The Group generated R2.6 billion (2017: R1.2 billion) in revenue for the year primarily from its
downstream operations in South Africa, an increase of 125% year on year (an increase of 164%,
taking into account the Group's share of revenues reported by SacOil Energy Equity Resources Limited
("SEER" or the "Joint Venture"), the Group's crude trading joint venture in Seychelles). Despite the
Group's effort to target higher volumes from the AO business, a lower-than-expected gross income of
R62.8 million (2017: gross loss of R1.5 million) was achieved due to challenges experienced with
the supply chain, the loss of customers and the occurrence of significant once-off items which
impacted revenue and consequently gross income and the loss for the year as highlighted below.
The gross income of the Group was, however, complemented by finance income of R53.1 million
(2017: R77.6 million) which in the current year excludes interest on the Encha receivable, a matter
under arbitration as disclosed in the Litigation section below, profit of R1.9 million (2017: nil)
from the crude trading Joint Venture and other income of R7.1 million (2017: R0.7 million) from the
Group's ancillary activities.
The Group's capital structure now includes a significant component of borrowings (R394.1 million
(2017: nil) which were partly utilised to fund acquisitions which resulted in an increase in finance
costs to R55.0 million (2017: R2.6 million).
The Group's other operating cost base, which now includes the AO business, decreased by 10% to
R264.3 million (2017: R274.6 million) despite the increase in business development expenditure in
line with the Group's expansion plan, the increase in legal costs in pursuit of the progression of
legacy issues and the occurrence of significant once-of items highlighted below. The Group's other
operating cost base also benefited from lower foreign exchange losses attributable to the less
volatile and stronger Rand during the year, reduced head office overheads and a reduction in the
impairment of financial assets. Overall, lower-than-expected income was generated by the Group,
which did not sufficiently cover its normal operating cost base and the once-off items noted,
resulting in the reported loss. Whilst these results do not reflect the significant efforts
throughout the year to optimise the newly acquired AO business, they do emphasise the continued
need to diversify the business further and maintain a focus to optimise the Group's operations and
cost structure.
Significant once-off items
As part of the integration and optimisation of the AO business, we temporarily suspended the Zimbabwe
operations whilst we restructured the business in order to revise the business model. This meant that
the Zimbabwe business was not fully operational for nine months of the financial year pending the
implementation of an improved working capital structure, the resolution of legacy operational issues
and the roll-out of an improved cost structure. On a larger scale, we also sought to optimise the
overall AO business by reviewing the total cost base of the business as part of the turnaround plan,
which resulted in the Group incurring restructuring costs totalling R7.0 million.
During the year the Group undertook reservoir characterisation studies at its Lagia operations in
Egypt, which resulted in lower production volumes due to the temporary suspension of steaming
activities and the prioritisation of the pilot well which was drilled in November 2017. Given the
lower production volumes, Lagia generated a loss of R16.1 million for the year.
One of the key priorities of the Board during the year, in line with its risk management strategy,
was the diversification of the Group's income streams given the volatility experienced in the oil
and gas industry in recent times, with a primary focus on cash-generating assets. This meant
significant expenditure on business development as the Group concluded, pursued and evaluated various
projects during the year. Business development expenditure for the year totalled R23.5 million
(2017: R10.9 million) which was incurred with respect to the acquisition of AO (R11.8 million),
the proposed acquisition of Belton Park (R3.9 million) that was not concluded and the ongoing
assessment of various upstream and midstream projects (R7.8 million).
As previously disclosed to shareholders, the Group acquired debt from Gemcorp Africa Fund I Limited,
a company based in Mauritius, which was partly used to fund the acquisition of AO. In terms of the
funding agreement the Group was required to mitigate the exposure to foreign currency risk which
cost R11.3 million, as projections at the time indicated that the Rand would potentially weaken.
The Company incurred penalties of R7.1 million imposed by the SARB arising from the contravention
of Exchange Control Regulations when the Company paid $10 million in 2011, under previous management,
in connection with the failed acquisition of Block I in the DRC. Shareholders have been informed of
the conclusion of the Board's investigation of this transaction. Whilst the SARB acknowledged that
the transgression occurred under previous management, it maintained that the Company was liable for
the penalties imposed. It however agreed to a one-year payment plan which commenced in October 2017.
At the end of the financial year R3.6 million remained outstanding with respect to this penalty.
Segment performance
South Africa ("SA")
The SA segment comprises the AO downstream fuel distribution business which generated 99.9%
(R2.6 billion) of the Group's revenue (results are incorporated for the nine months since acquisition).
The loss for the period was R52.8 million, primarily as a result of:
- the segment contributing lower-than-expected gross income of R65.7 million due to lower-than-expected
volumes and the impact on margins of the operational challenges detailed in the Operations Review section;
- finance costs of R22.9 million attributable to the loan from the Unemployment Insurance Fund obtained
to fund the acquisition of the Forever Fuels business;
- depreciation and amortisation of R22.1 million; and
- other operating costs of R79.0 million which primarily include:
- motor vehicle and transport-related expenses of R21.4 million;
- remuneration of R31.4 million;
- legal and consulting fees totalling R12.1 million;
- once-off restructuring costs of R4.1 million, off-set by finance and other income totalling R7.2 million; and
- a tax recovery of R0.7 million.
Zimbabwe
The temporary suspension and restructuring of the Zimbabwe operations meant this segment generated a
loss of R12.8 million for the nine months since acquisition, after the deduction of operating expenses
totalling R16.0 million which include R2.9 million of restructuring costs.
The segment contributed revenue of R23.1 million and gross income of R2.0 million.
Egypt
The temporary curtailment of production in order to prioritise reservoir characterisation studies and
the drilling of the pilot well, which was completed in November 2017, had an impact on the performance
of the Group's upstream business in Egypt. Consequently, revenue from this segment decreased by 34% to
R3.5 million (2017: R5.3 million) with a relatively higher decrease of 44% in the gross loss to
R5.0 million, a result of reduced steaming activities and improved oil prices.
Excluding the impact of the reversal of impairment of oil and gas assets of R62.1 million in the prior
year, the Egypt business generated a lower loss for the year of R16.1 million (2017: R34.2 million),
a decrease of 53%, as it benefited from the higher oil price, cost optimisation and the free floating
of the Egyptian pound which occurred during the year.
Democratic Republic of Congo ("DRC")
The Group's upstream operations in the DRC are currently in the exploration phase, with activities
focused on the review of seismic data. The Group does not incur any direct operating expenses with
respect to the exploration work due to the cost carry arrangement it entered into with Total E&P RDC
("Total"), the operator of the block. As such the profit from this segment for the year of
R18.2 million (2017: R20.7 million) is primarily a result of:
- Interest of R20.9 million (2017: R17.6 million) on the contingent consideration and a deferred tax
credit of R0.6 million (2017: R4.9 million), off-set by:
- Interest on the provision for the carried cost reimbursement totalling R2.2 million
(2017: R2.6 million) for the year
Nigeria
The Nigeria segment houses the Group's midstream crude trading business and a receivable from
Transcorp arising from a relinquished exploration project as detailed in the Litigation section.
Crude trading business
The Group experienced supply constraints during the year due to the increased number of parties
awarded contracts by the Nigerian National Petroleum Corporation ("NNPC"). As such we managed to
secure one lifting during the year which generated revenue of R0.5 billion (2017: R1.2 billion),
being the Group's share, a decrease of 61%. The gross income benefited slightly from a higher margin
negotiated for the year as it decreased by 53% to R3.5 million (2017: R7.5 million) relative to the
decrease in revenue. Overall this business generated a profit of R1.9 million (2017: R5.1 million),
which is accounted as the profit from the joint venture, after the deduction of operating expenses
totalling R1.6 million (2017: R2.6 million). Operating costs for this segment of the business
generally include management fees and travel costs.
Transcorp receivable
Interest income of R10.5 million (2017: R5.3 million) was recognised with respect to the Transcorp
receivable and an impairment charge of R6.4 million (2017: R27.5 million). The impairment is
reflective of the impact of the time value of money as the projected settlement date has been
deferred given the postponement of the hearing of the matter in the Nigerian courts as highlighted
in the Litigation section.
After taking into account the results of the crude trading business and the adjustments made to the
Transcorp receivable, this segment generated a profit of R6.0 million (2017: loss of R43.4 million).
Head office
The focus of the head office has been to optimise the Group's various investments and businesses and
to reduce the overall overheads. To date the following have been achieved:
- changes have been made to the executive structure;
- the Company delisted from AIM; and
- there were no salary increases awarded to management, executives and non-executives during the year.
Head office activities generated a loss of R213.3 million (2017: R[209.0] million), an decrease of
41% year on year despite the following:
- a reduction in the impairment of financial assets. There was an impairment charge of R143.3 million
in the prior year attributable to the Encha and Transcorp receivables. Current impairment charges
total R6.4 million, primarily arising from the further impairment of the Transcorp receivable due
to the postponement of the hearing of the matter in the Nigerian courts as noted above;
- a reduction in foreign exchange losses on the Group's USD asset base to R14.3 million
(2017: R68.0 million) as the Rand was not as volatile as in the prior year; and
- cost savings totalling R3.1 million on remuneration and legal and listing costs.
