TIDMSAC
RNS Number : 2857R
SacOil Holdings Limited
10 September 2014
SACOIL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/000460/06)
JSE Share Code: SCL AIM Share Code: SAC
ISIN: ZAE000127460
("SacOil" or "the Company")
Acquisition of a 100% interest in the Lagia oil field, onshore
Sinai Peninsula, Egypt
Further cautionary announcement
1. Introduction
SacOil, the African independent upstream oil and gas company, is
pleased to announce that it has entered into a sale and purchase
agreement dated 9 September 2014 (the "Agreement") to acquire a
Cyprus-registered exploration and production company, Mena
International Petroleum Company Ltd ("MIP"), from Mena
International Petroleum Holdings Company Ltd (the "Seller"), a
wholly-owned subsidiary of TSX Venture listed Mena Hydrocarbons
Inc. (TSXV:MNH) ("Mena Hydrocarbons") (the "Acquisition").
2. Rationale for the Acquisition
SacOil's current strategy is to grow and balance its existing
portfolio on the African continent through the addition of reserves
and production to its asset base. The two-pronged approach of this
strategy includes:
-- the monetization of the existing assets; and
-- expansion of the portfolio to deliver production and cash flows.
MIP has a 100% interest in the development lease for the Lagia
oil field, covering an area of approximately 32 square kilometres
on the Sinai Peninsula in Egypt. The Lagia oil field is at a
development stage with heavy oil (16-18deg API) in shallow
reservoirs and light oil potential in deeper reservoirs. The assets
include existing production facilities and oil storage for 3 000
barrels of oil. The field is currently in test production and
SacOil intends to implement a phased development programme to bring
the field into full production. Phase 1 will include the hydraulic
stimulation of 4 existing wells and the work-over of 1 well,
commencing as soon as practicable after closing the Acquisition,
and will be funded from existing cash resources.
Following completion of the Acquisition, which is expected on or
before 31 October 2014 (the "Completion Date"), SacOil will provide
further updates on its planned future development activities and
investments in the Lagia oil field.
Highlights of the Acquisition include:
-- The Lagia oil field represents the acquisition by SacOil of a
de-risked onshore development asset in Egypt with short timelines
to production and cash flows;
-- Proven plus probable reserves net to MIP of 6.174 million
barrels (audited by Degolyer and MacNaughton as at the year ended
31 December 2013); and
-- The Acquisition represents a strategic entry to Egypt, where
SacOil sees the potential to build a substantial E&P
business.
3. Terms of the Acquisition
SacOil will, subject to fulfilment of the conditions precedent
set out below, acquire all the issued shares in MIP (the "Sale
Shares") from the Seller, with effect from 9 September 2014 (the
"Effective Date").
As consideration for the Acquisition (the "Acquisition
Consideration"), the Seller will be entitled to receive US$ 10
million in SacOil shares via the issuance of 183 666 947 ordinary
shares in the Company (the "Consideration Shares"), based on the 30
day volume weighted average price of the SacOil shares on the JSE
for the period ended 8 September 2014. The Consideration Shares
shall be issued to Mena Hydrocarbons and shall not be traded for a
period of 4 months following the Completion Date. The Acquisition
Consideration shall be reduced by issuing fewer Consideration
Shares should the working capital deficiency on the Completion Date
be greater than US$4.1 million.
In addition, SacOil will settle in cash all MIP's liabilities,
to a maximum value of US$ 4.1 million (the "Cash Consideration").
The Cash Consideration includes an amount of US$1,857,319 due to
the holders of various promissory notes (the "Promissory Notes").
SacOil may from the Effective Date elect to pay MIP's trade
creditors directly, subject to a maximum of US$250,000 (the
"Loan"). Should the Acquisition not be completed, the Loan will
become immediately due and payable.
