TIDMSAC
RNS Number : 1353W
SacOil Holdings Limited
04 November 2014
SacOil Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1993/000460/06)
JSE share code: SCL AIM share code: SAC
ISIN: ZAE000127460
("SacOil" or "the Company" or "the Group")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST
2014
HIGHLIGHTS
- Cementing of Board and executive team
- Transition from development to production initiated
- Acquisition of 20% interest in Nigeria's OPL 233 completed; seismic survey initiated
- Completion of satellite imagery survey for Botswana assets and ESIA initiation in Malawi
- Strategic entry into Egypt through 100% acquisition of Lagia Oil Field
- Active review of capital structure and funding options
Dr Thabo Kgogo, Chief Executive of SacOil, commented:
"We attained a number of milestones during this period with the
support of a new Board and re-energised executive team.
In particular, the acquisition of Lagia Oil Field in Egypt marks
our transition from a development to a production company supported
by a reserve base able to deliver production and cash flow in the
near term. This transformational transaction also provides us with
greater access to the capital markets as we roll out our strategy
to build a substantial pan-African exploration and production
business.
Looking ahead, our funding situation remains a top priority and
we will continue to work towards the successful resolution of the
loan situation with EERNL but also actively review alternative
options, including rebalancing of our portfolio. The completion of
the forensic investigation and resolution of the matters raised
will remain a priority of the Board."
OVERVIEW
SacOil is an independent African oil and gas company,
dual-listed on the JSE and AIM, and has business operations that
are focused across the African continent. Currently, the Group
operates in the following jurisdictions: the Democratic Republic of
Congo ("DRC"); the Republic of Malawi; the Republic of Botswana;
and the Federal Republic of Nigeria. Further, the Company continues
to evaluate opportunities to secure high-impact acreage in other
established and prolific hydrocarbon basins in Africa.
OPERATIONS
Shareholders are referred to the announcement issued on SENS and
RNS on 9 October 2014, in which the Company communicated a detailed
update on its asset-level operations.
FINANCIAL REVIEW
The Group reported a decrease of 23% in profit after tax to
R20.7 million for the six months ended 31 August 2014 compared to
R27.0 million for the corresponding prior comparative period.
Although the Group's investment income increased by 64%, the
resultant increase was off-set by foreign exchange losses on the
Group's financial assets coupled with higher other operating
costs.
The increase in investment income is attributable to the
compounding effect of the interest accruals on the loan advanced to
Energy Equity Resources (Norway) Limited ("EERNL"). Furthermore,
the loan now attracts interest of 32% compared to 30% for the
corresponding prior comparative period, following the renegotiation
of the loan repayment terms (refer to note 13). The composition of
investment income is disclosed in note 4.
Other operating costs, as disclosed in note 3, increased by 305%
to R46.6 million (2013: R11.5 million) during the period under
review. The Group impaired its financial assets by R19.7 million
(2013: nil). The increase is also reflective of the Group's
investment in business development activities.
The Group's foreign exchange losses for the six months total
R7.2 million (2013: R43.7 million foreign exchange gains). The US
dollar / Rand exchange rate was less volatile during the six months
under review compared to the corresponding prior comparative period
when it fluctuated between R8.8398/US$1 and R10.3016/US$1 at the
beginning and end of the reporting period, respectively.
The Group extinguished all its debt in January 2014, resulting
in the elimination of borrowing costs (2013: R10.5 million).
Exploration and evaluation assets increased by R29.2 million to
R296.0 million (28 February 2014: R266.8 million) as a result of
the Group capitalising the seismic survey costs relating to OPL
233.
Other financial assets, as disclosed in note 8, increased by
R35.2 million to R691.1 million (28 February 2014: R655.9 million).
The net movement comprises:
- An increase in interest of R73.4 million on the EERNL loan
(R59.4 million), contingent consideration (R10.7 million) and other
financial assets (R3.3 million);
- A part repayment of the EERNL loan of R10.6 million;
- An impairment charge of R19.7 million against the EERNL loan; and
- Foreign exchange losses totalling R7.9 million.
Cash and cash equivalents comprise the translated US$10 million
cash collateral held as security for the performance bond on OPL
233 of R106.7 million (28 February 2014: R108.1 million) and cash
deposits amounting to R214.0 million (28 February 2014: R273.5
million). The decrease in cash is reflective of the Group's
investment in the OPL 233 seismic survey, business development
activities and normal operating costs.