Whilst the head office prioritised cost optimisation during the year, it still incurred significant
transactions and litigation-related costs, listed below, which dampened the impact of the reduction
in costs referred to above and contributed to the loss reported by the segment:
- the SARB penalties of R7.1 million referred to above;
- the head office executes the Group's overall business development strategy. As such, expenditure
totalling R23.5 million with respect to the AO acquisition (R11.8 million), Belton Park project
(R3.9 million) and various upstream and midstream projects (R7.8 million) as previously referred
to above, is reported under this segment;
- the Gemcorp equity bridge resulted in total interest costs of R12.9 million, in addition to the
forward exchange option which cost R11.3 million;
- the Company progressed some of the outstanding litigation (see Litigation section) and incurred
legal fees totalling R5.4 million; and
- the Group utilised external consultants with costs totalling R6.6 million technical operational
and integration support to assist with certain specific challenges for the Group, to avoid
increasing the head count of the Group.
Group financial position
The Group's total assets have increased by 56%, primarily due to the acquisition of AO and interest
on financial assets, off-set by foreign exchange losses.
The Group's cash position has improved by 289% as a result of the cash generated by the AO business
during the period.
The Group's total liabilities have increased R569.3 million, primarily as a result of loans acquired
from Gemcorp and the Unemployment Insurance Fund to fund the Group's acquisitions as mentioned above.
PRIOR-PERIOD CORRECTION
In 2011 and 2012 the Group entered into a cost carry arrangement with Total E&P RDC ("Total"), whereby
Total would provide a carry of all exploration and appraisal costs on behalf of the Group with respect
to its operations on Block III in the DRC. Under the terms of this arrangement Total is entitled to
recover these costs plus interest from the Group's share of oil revenues if Block III goes into
commercial production. In the prior years the Group accounted for the liability that could arise from
the cost carry arrangement with Total as a contingent liability, as a great degree of judgement was
applied in determining the chances of the liability materialising. After a further review of the
assumptions used in accounting for the liability, it was concluded that it is more probable than
previously assessed that this liability could materialise and as such that the liability should have
historically been accounted for as a provision and not a contingent liability. As a result of this
error in judgement the Group's investment in Block III under exploration and evaluation assets was
understated with a corresponding understatement of liabilities. The error has been corrected by restating
each of the affected financial statement line items for the prior periods as disclosed in note 5.
OPERATIONAL REVIEW
AO, SA and Zimbabwe
The Group completed the transformational and strategic acquisition of a controlling interest in AO
on 31 May 2017, which expanded the Group's operations into the downstream segment of the oil and
gas value chain and provided a platform for further acquisitions in the sector. The immediate priority
post-acquisition was the integration and optimisation of the business which led to the adoption and
implementation of a turnaround plan which focused on reliable and competitive supply, working capital
improvements, volume and margin enhancement, cost and logistics optimisation, and the growth of the
Zimbabwe business. To date we are happy to report the following achievements against this plan:
- supply agreements have been concluded with a number of oil majors which will ensure that the business
is able to procure fuel products at competitive rates;
- working capital facilities have now increased;
- Engagements are currently ongoing with respect to the renewal of customer contracts. New customers
which AO intends to target have also been identified;
- the immediate restructuring of the AO business to enable cost optimisation was completed at the end
of March 2018, which focused on the reduction of direct and indirect staff costs and other identified
operating costs. The impact of this optimisation should be fully reflected from the 2018/2019 financial
year as management is targeting annualised cost savings of R25 million. We do recognise that cost
optimisation is a continuous process; and
- most legacy issues in Zimbabwe have been resolved and the business model has been revised to focus
entirely on cash sales and a strategy has been implemented to grow the cash business from the
Beitbridge depot.
For the nine months reported on, challenges were presented by our operating context arising from fuel
price increases that required increased working capital and unprecedented discounts offered to
customers by resellers in excess of discounts we enjoyed from our supply chain. These factors were
some of the key drivers that resulted in the loss of some low-margin customers which negatively
impacted the expected volume and margin for the business. This was compounded by the temporary
suspension of the Zimbabwe operations whilst we restructured the business. AO sold 222.3 million
litres of fuel products for the nine months post-acquisition of which 70%, 9% and 21% were attributable
to diesel, petrol and paraffin sales respectively.
Looking ahead, we aim to complete the optimisation of the logistics function and initiate a group
sourcing strategy to include the Forever Fuels and Zimbabwe businesses, whilst targeting an
improvement in margins. We will also finalise the renewal of customer contracts and the onboarding
of targeted customers in order to strengthen our customer base. We have also strengthened our
lubricants product offering which should contribute a higher-margin business for AO in the current
financial year.
Lagia, Egypt
The Lagia operations continue to present significant operational challenges for the Group. The key
priority during the year was the pilot well which was completed and logged in December 2017. A total
of 90 feet of reservoir section was encountered during the drilling of the well, 31 feet of which was
perforated in line with the pilot well objective of limiting steaming activity to a particular
section of the reservoir. Positively, the heavy oil well had initial flow of water and oil, in line
with pre-drill expectation.
Steam injection subsequently commenced and the reservoir initially accepted steam without any
fracturing required. During efforts to bring the well on-stream, after an initial flow of around
300 bbls of steam-related water, the well produced little to no fluids and the well was subsequently
shut-in for further technical studies. Following a period of consultation and analysis with
independent consultant, Calgary-based Bouhry Global Energy Consultants, it was concluded that the
well encountered tight reservoir which restricted the flow of oil and would therefore require
hydraulic stimulation which was subsequently successfully completed. The well production peaked at
an estimated 75 bbls/day of heavy crude (11 API consistent with the wider field) and has now
stabilised at around 10 bbls/day of crude. Early production from this well indicates that the water
cut is estimated at 5%, which compares favourably with the average water cut of around 60% throughout
the Lagia field. The observed rates are within the range of the modelled estimates. The well remains
under observation.
The curtailment of the Lagia operations pending the outcome of the pilot well had a significant
impact on the production from the field. Total production for the year was 21 152 barrels
(2017: 66 383 barrels).
In the near term the operating priorities at Lagia are the re-evaluation of the field development
plans and the overall economic viability of this asset at the current production levels, whilst
taking into account the improved oil price environment.
Crude trading, Nigeria
As previously reported in the interim results, there was limited crude oil available under the contract
with the NNPC, due to the increased number of parties awarded similar contracts, coupled with an
increase in crude swaps for gasoline. As such SEER was able to secure only one lifting of
950 000 barrels of which 50% is attributable to Efora. The crude trading contract expired in
March 2018 and SEER applied for a new contract which was granted in May 2018 for a two-year period
on similar terms. Looking ahead, the NNPC is focused on improving oil supply in Nigeria. It is our
expectation that we will be able to secure more liftings under this new two-year contract.
Block III, DRC
Total, operator of Block III, continues to evaluate the seismic data obtained over the block. It is
likely that a well could be drilled as early as 2019 on the assumption that economically and
technically viable prospects and an identifiable well location are established. Total will continue
to carry the Group's exploration and appraisal costs in line with the cost carry arrangement,
which ceases if commercially viable resources are discovered and a development plan is approved.
The operating licence was again renewed in January 2018 and will expire on 26 January 2019.
Total will use this extension to complete the evaluation of the block.
BUSINESS DEVELOPMENT
The Group continues to focus on its strategy to evaluate opportunities in the sector that can be
combined with the existing businesses. We recognise that in order to build a solid platform for
growth, one which generates solid returns for our stakeholders, we need to invest in significant
business development activities in the short term, the impact of which, in the form of returns,
will only become evident in the longer term. Whilst we are very measured in our approach, we are
unable to guarantee that every project we evaluate will materialise. Below are the more significant
projects we assessed during the year:
AO
The acquisition was completed on 31 May 2017, whereby the Company acquired a 71% indirect interest
in the equity of AO. The Company issued 427 477 149 Efora ordinary shares as part consideration for
the acquisition of Phembani Oil Proprietary Limited, holding company of AO. The issue price of the
shares of 20.93 cents (rounded) was based on the 90-day volume weighted average price as at
31 May 2017, at a discount of 10%. The resulting value of the shares issued was R89.5 million.
The fair value of these shares was R85.5 million which resulted in a loss on the initial recognition
of the consideration of R4.0 million. The Company further paid cash of R39.0 million and was due to
pay a contingent consideration of R55.0 million if AO had achieved EBITDA of between R68.0 million
and R100.0 million for the year ended 31 December 2017, and if it recovered specified accounts
receivable within 12 months. The contingent consideration was subsequently reduced to R2.3 million
as AO did not meet the EBITDA target but it is highly likely that taxes on certain provisions will
be recoverable.
Belton Park
As part of the Group's strategy to strengthen its position in the fuel distribution market, the Company
announced on 2 October 2017 that it had concluded certain transaction agreements with Belton Park which
would have seen the Group acquire the assets and liabilities of its business. Unfortunately,
the transaction did not complete, as certain outstanding conditions precedent to the transaction were
not fulfilled and therefore the transaction agreements lapsed. The total transaction costs relating
to the project were R3.9 million.