There was no profit attributable to MIP in the last financial
year
4. Conditions precedent
The Acquisition is subject to representations and warranties
normal for a transaction of this nature. The Acquisition is subject
to fulfilment of the following conditions precedent on or before
the Completion Date:
4.1 the completion of the financial due diligence investigations into the affairs of MIP;
4.2 receipt of relevant confirmation from the Egyptian General
Petroleum Corporation ("EGPC") in relation to certain historical
costs recoveries due to MIP and other such matters related to the
petroleum operations of MIP;
4.3 receipt of confirmations from the Cyprus Registrar of
Companies and the Cyprus Inland Revenue of various administrative
and financial matters in relation to MIP;
4.4 receipt of MIP's unqualified audited financial statements
for the period ended 31 December 2013;
4.5 MIP's working capital on the Completion Date showing a
deficiency no greater than US$2,242,681 (excluding the Promissory
Notes);
4.6 the delivery by the Seller of various administrative
documents and copies of directors' and shareholders'
resolutions;
4.7 approval of the Mena Hydrocarbons' and the Seller's
shareholders, and no more than 5% of Mena Hydrocarbons'
shareholders having exercised their dissent rights;
4.8 security for the Loan, in the event that the Acquisition does not proceed to completion;
4.9 the release of the Seller's obligations under a letter of
guaranty referred to in the concession agreement in relation to the
Lagia oil field;
4.10 SacOil having placed US$ 1,857,319 (one million eight
hundred fifty seven thousand three hundred and nineteen) in escrow
to settle the Promissory Notes;
4.11 the JSE and AIM having approved the listing of the Consideration Shares;
4.12 no law or governmental order shall have been enacted prohibiting the Acquisition;
4.13 notification to, and receipt of written confirmation from,
EGPC and the Arab Republic of Egypt of the transfer of the Sale
Shares to SacOil and the change in control of MIP;
4.14 confirmation from the holders of the Promissory Notes of
the settlement amount as at the Completion Date and release of
security over the Sale Shares;
4.15 receipt of relevant approvals from the TSX Venture
Exchange, AIM, the JSE and any other relevant securities
commissions; and
4.16 the execution by certain shareholders of MENA Hydrocarbons
of an "Orderly Marketing Agreement", as defined in the Agreement,
for a 6 month period following the end of the 4 month lock up
period.
As a result of the Acquisition, MIP will become a subsidiary of
SacOil and confirmation is hereby given in terms of paragraph 9.16
of the JSE Listings Requirements that SacOil will ensure that none
of the provisions in the Memorandum of Incorporation ("MoI"), or
such similar document, of MIP will frustrate SacOil in any way from
compliance with, nor relieve it from, its obligations in terms of
the JSE Listings Requirements.
5. Pro forma financial effects of the Acquisition
The pro forma financial information applicable to the
Acquisition is still in the process of being finalised and will be
published in due course.
6. Categorisation of the Acquisition
The Acquisition is categorised as a Category 2 transaction for
SacOil in terms of the JSE Listings Requirements.
7. Further cautionary announcement
Shareholders are referred to the cautionary announcement dated
11 August 2014, and until such time as the pro forma financial
effects in relation to the Acquisition have been published, they
are advised to continue to exercise caution when dealing in the
Company's securities.
8. Commentary
Commenting on the Acquisition, Dr Thabo Kgogo, SacOil CEO, said,
"The signing of a definitive agreement to acquire Mena
International Petroleum Company Ltd is another significant
milestone in the history of the Company, and endorses our short to
medium term strategy of balancing our existing exploration and
appraisal portfolio with lower risk production and development
assets. We welcome our new shareholders and this opportunity to
expand into a new geographical location, which continues our
strategy of building a substantial Pan African company".
Commenting further, he noted, "This acquisition represents the
first booked reserves for the Company and through our anticipated
development programme, we will be targeting a daily production rate
from the Lagia oil field of more than 1,000 barrels of oil per day
by Q4 2015."
FirstEnergy Capital LLP is acting as financial adviser to SacOil
on the Acquisition.
Johannesburg
10 September 2014
JSE Sponsor
Nedbank Capital
For further information please contact:
finnCap Limited (Nominated Adviser and
Broker) +44 (0) 20 7220 0500
Matthew Robinson / Christopher Raggett
FirstEnergy Capital (Financial Adviser
and Joint Broker UK)
Majid Shafiq / Travis Inlow +44 (0) 20 7448 0200
Bell Pottinger (UK)
Philip Dennis +44 (0) 20 7861 3919
Nick Lambert +44 (0) 20 7861 3936
Rollo Crichton-Stuart +44 (0) 20 7861 3918
This information is provided by RNS
The company news service from the London Stock Exchange
END
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