Other financial liabilities, as disclosed in note 10, decreased
by R20.9 million, reflecting the settlement of the amounts owed to
Nigdel United Oil Company, the operator of OPL 233.
GOING CONCERN
The Board continues to explore funding and other alternatives
available to the Group to ensure that the Group has adequate
resources to continue operating for the next 12 months. The Group
interim financial statements presented have been prepared on a
going concern basis as detailed in note 14.
REPORTABLE IRREGULARITY
The Board of SacOil recently engaged Ernst & Young Inc. to
carry out a forensic investigation on specific historical
transactions of the Company between 1 August 2011 and 30 November
2011 relating to the Company's unsuccessful attempt to acquire
interests in Block I and II in the DRC, amongst other matters.
Based on matters raised in the preliminary forensic report,
Ernst & Young Inc., the Company's external auditors, have
reported to the Independent Regulatory Board for Auditors that they
have reason to believe that Reportable Irregularities committed by
previous members of management took place. These Reportable
Irregularities relate to matters which do not affect the current
condensed consolidated interim financial statements. The directors
do not expect that future losses will arise from the matters
raised.
The forensic investigation represents a key step taken by the
Board to address historical governance issues.
Shareholders will be kept informed of progress made regarding
this matter.
CHANGE IN DIRECTORATE
On 1 June 2014 the new CEO, Dr Thabo Kgogo, joined SacOil and
was appointed to the Board. On 11 August 2014 Bradley Cerff was
appointed to the Board as an Executive Director.
OUTLOOK
Good progress has been made across the existing portfolio of
exploration and appraisal assets during the period.
The acquisition of the Lagia Oil Field in Egypt completed in
October 2014 marks an inflexion point in SacOil's investment
profile with the Company transitioning from a pure exploration play
to an exploration and production business with cash-generating
assets.
SacOil is now focusing on its funding situation and will assess
various alternatives to ensure that an adequate capital structure
is in place to deliver on its stated strategy. This may include a
combination of portfolio rebalancing, rationalisation of assets and
alternative funding options which are being continually assessed.
The resolution of the US$18 million loan due to SacOil by EERNL is
a top priority which is anticipated to be resolved before the end
of the financial year.
Longer term, SacOil will continue to execute on ongoing projects
in the Democratic Republic of Congo, Malawi, Botswana and Nigeria
which are all expected to yield significant future milestones and
value for the Group. The partnership announced in March 2014
between SacOil, the Public Investment Corporation of South Africa
and the Instituto De Gestao Das Participacoes Do Estado in
Mozambique regarding the investigation of gas opportunities and
future distribution of gas in southern Africa also offers exciting
prospects.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Reviewed
Six months Six months
to 31 August to 31 August
2014 2013
----------------------------------------------- ---- ------------- -------------
Note R R
----------------------------------------------- ---- ------------- -------------
Other income - 43 737 699
Other operating costs (46 575 517) (11 501 668)
Operating (loss)/profit 3 (46 575 517) 32 236 031
Investment income 4 77 001 921 46 927 405
Finance costs (646) (10 474 963)
Profit before taxation 30 425 758 68 688 473
Taxation (9 756 554) (41 712 659)
Profit for the period 20 669 204 26 975 814
Total comprehensive income for the period 20 669 204 26 975 814
Profit/(loss) attributable to:
Equity holders of the parent 22 320 598 26 284 839
Non-controlling interest (1 651 394) 690 975
20 669 204 26 975 814
Total comprehensive income/(loss) attributable
to:
Equity holders of the parent 22 320 598 26 284 839
Non-controlling interest (1 651 394) 690 975
20 669 204 26 975 814
Earnings per share
Basic (cents) 6 0.72 2.76
Diluted (cents) 6 0.72 2.76
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited Twelve
Six months months to
to 31 August 28 February
2014 2014
------------------------------------------------ ---- ------------- --------------
Note R R
------------------------------------------------ ---- ------------- --------------
Assets
Non-current assets
Property, plant and equipment 216 164 247 207
Exploration and evaluation assets 7 296 012 868 266 809 536
Other intangible assets 130 172 175 476
Other financial assets 8 461 698 405 433 344 048