RIGHTS ISSUE
The Company convened a general meeting of shareholders on 18 June 2018, as required by the
Companies Act, to seek shareholder approval for the Company to issue shares, which will be done in
terms of a rights issue of R600 million ("the Rights Issue") that will be greater than 30% of the
Company's market capitalisation. The proceeds of the Rights Issue will be utilised to repay the
Gemcorp loan, for operational and working capital requirements and to fund the Group's growth
strategy. Should the necessary resolutions be approved by shareholders, the Company will launch the
Rights Issue as soon as possible. The Company has received undertakings from shareholders owning up
to 60% of the issued share capital of the Company in which they commit to support the resolution
required to issue the shares. One of these shareholders is the Government Employees Pension Fund,
managed by the Public Investment Corporation, which has pledged to fully follow its rights under
the proposed Rights Issue.
GOING CONCERN
The Group continues to rely on its ability to successfully raise further financing to fund future
working capital, repayment of the Gemcorp equity bridge facility and business development needs.
The Board remains reasonably confident that it will manage the material uncertainties that exist
which are highlighted in note 30 to the condensed consolidated interim results. The condensed
consolidated interim results have therefore been prepared on a going concern basis.
LITIGATION UPDATE
OPL 281
As previously announced, SacOil 281 Nigeria Limited ("SacOil 281") terminated its participation
with Transnational Corporation of Nigeria Plc. ("Transcorp"), the operator of Oil Prospecting Licence
("OPL") 281. Efora contributed $12.5 million towards farm-in fees on 28 February 2011, which fees
contractually were to be refunded with interest by Transcorp. Notwithstanding the receipt of Transcorp's
acknowledgement of its refund obligation, Efora subsequently received notice from Transcorp that
Efora's termination of the Farm-out and Participation Agreement ("FoPA") in December 2014 was wrongful
and amounted to a repudiation of the FoPA. Pursuant to the FoPA, SacOil 281 filed a notice for
arbitration with the Nigerian Chartered Institute of Arbitrators, Nigeria Branch on 28 August 2015
to recover its farm-in and related fees plus interest thereon.
On 18 June 2015 Transcorp in response filed the following two court applications in the High Court:
Lagos State:
(i) alleging the repudiation of the FoPA by SacOil 281, claiming the sum of US$50.0 million as
special damages for wrongful termination; and
(ii) challenging the validity, applicability and appointment of arbitrators and the arbitration
clause in the FoPA.
SacOil 281 opposed these proceedings and on 31 May 2016 the High Court and Lagos State ruled against
SacOil 281 on "matter (ii)" but granted SacOil 281 leave to appeal on 30 June 2016. Transcorp have
made a settlement offer to Efora in an attempt to resolve the legal dispute, which would allow Efora
to farm-in to OPL 281 for 40% of the working interest. There are ongoing discussions with Transcorp
around alternative proposals; however, the legal process relating to the appeal hearing is still in
progress. A court date was scheduled for February 2018, but this was postponed to 17 April 2018
when the appeal commenced and the Appeal Court noted that the court registrar had not served all
the respondents with hearing notices and further postponed the appeal to 26 March 2019. It is
anticipated that this matter will be concluded during the second quarter of 2019.
Encha Group Limited and Encha Energy Proprietary Limited
The Company instituted action against Encha Group Limited for payment of R75.0 million, together
with interest and costs. In the same action, the Company is claiming payment of R75.0 million,
plus interest, from Encha Energy Proprietary Limited and Encha Group Limited on the basis of a written
acknowledgement of debt provided by Encha Energy Proprietary Limited, in respect of which Encha Group
Limited bound itself as surety. The parties have agreed to refer the matter to arbitration and the
arbitration process was due to begin on 20 November 2017. The matter has been postponed by the parties
and the revised date will be agreed between the arbitrator and the parties in due course. The company
has, in April 2018, amended its statement of claim to introduce alternative causes of action, based
on the underlying contracts.
Robin Vela
The Company instituted legal action against Mr Robin Vela (its former CEO) in which it claimed an
amount of approximately R3.3 million together with interest in respect of taxes that became due to
the South African Revenue Service and which were not deducted from the salary that was paid to him
by the Company during his tenure as CEO. The Company has also claimed legal costs. Mr Vela defended
the action and also raised three counterclaims in the action in terms of which he claimed an amount
of just under R0.3 million allegedly owing in respect of unpaid leave, an amount of approximately
R2.8 million allegedly due in respect of a bonus and an amount of approximately R16.9 million
allegedly owing in respect of the breach of a share option agreement. In addition, Mr Vela also
claimed interest on these amounts and legal costs. The trial commenced on 28 August 2017 and was
concluded. The court delivered judgement on 6 February 2018 and found for the Company in respect of
the capital portion of its claim. Mr Vela's two counterclaims were dismissed, but the court found
the Company liable to Mr Vela for the bonus claim. Mr Vela applied for leave to appeal and was
granted leave to appeal. He is appealing against the court upholding the Company's claim against him
and the court dismissing two of his counterclaims. The Company applied for and was granted leave to
cross-appeal. The Company is cross-appealing against the court upholding Mr Vela's bonus claim.
Mr Vela's notice of appeal has been filed with the Supreme Court of Appeal. The Company's notice
of cross-appeal has been finalised and filed with the Supreme Court of Appeal.
Richard Linnell
Mr Richard Linnell (the Company's former Chairman) instituted legal action against the Company during
September 2016 in which he claims, amongst others, payment of approximately R14.7 million, together
with interest, and the reinstatement of 12.6 million share options which the Company contends have
lapsed. He is also claiming legal costs. The Company is defending the action and for over 18 months
Mr Linnell has taken no steps to progress this legal action. This claim is disclosed as a contingent
liability as at 28 February 2018.
OUTLOOK
This financial year will be a pivotal period in the development of our company. Our primary objective
is to optimise each division of the business to ensure continued focus on cost discipline and
operational efficiencies. We will maintain the good progress we demonstrated with regards to AO and
hope to improve performance throughout the year as we benefit from the restructuring activities
undertaken in the prior year.
Our near-term focus is on completion of the Rights Issue so we can use the proceeds to execute our
growth strategy, which includes near-term completion of M&A opportunities. The Rights Issue will
also put the company on a considerably stronger footing in terms of our ability to leverage a strong
balance sheet to support our growth ambitions.
Certainly, challenges remain, both in terms of legacy issues as well as those that we have acquired
in recent years; however our portfolio is beginning to take the form of the strategic vision that we
set ourselves a number of years ago, and we have seen the formation of a more stable business
underpinned by multiple revenue streams from a diverse asset base across a continent characterised
by potential and opportunity. Furthermore, the strengthening of global commodity prices continues
to positively impact sentiment and margins throughout the industry, and we remain well placed to
benefit from this significant recovery.
Taking all of this into account, we remain confident that the coming year will be the year in which
Efora successfully builds on the strong foundations that we have been laying over the previous years,
and begin to deliver the value that our shareholders expect and deserve.
CHANGES IN DIRECTORATE
The following directors were appointed during the reporting period:
Ms Thuto Masasa on 1 April 2017
Mr Patrick Mngconkola on 1 April 2017
Mr Boas Seruwe on 1 April 2017
The following directors resigned or retired during the reporting period:
Mr Tito Mboweni on 2 October 2017
Mr Mzuvukile Maqetuka on 2 October 2017
Mr Vusumzi Pikoli on 28 September 2017
Ms Titilola Akinleye on 28 September 2017
ABOUT EFORA
Efora Energy Limited is a South African based independent African oil and gas company, listed on
the JSE. The Company has a diverse portfolio of assets spanning production in Egypt; exploration
and appraisal in the Democratic Republic of Congo; midstream project relating to crude trading in
Nigeria; and material downstream distribution operations throughout southern Africa. Our focus as a
Group is on delivering energy for the African continent by using Africa's own resources to meet
the significant growth in demand expected over the next decade.
CONDENSED PROVISIONAL CONSOLIDATED REVIEWED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 28 February 2018
Restated*
2018 2017
Notes R'000 R'000
Revenue 2 631 069 1 171 247
Cost of sales (2 568 287) (1 172 733)
Gross income/(loss) 62 782 (1 486)
Other income 7 094 686
Other operating costs (246 338) (274 649)
Loss from operations (176 462) (275 449)
Share of profit from joint venture net of taxation 6 1 878 -
Finance income 53 073 77 613
Finance costs (55 017) (2 636)
Loss before taxation (176 528) (200 472)
Taxation 669 (4 877)
Loss for the year (175 859) (205 349)
Other comprehensive loss:
Items that may be reclassified to profit or loss in subsequent periods:
Exchange differences on translation of foreign operations (1) (38 318) (21 536)
Other comprehensive loss for the year net of taxation (38 318) (21 536)
Total comprehensive loss for the year (214 177) (226 885)
Loss attributable to:
Equity holders of the Company (151 971) (205 349)
Non-controlling interests (23 888) -
Loss for the year (175 859) (205 349)
Total comprehensive loss attributable to:
Equity holders of the Company (189 892) (226 885)
Non-controlling interests (24 285) -
Total comprehensive loss for the year (214 177) (226 885)
Loss per share
Basic (cents) (2) 12 (42.34) (62.80)
Diluted (cents) (2) 12 (42.34) (62.80)
* Details relating to the restatement are provided in note 5.
1 This component of other comprehensive loss does not attract taxation.
2 The current year basic and diluted loss per share have been affected by the share consolidation
that took place during the year. The prior year basic and diluted loss per share have been
adjusted to reflect the impact of the share consolidation had it occurred in the prior year.
The adjustment has been made to enable comparability and is neither a prior period error or a
change in accounting policy.
CONDENSED PROVISIONAL CONSOLIDATED REVIEWED STATEMENT OF FINANCIAL POSITION
As at 28 February 2018
Restated* Restated*
2018 2017 2016
Notes R'000 R'000 R'000
ASSETS
Non-current assets
Exploration and evaluation assets 95 860 96 319 74 745
Oil and gas properties 169 243 183 758 166 030
Investment in joint venture 6 5 847 - -
Loans and other non-current receivables 7 452 086 468 322 253 799
Property, plant and equipment 83 286 1 187 1 075
Intangible assets 4 261 655 58 284 57 844
Total non-current assets 1 067 977 807 870 553 494
Current assets
Loans and other current receivables 7 - 2 574 383 145
Inventories 22 454 7 484 9 330
Derivative asset 258 - -
Trade and other receivables 8 146 509 2 192 3 405
Cash and cash equivalents 72 806 18 724 107 349
Total current assets 242 027 30 974 503 229
Total assets 1 310 004 838 844 1 056 723
EQUITY AND LIABILITIES
Shareholders' equity
Stated capital 9 1 305 911 1 216 504 1 216 504
Reserves 21 072 58 452 77 963
Accumulated loss (750 640) (598 669) (393 320)
Equity attributable to equity holders of Company 576 343 676 287 901 147
Non-controlling interests 1 834 - -
Total shareholders' equity 578 177 676 287 901 147
LIABILITIES
Non-current liabilities
Deferred tax liability 81 360 83 403 78 526
Borrowings 10 215 146 - -
Provisions 11 53 271 56 884 41 837
Finance lease obligations 714 - -
Total non-current liabilities 350 491 140 287 120 363
Current liabilities
Borrowings 10 178 901 - -
Financial liabilities 8 603 - -
Finance lease obligations 2 183 - -
Loan from joint venture 7 134 - -
Taxation payable 13 418 12 851 12 851
Trade and other payables 171 097 9 419 22 362
Total current liabilities 381 336 22 270 35 213
Total liabilities 731 827 162 557 155 576
Total equity and liabilities 1 310 004 838 844 1 056 723
* Details relating to the restatement are provided in note 5.
CONDENSED PROVISIONAL CONSOLIDATED REVIEWED STATEMENTS OF CHANGES IN EQUITY
Restated*
Total equity
Foreign attributable Non-
Stated currency Share-based Restated* to equity controlling Restated*
capital translation payment Total Accumulated holders of interest Total
(note 9) reserve reserve reserves loss the Company ("NCI") equity
R R R R R R R R
Balance at 29 February 2016 1 216 504 70 177 7 786 77 963 (393 320) 901 147 - 901 147
Previously reported 1 216 504 70 177 7 786 77 963 (375 253) 919 214 - 919 214
Correction of error (note 5) - - - - (18 068) (18 068) - (18 068)
Changes in equity:
Loss for the year - - - - (205 349) (205 349) - (205 349)
Previously reported - - - - (211 822) (211 822) - (211 823)
Correction of error (note 5) - - - - 6 475 6 475 - 6 475
Other comprehensive loss for the year - (21 536) - (21 536) - (21 536) - (21 536)
Total comprehensive loss for the year - (21 536) - (21 536) (205 349) (226 885) - (226 885)
Share-based payments expense - - 2 025 2 025 - 2 025 - 2 025
Total changes - (21 536) 2 025 (19 511) (205 349) (224 860) - (224 860)
Balance at 28 February 2017 1 216 504 48 641 9 811 58 452 (598 669) 676 287 - 676 287
Previously reported 1 216 504 48 641 9 811 58 452 (587 075) 687 881 - 687 881
Correction of error (note 5) - - - - (11 594) (11 594) - (11 594)
Changes in equity:
Loss for the year - - - - (151 971) (151 971) (23 888) (175 859)
Other comprehensive (loss)/income for the year - (37 921) - (37 921) - (37 921) (397) (38 318)
Total comprehensive loss for the year - (37 921) - (37 921) (151 971) (189 892) (24 285) (214 177)
Consideration for business combination (note 4) 89 487 - - - - 89 487 26 119 115 606
Transaction costs (note 4) (80) - - - - (80) - (80)
Share-based payments expense - - 541 541 - 541 - 541
Total changes 89 407 (37 921) 541 (37 380) (151 971) (99 944) 1 834 (98 110)
Balance at 28 February 2018 1 305 911 10 720 10 352 21 072 (750 640) 576 343 1 834 578 177
* Details relating to the restatement are provided in note 5.
CONDENSED PROVISIONAL CONSOLIDATED REVIEWED STATEMENTS OF CASH FLOWS
2018 2017
Notes R'000 R'000
Cash flows from operating activities
Cash used in operations (65 641) (83 156)
Finance income 5 855 3 989
Finance costs (25 984) (1)
Tax paid (336) -
Net cash used in operating activities (86 106) (79 168)
Cash flows from investing activities
Purchase of property, plant and equipment (863) (586)
Purchase of exploration and evaluation assets - (781)
Purchase of oil and gas properties (5 104) (6 916)
Purchase of intangible assets (410) -
Acquisition of subsidiary, net cash acquired 4 20 202 -
Repayments/(advances) of loans and other receivables 892 (668)
Net cash from/(used in) investing activities 14 717 (8 951)
Cash flows from financing activities
Transaction costs on issue of shares 9 (80) -
Loan received from joint venture 2 732 -
Proceeds from borrowings 164 467 -
Repayments of borrowings (39 771) -
Payment of finance lease obligations (1 877) -
Net cash from financing activities 125 471 -
Total movement in cash and cash equivalents for the year 54 082 (88 119)
Foreign exchange losses on cash and cash equivalents - (506)
Cash and cash equivalents at the beginning of the year 18 724 107 349
Cash and cash equivalents at the end of the year 72 806 18 724
NOTES
1 BASIS OF PREPARATION
The condensed provisional consolidated reviewed financial statements are prepared in accordance
with the requirements of the JSE Limited Listings Requirements, the requirements of the Companies
Act of South Africa, the measurement and recognition requirements of International Financial
Reporting Standards ("IFRS") and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and the Financial Reporting Pronouncements as issued by Financial Reporting
Standards Council and to also, as a minimum, contain the information required by IAS 34 - Interim
Financial Reporting. The accounting policies applied in the preparation of the condensed provisional
consolidated reviewed financial statements are in terms of IFRS and are consistent with those
applied in the previous consolidated annual financial statements. None of the new standards,
interpretations and amendments effective as of 1 January 2017 have had material impact on the
condensed consolidated reviewed annual financial statements.
These condensed provisional consolidated reviewed financial statements have been prepared on a
going concern basis after taking into account the matters in note 16.
All monetary information is presented in the functional currency of the Company, being South African
Rand and is rounded to the nearest thousand (R'000).
2 PREPARATION OF THE CONDENSED PROVISIONAL CONSOLIDATED REVIEWED FINANCIAL STATEMENTS AND AUDITOR'S
REVIEW CONCLUSION
The directors take full responsibility for the preparation of these condensed provisional
consolidated reviewed financial statements. These condensed provisional consolidated reviewed
financial statements for the year ended 28 February 2018 have been prepared under the supervision
of the Chief Financial Officer, Mr Marius Damain Matroos CA (SA).
These condensed provisional consolidated financial statements for the year ended 28 February 2018
have been reviewed by SizweNtsalubaGobodo Inc. A copy of the auditors' unmodified review
conclusion, 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.
3 SEGMENTAL REPORTING
The Group has identified reportable segments that are used by the Group Executive Committee
(chief operating decision-maker) to make key operating decisions, allocate resources and assess
performance. For management purposes the Group is organised and analysed by geographical locations.
For the year under review the Group operated in the following locations: South Africa, Egypt,
Nigeria, DRC, Malawi, Botswana, Zimbabwe, Zambia and Mauritius. The Group's externally reportable
operating segments are shown below.
Head office activities include the general management, financing and administration of the Group.
The head office is located in South Africa and was reported as the South Africa segment in the
prior year as the Group did not have operations locally. In the current year the South Africa
segment includes the newly acquired fuel distribution business disclosed in note 4 resulting in
the headoffice being segmented separately. The Group's operations in Zambia and Malawi, which were
immaterial for the year, did not meet the recognition criteria for externally reportable segments
and have been aggregated under the South Africa segment as they meet the aggregation criteria
permitted by IFRS on the basis of the nature of the products.