Total non-current assets 758 057 609 700 576 267
Current assets
Other financial assets 8 229 396 582 222 542 359
Trade and other receivables 4 549 486 649 764
Cash and cash equivalents 9 320 705 723 381 579 766
Total current assets 554 651 791 604 771 889
1 312 709 1 305 348
Total assets 400 156
Equity and Liabilities
Shareholders' equity
1 109 977 1 109 977
Stated capital 054 054
Reserves 6 001 847 6 001 847
(157 105 (179 426
Accumulated loss 558) 156)
Equity attributable to equity holders of parent 958 873 343 936 552 745
Non-controlling interest 10 567 082 12 218 476
Total shareholders' equity 969 440 425 948 771 221
Liabilities
Non-current liabilities
Deferred tax liability 93 820 127 92 498 394
Total non-current liabilities 93 820 127 92 498 394
Current liabilities
Other financial liabilities 10 53 242 500 74 167 311
Share-based payment liability 1 066 000 -
Current tax payable 183 250 024 176 856 253
Trade and other payables 11 890 324 13 054 977
Total current liabilities 249 448 848 264 078 541
Total liabilities 343 268 975 356 576 935
1 312 709 1 305 348
Total equity and liabilities 400 156
3 086 169 3 086 169
Number of shares in issue 261 261
Net asset value per share (cents) 31.41 30.74
Net tangible asset value per share (cents) 21.82 22.10
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 August 2014
Stated capital Share-based Accumulated Total
payment reserve loss equity
attributed
to equity
holders
of the Non-controlling
parent interests Total equity
-------------------- -------------- ---------------- ----------- ----------- --------------- ------------
R R R R R R
-------------------- -------------- ---------------- ----------- ----------- --------------- ------------
Balance at 28 1 109 977 (179 426 936 552
February 2014 054 6 001 847 156) 745 12 218 476 948 771 221
Changed to equity:
Profit / (loss) 22 320
for the period - - 22 320 598 598 (1 651 394) 20 669 204
Total comprehensive
income/(loss) 22 320
for the period - - 22 320 598 598 (1 651 394) 20 669 204
22 320
Total changes - - 22 320 598 598 (1 651 394) 20 669 204
Balance at 31 1 109 977 (157 105 958 873
August 2014 054 6 001 847 558) 343 10 567 082 969 440 425
For the six months
ended 31 August
2013
Balance at 28 534 172 (219 700 341 153
February 2013 123 26 681 469 074) 518 22 298 155 363 451 673
Changes in equity:
Profit for the 26 284
period - - 26 284 839 839 690 975 26 975 814
Total comprehensive
income for the 26 284
period - - 26 284 839 839 690 975 26 975 814
Share options
lapsed - (20 679 622) 20 679 622 - - -
26 284
Total changes - (20 679 622) 46 964 461 839 690 975 26 975 814
Balance at 31 534 172 (172 735 367 438
August 2013 123 6 001 847 613) 357 22 989 130 390 427 487
CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Reviewed
Six months Six months
to 31 August to 31 August
2014 2013
------------------------------------------------------------- ------------- -------------
R R
------------------------------------------------------------- ------------- -------------
Cash flows from operating activities
Cash used in operations (24 114 839) (8 739 666)
Interest income 3 528 096 217 185
Tax received - 32 412
Net cash used in operating activities (20 586 743) (8 490 069)
Cash flows from investing activities
Purchase of exploration and evaluation assets (29 233 332) (4 210 593)
Purchase of property, plant and equipment (28 986) -
Receipts from loans and receivables 10 607 190 4 303 501
Net cash (used in)/from investing activities (18 655 128) 92 908
Cash flows from financing activities
(Repayment of)/proceeds from other financial liabilities (20 220 311) 3 288 700
Net cash (used in)/from financing activities (20 220 311) 3 288 700
Total movement in cash and cash equivalents for the period (59 462 182) (5 108 461)
Foreign exchange (losses)/gains on cash and cash equivalents (1 411 861) 14 656 775
Cash and cash equivalents at the beginning of the period 381 579 766 94 032 416
Cash and cash equivalents at the end of the period 320 705 723 103 580 730
NOTES
1. BASIS OF PREPARATION
The consolidated condensed interim financial statements of the
Group, comprising SacOil Holdings Limited and its subsidiaries
(together "the Group"), for the six months ended 31 August 2014,
have been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB"), the preparation and disclosure requirements of IAS 34 -
Interim Financial Reporting, the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee, the Financial
Pronouncements as issued by the Financial Reporting Standards
Council, the Listings Requirements of the JSE Limited and in the
manner required by the South African Companies Act, No. 71 of 2008
(as amended).