Egypt Nigeria DRC South Africa Botswana Zimbabwe Mauritius Head office Eliminations Consolidated
2018 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue 3 454 - - 2 625 588 - 23 079 - - (21 052) 2 631 069
Cost of sales (8 441) - - (2 559 846) - (21 052) - - 21 052 (2 568 287)
Gross (loss)/profit (4 987) - - 65 742 - 2 027 - - - 62 782
Other income - 201 - 5 195 5 229 53 - 5 281 (8 865) 7 094
Depletion, depreciation and amortisation (5 842) - - (22 063) (153) - - (615) - (28 673)
Share of profit from joint venture (note 6) - 1 878 - - - - - - - 1 878
Finance income - 10 461 20 927 2 076 - - - 20 514 (905) 53 073
Finance costs - - (2 167) (25 418) - - - (28 337) 905 (55 017)
Other operating expenses (5 245) (6 590) (1 162) (78 977) (167) (15 984) (83) (118 322) 8 865 (217 665)
Taxation - - 626 658 - 1 065 173 (1 853) - 669
(Loss)/profit for the year (16 074) 5 950 18 224 (52 787) 4 909 (12 839) 90 (123 332) - (175 859)
Segment assets - non-current 217 510 102 930 302 803 293 153 - 34 559 9 763 315 629 (207 849) 1 068 498
Segment assets - current 10 385 2 25 210 185 24 4 613 56 16 216 - 241 506
Segment liabilities - non-current (114 841) - (211 136) (187 587) - (35 014) (9 762) - 207 849 (350 491)
Segment liabilities - current (4 097) (30) - (104 792) - (87 396) (91) (184 930) - (381 336)
Egypt Nigeria DRC Malawi Botswana South Africa Eliminations Consolidated
2017 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue 5 263 1 165 984 - - - - - 1 171 247
Cost of sales (14 210) (1 158 523) - - - - - (1 172 733)
Gross (loss)/profit (8 947) 7 461 - - - - - (1 486)
Other income 62 147 447 31 755 - 215 5 105 (98 983) 686
Finance income - 5 249 17 575 - - 54 789 - 77 613
Finance costs - (1) (2 635) - - - - (2 636)
Other operating expenses (25 247) (56 526) (21 108) - (1 859) (268 892) 98 983 (274 649)
Taxation - - (4 877) - - - - (4 877)
(Loss)/profit for the year 27 953 (43 370) 20 710 - (1 644) (208 998) - (205 349)
Segment assets - non-current 241 807 109 561 304 368 307 153 345 741 (194 067) 807 870
Segment assets - current 11 093 17 24 - 2 19 838 - 30 974
Segment liabilities - non-current (112 140) - (217 628) - (4 586) - 194 067 (140 287)
Segment liabilities - current (5 300) (741) - - (454) (15 775) - (22 270)
Business segments
The operations of the Group comprise oil and gas exploration and production, crude trading and
the sale of petroleum products. The Group relinquished its exploration licences in Botswana and
Malawi and ceased its activities in Equatorial Guinea.
Botswana
After a thorough review of all available geo-scientific data of the Kalahari Basins of Botswana
as well as integrating exploration data from the neighbouring Gemsbok Basin in Namibia and the
Kariba Basin in Zimbabwe, it was concluded that the potential for finding hydrocarbons was low
and that further exploration in PELs 123,124 and 125 would be of a high risk nature. It was
therefore decided not to renew the PELs when they expired in June 2017.
Malawi
The relinquishment of the Block 1 licence in August 2017 followed a desktop study completed by
Efora which concluded that, although there is potential for petroleum exploration, the risk remains
substantial due to the inability to distinguish between magnetic and sedimentary layers by using
magnetic data.
Equatorial Guinea
The Group terminated its participation in the Bioko Oil Terminal project during the year.
Revenue
The Group derives revenue from the following sources:
- The sale of crude oil from the Lagia Oil Field to the Egyptian General Petroleum Corporation
("EGPC"). This revenue is included under the Egypt segment.
- Sales of petroleum products to a diversified customer base which includes local government and
mining, construction, transport, manufacturing, retail and agricultural customers. These revenues
are included under the South Africa and Zimbabwe segments.
Inter-segment revenues are eliminated upon consolidation and are reflected in the "eliminations"
column. There were no inter-segment revenues in the prior year.
Taxation - Egypt
No income or deferred tax has been accrued by Mena International Petroleum Company Limited
("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.
4 BUSINESS COMBINATION AND GOODWILL
On 31 May 2017 the Group acquired 100% of the share capital of Phembani Oil Proprietary Limited
("Phembani"), an investment holding company whose only asset is a 71% equity interest in Afric Oil
Proprietary Limited ("AO") which owns a fuel distribution business. Phembani was acquired to
enable the Group to enter the downstream segment of the oil and gas value chain and also to expand
its footprint in southern Africa. The acquisition is also expected to contribute significant
revenues and cash flows to the Group in line with its strategy of establishing a sustainable business.
The Company issued 427 477 149 Efora ordinary shares as part consideration for the acquisition
of Phembani. The issue price of the shares of 20.93 cents (rounded) was based on the 90-day
volume weighted average price as at 31 May 2017, at a discount of 10%. The resulting value of
the shares issued was R89.5 million. The fair value of these shares was however R85.5 million
which resulted in a fair value loss of R4.0 million on initial recognition of the consideration.
The Company further paid cash of R39.0 million and was due to pay a contingent consideration of
R55.0 million if AO had achieved EBITDA of between R68.0 million and R100.0 million for the year
ended 31 December 2017, and if it recovered specified accounts receivable within 12 months.
The contingent consideration was subsequently reduced to R2.3 million as AO did not meet the
EBITDA target but it is highly likely that taxes on certain provisions will be recoverable.
The net assets attributed to the acquisition in the Group annual financial statements for the
year ended 28 February 2017, were based on a provisional assessment of their fair values as the
Company sought an independent valuation of identified intangible assets (brands and customer
relationships) and tangible assets. The valuation had not been completed by the time the
2017 financial statements were approved for issue by the Board of Directors. Furthermore,
the fair values of the assets acquired were based on a provisional balance sheet as at
31 March 2017, representing at the time the latest available information close to the acquisition
date. The valuation has now been completed and financial information as at 31 May 2017 has also
been obtained. The final fair values of the identifiable assets and liabilities of Phembani as
at the date of acquisition, which are different from amounts previously reported for reasons
noted, are therefore outlined below:
Final fair value
R'000
Property, plant and equipment 96 397
Intangible assets (1) 162 623
Other financial assets 3 085
Inventories 17 791
Current tax receivable 253
Trade and other receivables (2) 200 288
Cash and cash equivalents 59 202
539 639
Borrowings (264 187)
Finance lease obligations (4 774)
Deferred tax liability 1 417
Trade and other payables (182 028)
(449 572)
Total identifiable net assets at fair value 90 067
Non-controlling interest (26 119)
Goodwill arising on acquisition 62 809
Consideration at fair value 126 757
Cash 39 000
Equity instruments 85 495
Contingent consideration (equity instruments) 2 262
The net cash inflow on acquisition is as follows:
Cash paid (39 000)
Net cash acquired with the subsidiary 59 202
Net consolidated cash inflow 20 202
1 Comprising brands, customer relationships and computer software.
2 Includes an impairment provision of R53.5 million.
The fair value of trade and other receivables is R202.9 million and includes trade receivables
with a fair value of R184.8 million. The gross contractual amount for trade receivables due is
R238.3 million, of which R53.5 million is expected to be uncollectible.
The goodwill arising on acquisition of R62.8 million is attributable to expected synergies from
the integration of the AO and Big Red Investments Proprietary Limited businesses and is allocated
entirely to the AO business. None of the goodwill recognised is expected to be deductible for
income tax purposes.
From the date of acquisition to 28 February 2018, AO has contributed revenue of R2.6 billion
and a loss of R65.5 million to the Group loss. If the acquisition of AO had taken place at the
beginning of the year, the Group revenue for the year ended 28 February 2018 would have been
R3.7 billion and AO would have contributed a loss of R108.5 million to the Group results.
Transaction costs of R11.8 were expensed and are included in other operating expenses.
The attributable costs of the issuance of the shares of R0.08 million have been charged directly
to equity as a reduction in share capital.
Goodwill
For impairment testing purposes, the goodwill of R62.8 million, which is included in intangible
assets, acquired through the business combination detailed above has been allocated to the
Afric Oil cash generating unit ("AO CGU"). The cash generating unit was compared to its
recoverable amount which was determined through value-in-use calculations where future cash flows
were estimated and discounted at the weighted average cost of capital. The recoverable amount
of the AO CGU as at 28 February 2018 was determined to be R144.5 million. The discount rate
applied to the cash flow projections is 13.09%, and cash flows beyond the five-year period are
extrapolated using an average growth rate of 4%. As a result of the analysis, management did not
identify an impairment for the AO CGU. Key assumptions used in determining the value in use
are as follows:
- Gross margins
- Discount rate
- Market share during the budget period
- Growth rates used to extrapolate cash flows beyond the budget period
Gross margins: Gross margins are based on average values achieved from current trading activities
and are derived from regulated wholesale prices.
Discount rates: The discount rate calculation is based on the specific circumstances of the Group
and is derived from its weighted average cost of capital ("WACC"). The WACC takes into account
both debt and equity, weighted 50% each. The cost of equity is derived from the expected return
on investment by the Group's investors. The cost of debt is based on the interest-bearing
borrowings the Group is obliged to service. Segment-specific risk is incorporated by applying
individual beta factors. The beta factors are evaluated annually based on publicly available
market data.
Market share: Management expects the Group's share of the petroleum products market to be stable
over the forecast period.
Growth rates: Based on the estimated growth rate for the petroleum products sector.
Sensitivity to changes in assumptions
Management assessed that the value-in-use calculation would be most sensitive to the discount
rate applied to determine the recoverable amount. A 2% increase in the discount rate would
reduce the recoverable amount by R42.8 million without resulting in an impairment of the goodwill
allocated to the AO CGU.
5 CORRECTION OF ERROR
Recognition of the Block III contingent liability attributable to ongoing exploration activities
In 2011 and 2012 the Group entered into a cost carry arrangement with Total E&P RDC ("Total"),
whereby Total would provide a carry of all exploration and appraisal costs on behalf of the
Group with respect to its operations on Block III in the DRC. Under the terms of this arrangement,
Total is entitled to recover these costs plus interest from the Group's share of oil revenues if
Block III goes into commercial production. In the prior years the Group accounted for the
liability that could arise from the cost carry arrangement with Total as a contingent liability
as a great degree of judgement was applied in determining the chances of the liability materialising.
During the current year, after a further review by the new auditors of the assumptions used in
accounting for the liability, it was concluded that it is more probable than previously assessed
that this liability could materialise and as such that the liability should have historically been
accounted for as a provision and not a contingent liability. As a result of this error, the Group's
investment in Block III under exploration and evaluation assets was understated with a corresponding
understatement of liabilities. The error has been corrected by restating each of the affected financial
statement line items for the prior periods as follows:
Previously Previously
reported Restated reported Restated
28 February 28 February 28 February 28 February
2017 Adjustment 2017 2016 Adjustment 2016
Balance sheet (extract) R'000 R'000 R'000 R'000 R'000 R'000
Exploration and evaluation assets 51 029 45 290 96 319 50 976 23 769 74 745
Provisions (note 11) - (56 884) (56 884) - (41 837) (41 837)
Impact on net assets 51 029 (11 594) 39 435 50 976 (18 068) 32 908
Accumulated loss (587 075) (11 594) (598 669) (375 252) (18 068) (393 321)
Impact on equity (587 075) (11 594) (598 669) (375 252) (18 068) (393 321)
Statement of comprehensive income (extract)
Finance costs (1) (2 635) (2 636) (4) (1 125) (1 129)
Other operating expenses (283 758) 9 109 (274 649) (194 429) (10 574) (205 003)
(Loss)/profit before taxation (206 947) 6 475 (200 472) 100 009 (11 699) 88 310
(Loss)/profit for the year (211 824) 6 475 (205 349) 39 587 (11 699) 27 888
Total comprehensive (loss)/profit for the year (233 360) 6 475 (226 885) 101 047 (11 699) 89 348
The change did not have an impact on OCI or the Group's operating, investing and financing cash
flows. The Group did not have non-controlling interests at 29 February 2016 and 28 February 2017.
Impact on loss per share*
Basic and diluted loss per share (note 12) (64,78) 1,98 (62,80)
Basic and diluted headline loss per share (note 12) (78,47) 1,98 (76,48)
* Loss per share numbers for the prior year have been adjusted to reflect the impact of the share
consolidation that took place during the year as detailed in note 12.
6 INVESTMENT IN JOINT VENTURE
Participating interest
Country of Principal place Nature of 2018 2017
registration of business activities % %
SacOil Energy Equity Resources Limited ("SEER") Seychelles Nigeria Crude trading 50% -
Crude trading, Nigeria
Efora, jointly with Energy Equity Resources (Nigeria Services) Limited, through SEER, participates
in crude trading in Nigeria. Efora's share of this arrangement is 50%. The interest in this
joint venture is accounted for using the equity accounting method. In the prior year this
arrangement was neither a joint venture nor a joint operation but rather classified as a cost-
sharing arrangement. In the current year this arrangement is classified as a joint venture.
The change in the basis of accounting post acquisition is due to the change in the structuring
of the Group's interest in SEER. Since the incorporation of SEER up until 22 March 2017 the
Group's participation in SEER was governed by a 50/50 cost-sharing agreement which meant that
the Group accounted for its 50% share of assets, revenues and costs in preparing its financial
statements. Since the conclusion of a shareholders agreement on 22 March 2017, which now
stipulates that the Group is entitled to a 50% share of SEER's net assets, the Group now accounts
for this investment as a joint venture in line with IFRS 11. SEER entered into an agreement with
the Nigerian National Petroleum Corporation Limited for the purchase of crude oil grades for
onward sale. The agreement expired on 31 March 2018 and a new contract was awarded in May 2018
for a period of two years.
Summarised financial statement information (100%) of the joint venture, based on its IFRS
financial statements, is set out below:
Condensed statement of profit or loss of SEER 2018
R'000
Revenue 917 046
Cost of sales (910 080)
Other operating costs (3 211)
Profit for the year 3 755
Total comprehensive income for the year 3 755
Group's share of profit for the year 1 878
Condensed statement of financial position of SEER
Non-current assets 8
Current assets (1) 15 685
Current liabilities (3 999)
Equity 11 694
Portion of the Group's ownership 5 847
1 Including cash of R0.05 million and loans to shareholders of R15.6 million.
Reconciliation of carrying amount R'000
Balance at 1 March 2017 -
Net assets through restructuring of cost-sharing agreement 4 610
Share of profit 1 878
Exchange differences (641)
Balance at 28 February 2018 5 847
The joint venture had no contingent liabilities or capital commitments as at 28 February 2018.
SEER cannot distribute its profits until it obtains the consent of the two joint venture partners.
SEER is domiciled in Seychelles and is tax exempt.
7 LOANS AND OTHER RECEIVABLES
The following impairments to loans and other receivables have been recorded:
2018 2017
R'000 R'000
Transcorp Refund 12 720 54 897
12 720 54 897
Transcorp Refund
Included in loans and other receivables is an amount due from Transcorp of R194.2 million after
recording an impairment charge of R12.7 million (2017: R54.9 million). The impairment charge,
which is recorded under other operating expenses, reflects the impact of the time value of money
as it is estimated it will take longer to recover funds owed by Transcorp, as the hearing of the
pending litigation as stated in the Litigation Section was postponed in the prior year and again
in the current year.
The provision for impairment of loans and other receivable is as follows:
2018 2017
R'000 R'000
Balance at 1 March 115 919 173 571
Utilisation of provision attributable to the loan due from EERNL - (173 571)
Acquisition through business combination 1 250 -
Arising during the year 4 195 115 919
Advance payment against future services - 115 825
Phembani Group Proprietary Limited 827 -
Supplier development loans 1 368 -
Deferred consideration on disposal of Greenhills plant 2 000 94
Balance at 28 February 121 364 115 919
Deferred consideration on disposal of Greenhills plant
The remaining consideration of R2.0 million for the disposal of the Greenhills plant was due on
1 October 2016. Subsequently an addendum to the original sale of business agreement was
concluded on 31 October 2017. Under the terms of the amended agreement, the remaining amount of
R2.0 million will be paid in four instalments of R0.5 million each based on a payment plan with
the last instalment expected on 30 June 2019. Interest will accrue on the value of each
instalment at a rate of 10% calculated from 31 August 2017, as agreed, to the date of payment.
The first instalment, which has been provided for in full, was due on 28 February 2018 and
remains outstanding as at the date of these financial statements.
Phembani Group Proprietary Limited
Included in loans and other receivables is an amount of R0.8 million due from Phembani Group
Proprietary Limited. An impairment charge of R0.8 million was recognised under other operating
expenses after considering the recoverability of this amount.
Supplier development loans
Included in loans and other receivables is an amount of R2.6 million due from loans granted to
suppliers in line with Afric Oil's strategy for broad-based black economic empowerment with
respect to supplier development. Due the the recurring default on the supplier development
loans an impairment charge of R2.6 million has been recognised with respect to these loans under
other operating expenses.