Principal accounting policies
The same accounting policies, presentation and methods of
computation have been followed in these consolidated condensed
interim financial statements of the Group as those applied in the
preparation of the Group's annual financial statements for the year
ended 28 February 2014.
The consolidated condensed interim financial statements of the
Group should be read in conjunction with the Group's consolidated
annual financial statements for the year ended 28 February
2014.
The following new IFRS and/or IFRICs were effective for the
first time for this interim period from 1 January 2014:
- Amendments to IFRS 10, IFRS 12 and IAS 27, Investment Entities
- Amendments to IAS 32, Off-setting Financial Assets and Financial Liabilities
- Amendments to IAS 36, Recoverable Amount Disclosures for Non-financial Assets
- Amendments to IAS 39, Novation of Derivatives and Continuation of Hedge Accounting
The above standards did not have an impact on the Group's
results.
Notes to oil and gas disclosure
In accordance with AIM Guidelines, Bradley Cerff is the
qualified person that has reviewed the technical information
contained in this news release. Bradley has 18 years' experience in
the oil and gas industry with a Masters Degree in Science and
Business Administration focused on Foreign Direct Investment in the
African oil and gas industry. He is also a member of the Society of
Petroleum Engineers.
2. AUDITOR'S REVIEW REPORT
The condensed consolidated interim financial statements are
prepared in accordance with International Financial Reporting
Standard, IAS 34, Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee
and Financial Pronouncements as issued by Financial Reporting
Standards Council and the requirements of the Companies Act of
South Africa. The accounting policies applied in the preparation of
these interim financial statements are in terms of International
Financial Reporting Standards and are consistent with those applied
in the previous annual financial statements. These interim
condensed consolidated financial statements for the period ended 31
August 2014 have been reviewed by Ernst & Young Inc. who
expressed an unmodified review conclusion. They have been prepared
under the supervision of the Group's Financial Director: Tariro
Mudzimuirema CA (SA).
The unqualified review report includes an Emphasis of Matter
Paragraph on material uncertainties relating to the going concern
of the entity.
The report also includes an "Other Legal and Regulatory
Requirements" paragraph with respect to reportable irregularities
which were reported in terms of section 45 of the Auditing
Profession Act to the Independent Regulatory Board for Auditors
(IRBA). The reportable irregularities are based on the further
analysis by the external auditors of the preliminary findings of a
forensic investigation into the historical conduct of the affairs
of the Company, which investigation was instituted by the Company
on the instruction of the board. The board is considering the
section 45 report to the IRBA in relation to the reportable
irregularities, with a view to take such action as is
appropriate.
A copy of the auditor's review report is available for
inspection at the Company's registered office together with the
financial statements identified in the auditor's report.
3. OPERATING (LOSS) / PROFIT
31 August 31 August
2014 2013
----------------------------------------------------- ------------ ----------------
R R
----------------------------------------------------- ------------ ----------------
Foreign exchange (losses)/gains (7 243 168) 43 737 699
Provision for impairment of financial asset (note 8) (19 736 842) -
Corporate costs (1 533 726) (1 496 983)
Auditor's remuneration (1 017 750) (140 926)
Employee benefit expense (8 780 907) (5 171 965)
Accounting fees (34 400) (20 000)
Consulting fees (2 084 710) (759 620)
Legal fees (485 718) (947 065)
Travel and accommodation (1 627 679) (691 390)
Depreciation (105 334) (94 046)
Property, plant and equipment (60 030) (63 235)
Other intangible assets (45 304) (30 811)
Rentals - premises (497 871) (561 303)
Broker's fees (545 863) (744 998)
4. INVESTMENT INCOME
31 August 31 August
2014 2013
---------------------------------------------- ---------- ----------
R R
---------------------------------------------- ---------- ----------
Interest receivable - loans 59 430 348 34 225 495
Interest received - cash and cash equivalents 3 528 096 217 185
Imputed interest on financial assets 14 043 477 12 484 725
77 001 921 46 927 405
5. SEGMENTAL REPORTING
The Group operates in five geographical locations which form the
basis of the information evaluated by the Group's chief operating
decision-maker. For management purposes the Group is organised and
analysed by these locations. These locations are: South Africa,
Nigeria, DRC, Botswana and Malawi. Operations in South Africa
relate to the general management, financing and administration of
the Group.