8 TRADE AND OTHER RECEIVABLES
As at 28 February 2018, trade receivables with a carrying value of R42.6 million (2017: nil)
were impaired and fully provided for. The movements in the provision for impairment of trade
receivables are outlined below:
R'000
At 1 March 2017 -
Aquired through business combination (note 4) 53 462
Unused amounts reversed (10 904)
At 28 February 2018 42 558
9 STATED CAPITAL 2018 2017
Authorised:
Number of ordinary shares with no par value (000's) 10 000 000 10 000 000
Allotted equity share capital:
Reported at the beginning of the year (R'000) 1 216 504 1 216 504
Non-cash shares issued (R'000) 89 487 -
Share issue costs (R'000) (80) -
As at 28 February (R'000) 1 305 911 1 216 504
Reconciliation of number of shares issued:
Reported at the beginning of the year (000's) 3 269 836 3 269 836
Non-cash shares issued (000's) 427 478 -
Share consolidation (000's) (3 327 581) -
As at 28 February (000's) 369 733 3 269 836
Non-cash shares issued comprise:
Number of Issue Value
shares issued price (1) R000s
Date Nature of transaction Recipient (000s) R (note 4)
31 May 2017 Part consideration for the acquisition of Afric Oil Gentacure Proprietary Limited 387 459 0.21 81 110
31 May 2017 Part consideration for the acquisition of Afric Oil Moopong Investment Holdings Proprietary Limited 40 019 0.21 8 377
427 478 0.21 89 487
1 The issue price is rounded to two decimal places.
2018 2017
R'000 R'000
10 BORROWINGS
Non-current
Redlex Investments Proprietary Limited (1) 5 152 -
Unemployment Insurance Fund (2) 209 994 -
215 146 -
Current
Gemcorp Africa Fund I Limited (3) 146 010 -
Redlex Investments Proprietary Limited (1) 8 156 -
Impact Trust (4) 2 929 -
Loan due to EERNL (5) 107 -
Turquoise Moon Proprietary Limited (6) 21 699 -
178 901 -
Total 394 047 -
1 The loan represents an amount payable by Afric Oil with respect to the acquisition of the
business assets of Big Red Proprietary Limited, Turquoise Moon Trading 477 Proprietary Limited
and Redlex Investments Proprietary Limited which occurred in March 2017. This loan bears
interest at 10.5% per annum, is secured by motor vehicles and is repayable in 30 monthly
instalments of R0.8 million each which commenced on 1 April 2017. Full repayment of the loan
is expected on 30 September 2019. Interest totalling R1.3 million was charged to finance
costs in profit or loss with respect to this loan for the nine months since acquisition.
This loan is denominated in Rands.
2 The loan was granted to Afric Oil in February 2017 in order to purchase the business assets
of Big Red Proprietary Limited, Turquoise Moon Trading 477 Proprietary Limited and Redlex
Investments Proprietary Limited. The loan accrues interest on a monthly basis compounded
quarterly at a rate of three-month Jibar plus 420 basis points. The loan is secured by
cession of inventories and trade receivables, bonds over movable and immovable properties,
a cession of shares in or claims against all Afric Oil subsidiaries and the subordination of
all claims. Repayments of the loans were due to commence on 31 October 2017 but Afric Oil
obtained a moratorium on 15 May 2018 on both capital and interest repayments which will
last a year following which the loan will be repayable over 20 equal quarterly instalments.
Interest will continue to accrue on the loan during the moratorium. Interest totalling
R21.1 million was charged to finance costs in profit or loss with respect to this loan for
the nine months since acquisition. This loan is denominated in Rands. The Unemployment
Insurance Fund is represented by the Public Investment Corporation.
3 The Gemcorp Africa Fund I Limited loan which was acquired by Efora on 1 June 2017 is
repayable on 31 August 2018 from the proceeds of a rights issue which the Board has committed
to undertake. The loan is secured by a cession in security of the rights offer proceeds,
bears interest at 8.5% per annum and was arranged at a fee of 2%. The loan was utilised to
fund the acquisition of Phembani Oil Proprietary Limited and is also being used for working
capital and general corporate purposes of the Group. Interest totalling R12.9 million was
charged to finance costs in profit or loss with respect to this loan. This loan is
denominated in US Dollar.
4 The loan amount arose from the purchase of the business assets of AfricOil Petroleum -
Zimbabwe and represents the balance owing to the liquidator. The loan is unsecured, bears
no interest and has no fixed terms of repayment. This loan is denominated in US Dollar.
5 The loan due to EERNL is attributable to costs incurred on the Group's behalf pertaining to
the operation of SEER. The loan is interest free, unsecured and has no fixed repayment terms.
This loan is denominated in US Dollar.
6 The loan represents an amount payable by Afric Oil with respect to the acquisition of
ERF 381 and ERF 380 in the township of Aureus Extension 3. This loans bears interest at
prime minus 1 basis point per annum, is unsecured and is repayable in 19 instalments of
R0.4 million which commenced in March 2017 with a final payment of R20.4 million.
Full repayment of the loan is expected in September 2018. Interest totalling R1.5 million
was charged to finance costs in profit or loss with respect to this loan for the nine months
since acquisition. This loan is denominated in Rands.
11 PROVISIONS
Restated* Restated*
2018 2017 2016
R'000 R'000 R'000
Non-current
Carried cost reimbursement 53 271 56 884 41 837
Carried cost reimbursement
Balance at 1 March 2015 30 138
Interest 1 125
Exchange differences 10 574
Balance at 29 February 2016 - Restated* 41 837
Arising during the year 21 522
Interest 2 634
Exchange differences (9 109)
Balance at 28 February 2017 - Restated* 56 884
Interest 2 167
Exchange differences (5 780)
Balance at 28 February 2018 53 271
* Restated as disclosed in note 5.
Carried cost reimbursement
The farm-in agreement between Semliki and Total provides for a carry of costs by Total on behalf
of Semliki on Block III. Semliki's rights under the contract were subsequently assigned to
SacOil DRC as part of the reorganisation concluded on 29 February 2016. Total will be entitled
to recover the accrued aggregate of the carried costs, plus interest (at LIBOR for one-month
deposits plus 3%), from SacOil DRC's share of cost oil plus 80% of profit oil if Block III
commences commercial production. Based on current estimates commercial production is anticipated
in 2022. The carried cost reimbursement provision at 28 February 2018 represents the present
value of estimated costs and interest totalling R53.3 million (2017: R56.9 million, 2016: R41.8 million).
2018 2017
12 LOSS PER SHARE
Basic (cents) (42.34) (62.80)
Diluted (cents) (42.34) (62.80)
Loss attributable to equity holders of the Company used in the
calculation of the basic and diluted loss per share (R'000) (151 971) (205 347)
Weighted average number of ordinary shares used in the calculation
of basic loss per share (000's) 358 956 326 983
Issued shares at the beginning of the reporting period (000's) 3 269 836 3 269 836
Effect of shares issued during the reporting period
(weighted) (000's) 319 729 -
Share consolidation (000's) (3 230 609) (2 942 853)
Add: Dilutive share options (000's) - -
Weighted average number of ordinary shares used in the calculation
of diluted loss per share (000's) 358 956 326 983
Headline loss per share
Basic (cents) (42.20) (76.49)
Diluted (cents) (42.20) (76.49)
Reconciliation of headline loss R'000 R'000
Loss attributable to equity holders of the Company (151 971) (205 347)
Adjust for:
Reversal of impairment of oil and gas assets - (46 179)
Reversal of impairment of intangible assets - (15 968)
Write-off of property, plant and equipment 535 -
Write-off of exploration and evaluation asset 307 -
Adjustments attibutable to NCIs (155) -
Tax effects of adjustments (192) 17 401
Headline loss (151 476) (250 093)
Adjustment of prior-year loss per share and headline loss per share
On 25 October 2017 the Company restructured its authorised and issued stated capital by
consolidating every 10 ordinary shares of no par value into 1 ordinary share of no par value.
The restructuring did not affect either the loss attributable to equity holders of the Company
or dilutive share options. Its impact on the shares in issue had the share consolidation taken
place in the prior year is reflected below. It is important to note that the adjustment has been
made to facilitate comparability and is neither a prior period error or a change in accounting policy.
Weighted average number of ordinary shares used in the calculation of basic and diluted loss per
share and basic and diluted headline loss per share:
Previously reported Adjusted
Issued shares as previously stated (000's) 3 269 836 3 269 836
Impact of share consolidation had this occurred in the
prior year (000's) - (2 942 853)
Weighted average number of ordinary shares used in the
calculation of basic and diluted loss per share and basic and
diluted headline loss per share (000's) 3 269 836 326 983
Impact of Adjusted for Impact of
Previously share share prior-year
reported consolidation consolidation error (note 5) Restated
Adjusted basic and diluted loss per share (6.48) (58.30) (64.78) 1.98 (62.80)
Adjusted basic and diluted headline loss per share (7.85) (70.62) (78.47) 1.98 (76.48)
13 RELATED PARTIES
Key management compensation 2018 2017
R'000 R'000
Non-executive directors:
Fees 4 096 3 975
Executive directors
Salaries 7 489 8 676
Other key management
Salaries 7 336 7 575
14 FAIR VALUE MEASUREMENT
The fair values of cash and cash equivalents, trade and other receivables, trade and other payables,
financial liabilites and the loan from the joint venture approximate carrying values due to the
short-term maturities of these instruments. Set out below is a comparison, by class, of the carrying
amounts and fair values of the Group's financial instruments, other than those with carrying amounts
that are reasonable approximations of fair values:
Carrying value Fair value
2018 2017 2018 2017
R'000 R'000 R'000 R'000
Loans and receivables
Loans and other receivables (note 7) (1) 452 086 470 896 389 061 428 682
Derivative financial assets
Foreign exchange option 258 - 258 -
Financial liabilities at amortised cost
Borrowings (note 10) (394 047) - (411 732) -
1 In terms of Efora'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 Efora intends to collect the cash flows from these instruments when they
fall due over the life of the instrument. Changes in market discount rates which affect fair
value would therefore not impact the valuation of these financial instruments and are not
considered to be objective evidence of impairment for items carried at amortised cost per
IAS 39 as this does not impact the timing or amount of expected future cash flows.
Valuation techniques and assumptions applied to measure fair values
When the fair values of financial assets and financial liabilities recorded in the statement of
financial position cannot be measured based on quoted prices in active markets, their fair value
is measured using valuation techniques including the discounted cash flow ("DCF") model. The inputs
to these models are taken from observable markets where possible, but where this is not feasible,
a degree of judgement is required in establishing fair values. Judgements include considerations
of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to
these factors could affect the reported fair value of financial instruments.
Fair value at
28 February 2018 Valuation technique Significant inputs
Assets
Loans and other receivables 389 061 Discounted cash flow model Weighted average cost of capital
Foreign exchange option 258 Forward pricing using present value calculations Forward exchange rates, discount rate
Liabilities
Borrowings (411 732) Discounted cash flow model Weighted average cost of capital
Fair value hierarchy
The following table presents the Group's assets for which the fair value is disclosed above.
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
At 28 February 2018
Loans and other receivables - - 389 061 389 061
Foreign exchange option - 258 - 258
Borrowings - - (411 732) (411 732)
At 28 February 2017
Loans and other receivables - - 428 682 428 682
There were no transfers between any levels during the year. The Group's own non-performance risk
at 28 February 2018 was assessed to be insignificant, however the Group's ability to meet all
its obligations is dependent on its ability to raise funds as referred to in note 15.
15 CONTINGENT LIABILITIES
Contingent liabilities - Group
Claim by former chairman of the Company
Richard Linnell (the Company's former Chairman) instituted legal action against the Company during
September 2016 in which he claims, amongst others, payment of approximately R14.7 million,
together with interest, and the reinstatement of 12.6 million share options which the Company
contends have lapsed. He is also claiming legal costs. The Company is defending the action and
for over 18 months, Mr Linnell has taken no steps to progress this legal action. The outcome of
this matter cannot be estimated at this point in time and accordingly, no provision was
recognised at 28 February 2018.
Claimed transation fees
Gem Capital issued summons against Afric Oil Proprietary Limited on 11 October 2017. The claim
is twofold:
(1) Gem Capital's is claiming outstanding fees for assisting Afric Oil with the procurement of
financing from the Public Investment Corporation to purchase Forever Fuels. The claim is for
an outstanding amount of R0.5 million plus interest at 2% above prime rate from 22 May 2017.
The claim is being opposed by the company's attorneys, TGR Attorneys.
(2) Gem Capital is claiming success fees for providing advice and assistance with the "SacOil"
(now Efora) transaction, being the acquisition of Afric Oil by Efora for R200 million
(correct purchase price is R130.7 million). The claim is for R6.8 million plus interest at
2% above prime rate from 31 May 2018. The claim is being opposed by the company's attorneys,
TGR Attorneys.
The outcome of these matters cannot be estimated at this point in time and, accordingly,
no provision was recognised at 28 February 2018.
16 GOING CONCERN
The Group incurred a net loss for the year ended 28 February 2018 of R175.9 million
(2017: R205.3 million). The results of the Group continue to be affected by developments in the
global markets with respect to oil prices and exchange rates as well as lower than expected
performance of the Lagia and Afric Oil investments for the reasons highlighted in the operations
and finance reviews. Consequently, the Group's operations have not delivered the expected
cash flows which has resulted in a net cash outflow of R86.1 million (2017: R79.2 million) for
the year from operations, business development activities and overhead costs. The Group's cash
resources at 28 February 2018 total R72.8 million and are presently not considered adequate to
meet the Group's obligations for the foreseeable future. The following uncertainties therefore
exist with respect to the Group's ability to remain a going concern as it may not be able to
realise its assets and discharge its liabilities in the normal course of business:
Availability of funding for the Group's activities
A deficit of R126.1 million exists in the Group's cash flow forecast to May 2019 ("the Forecast")
for reasons highlighted above. Part of this deficit is attributable to the Gemcorp loan repayment.
In order to mitigate the risk of the Group falling short on its obligations the Board has put in
place the following plans:
- A general meeting of shareholders has been convened to consider and if deemed appropriate,
approve the issue of shares by the Company which will be done by way of a rights issue that
will be greater than 30% of the Company's market capitalisation ("the Rights Issue").
The proceeds of the Rights Issue will be utilised to repay the Gemcorp loan, for operational
and working capital requirements and to fund the Group's growth strategy. Should the necessary
resolution be approved by shareholders at the general meeting on 18 June 2018, the Company
will launch the Rights Issue as soon as possible. Management has received undertakings from
shareholders owning more than 60% of the issued share capital of the Company in which they
commit to support the resolution required to issue the shares. Furthermore, these shareholders
have pledged to fully follow their rights under the proposed Rights Issue which will raise a
minimum of approximately R364 million. Whilst the Board is confident that it will be able to
obtain the required support from shareholders making up 75% of the issued share capital as
required by the Companies Act, it is difficult to establish with certainty the extent to which
the Company will be able to secure the remaining 15% of votes required to approve the Rights
Issue from the fragmented shareholder base.
- As previously announced, the Board had anticipated that the Company would have completed the
Rights Issue by 31 May 2018, the proceeds of which would have been utilised partly to fund
the repayment of the Gemcorp loan which is due on the same date. Due to the deferral of the
Rights Issue, management obtained an extension of the Gemcorp loan until 31 August 2018 in
order to align the repayment thereof with the new timeline for the proposed Rights Issue.
Operational performance of the Group
As noted above the Group incurred a net loss R175.9 million partly due to the losses generated
by the Lagia and Afric Oil businesses and the losses reported by the headoffice. Lagia production
is expected to increase significantly based on the planned development activities following the
drilling of the pilot well and it is expected that this should have a material impact on the
financial performance of the Group as a whole, subject to the impact of production rates actually
achieved for each well and prevailing exchange rates and oil prices during the foreseeable future.
The acquisition of Afric Oil was completed on 31 May 2017 and management focussed on the
integration and optimisation of the business for the period following acquisition. The integration
activities had an impact on the performance of the business due to integration related costs,
the temporary suspension and restructuring of the Zimbabwean business and changes in the contract
arrangements for the supply of products to the business. The full realisation of benefits
associated with these activities as reflected in future projections for the business remains an
uncertainty. Management is however confident that these activities will result in an improvement
of the underlying financial performance of the Group.
The focus of the head office has been to optimise the Group's various investments and businesses
and to reduce the overall overheads. The optimisation initiatives implemented by management
are beginning to take shape which will see a further reduction in the head office cost base which
will impact the future performance of the Group.
17 EVENTS AFTER THE REPORTING PERIOD
The following events took place from the period 1 March 2018 to the date of this SENS.
Extension of Gemcorp Africa Fund I Loan
On 31 May 2018 the Company concluded an agreement to extend the repayment of the Gemcorp Africa
Fund I Limited loan of US$12.5 million to 31 August 2018. The loan which was acquired by Efora
on 1 June 2017 is repayable from the proceeds of a rights issue which the Board has committed
to undertake if approved by shareholders at the general meeting convened on 18 June 2018
(also see note 16). The loan is secured by a cession in security of the rights offer proceeds
and bears interest at 8.5% per annum. The loan was utilised to fund the acquisition of
Phembani Oil Proprietary Limited and is also being used for working capital and general
corporate purposes of the Group.
Moratorium on loan from the Unemployment Insurance Fund
On 15 May 2018 Afric Oil obtained a moratorium on both capital and interest repayments which
will last a year following which the loan will be repayable over 20 equal quarterly instalments.
Interest will continue to accrue on the loan during the moratorium. The loan accrues interest on
a monthly basis compounded quarterly at a rate of three-month Jibar plus 420 basis points.
On behalf of the Board
Boas Seruwe Dr Thabo Kgogo Damain Matroos
Chairman Chief Executive Officer Chief Financial Officer
Johannesburg
31 May 2018
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@eforaenergy.com
Website: www.eforaenergy.com
Directors
Dr Thabo Kgogo (Chief Executive Officer), Marius Damain Matroos (Chief Financial Officer),
Boas Seruwe (Chairman)*, Ignatius Sehoole*, Thuto Masasa*, Patrick Mngconkola*
* Independent non-executive directors
Advisers
Company Secretary: Fusion Corporate Secretarial Services Proprietary Limited
Transfer Secretaries: Link Market Services South Africa Proprietary Limited
Corporate Legal Advisers: Norton Rose Fulbright South Africa
Auditor - external: SizweNtsalubaGobodo
Auditors - internal: Grant Thornton Inc.
JSE Sponsor: PSG Capital Proprietary Limited
Investor Relations: Buchanan Communications Limited
Date: 31/05/2018 05:50:00 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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