Nigeria DRC Malawi Botswana South Africa Consolidated
------------------------- ------------ -------------- ------- --------- ------------ ------------
R R R R R R
------------------------- ------------ -------------- ------- --------- ------------ ------------
For the six months
ended 31 August 2014
Other income - - - - - -
Investment income 109 10 718 172 - - 66 283 640 77 001 921
Finance costs - (621) - - (25) (646)
Other operating expenses (1 003 951) (1 627 639) - (491 032) (43 452 895) (46 575 517)
Taxation (11) (14 602 884) - - 4 846 341 (9 756 554)
Profit/(loss) for
the period (1 003 853) (5 512 972) - (491 032) 27 677 061 20 669 204
Segment assets
- non-current 220 393 305 303 726 387 866 740 386 548 232 684 629 758 057 609
554 651
- current 106 732 672 38 425 476 - - 409 493 643 791
Segment liabilities
- non-current - (91 744 045) - - (2 076 082) (93 820 127)
(146 310 (249 448
- current (53 242 500) 390) - (222 400) (49 673 558) 848)
For the six months
ended 31 August 2013
Other income - 27 078 912 - - 16 658 787 43 737 699
Investment income 211 077 9 693 141 - - 37 023 187 46 927 405
Finance costs - - - - (10 474 963) (10 474 963)
Other operating expenses (17 793) - - (8 241) (11 475 634) (11 501 668)
Taxation 32 413 (34 612 756) - - (7 132 316) (41 712 659)
Profit/(loss) for
the period 225 697 2 159 297 - (8 241) 24 599 061 26 975 814
Segment assets
- non-current 131 009 869 324 724 643 896 740 386 548 195 125 810 652 143 610
- current 103 235 757 67 931 - - 155 657344 258 961 032
Segment liabilities
- non-current - (88 755 267) - - - (88 755 267)
(286 376 (431 921
- current (51 508 000) (94 037 825) - - 063) 888)
6. EARNINGS PER SHARE
31 August 31 August
2014 2013
--------------------------------------------------------------- ---------- -----------
R R
--------------------------------------------------------------- ---------- -----------
Basic (cents) 0.72 2.76
Diluted (cents) 0.72 2.76
Profit for the period used in the calculation of the basic
and diluted earnings per share 22 320 598 26 284 839
Weighted average number of ordinary shares used in the 3 086 169
calculation of basic earnings per share 261 953 340 791
3 086 169
Issued shares at the beginning of the reporting period 261 953 340 791
Effect of shares issued during the reporting period (weighted) - -
Add: Dilutive share options 2 325 710 -
Weighted average number of ordinary shares used in the 3 088 494
calculation of diluted earnings per share 971 953 340 791
Headline earnings per share
Basic (cents) 0.72 2.76
Diluted (cents) 0.72 2.76
Reconciliation of headline earnings
Profit for the period 22 320 598 26 284 839
Headline earnings for the period 22 320 598 26 284 839
7. EXPLORATION AND EVALUATION ASSETS
At 28 February Additions At 31 August Additions 28 February Disposals At 31 August
2013 2013 2014 Additions 2014
---------------- -------------- ---------- ------------ --------- ----------- --------- --------- ------------
R R R R R R
---------------- -------------- ---------- ------------ --------- ----------- --------- --------- ------------
Block III
DRC 74 366 275 - 74 366 275 - 74 366 275 - - 74 366 275
OPL 281 Nigeria 44 072 922 - 44 072 922 - 44 072 922 - - 44 072 922
60 150 147 087 29 233 176 320
OPL 233 Nigeria 43 523 230 43 413 717 86 936 947 104 051 332 - 383
Botswana - 386 548 386 548 - 386 548 - - 386 548
Malawi 896 740 - 896 740 - 896 740 - (30 000) 866 740
162 859 206 659 60 150 266 809 29 233 296 012
167 43 800 265 432 104 536 332 (30 000) 868
OPL 233
No borrowing costs have been capitalised during the period under
review (August 2013: R32.6 million), as the Group settled the debt
previously incurred to finance OPL 233, in January 2014.
Exploration expenditures totalling R29.3 million (August 2013:
R10.8 million) have been capitalised, primarily relating to the
seismic survey.
8. OTHER FINANCIAL ASSETS
31 August 28 February
2014 2014
------------------------------------------------------- ------------ ------------
R R
------------------------------------------------------- ------------ ------------
Non-current
Contingent consideration 229 360 113 221 493 152
Deferred consideration on disposal of Greenhills Plant 3 442 662 3 281 164
Advance payment against future services 65 459 171 62 388 430
Loan due from EER 163 436 459 146 181 302
461 698 405 433 344 048
Current
Loan due from EER 237 930 825 210 835 454
Loan due from DIG 47 097 098 47 694 469
Deferred consideration on disposal of Greenhills Plant 1 983 876 1 890 811
287 011 799 260 420 734
Less: Provision for impairment (57 615 217) (37 878 375)
229 396 582 222 542 359
Total 691 094 987 655 886 407
9. CASH AND CASH EQUIVALENTS
31 August 28 February
2014 2014
------------------------------------ ----------- -----------
R R
------------------------------------ ----------- -----------
Cash and cash equivalents comprise:
Bank balances 10 610 303 273 466 636
Short-term deposits 203 394 054 -
214 004 357 273 466 636
Restricted cash 106 701 366 108 113 130
320 705 723 381 579 766
Restricted cash comprises the cash collateral of US$10 million
(February 2014: US$10 million) paid to Ecobank to secure the US$25
million performance bond on OPL 233. The cash is held in the bank
account of SacOil's wholly owned subsidiary, SacOil 233 Nigeria
Limited. The remainder of the performance bond is secured by a
first ranking legal charge over SacOil's investment in SacOil 233
Nigeria Limited.
10. OTHER FINANCIAL LIABILITIES
31 August 28 February
2014 2014
----------------------------------------- ---------- -----------
R R
----------------------------------------- ---------- -----------
Energy Equity Resources (Norway) Limited 53 242 500 53 947 000
Nigdel United Oil Company Limited - 20 220 311
53 242 500 74 167 311
11. CONTINGENT ASSETS AND LIABILITIES
31 August 31 August
2014 2013
-------------------------------------------------------------- ----------- -----------
R R
-------------------------------------------------------------- ----------- -----------
Commitments
Exploration and evaluation assets - work programme commitment 744 044 728 413 938 891
Exploration and evaluation activities will be funded from
current cash resources and funds from future capital-raising
initiatives.
31 August 28 February
2014 2014
--------------------------------------------------------- ----------- -----------
R R
--------------------------------------------------------- ----------- -----------
Contingent liabilities
Performance bond on OPL 233 issued by Ecobank in respect
of OPL 233 exploration activities 159 727 500 161 841 000
Cost carry arrangement with Total 36 591 084 36 508 805
Farm-in and transaction fees on receipt of title to OPL
233 139 495 350 141 341 140
Farm-in and transaction fees on receipt of title to OPL
281 154 403 250 156 446 300
490 217 184 496 137 245
Performance bond
In April 2012, the Group posted a US$25 million performance bond
to support the work programme on OPL 233. This performance bond is
secured by a R106.7 million (US$10 million) (28 February 2014:
R108.1 million (US$10 million)) cash collateral as disclosed in
note 9. The remainder of the performance bond, disclosed as a
contingent liability, is secured by a first ranking legal charge
over SacOil\'s investment in SacOil 233 Nigeria Limited.
Cost carry arrangement
The farm-in agreement between Semliki and Total provides for a
carry of costs by Total on behalf of Semliki. Total will be
entitled to recover these costs, being Semliki's share of the costs
on Block III, plus interest, from future oil revenues. The
contingency becomes probable when production of oil commences and
will be raised in full at that point.
At 31 August 2014, Total has incurred R36.6 million (28 February
2014: R36.5 million) of costs on behalf of Semliki. Should this
liability be recognised, a corresponding increase in assets will be
recognised, which, together with existing exploration and
evaluation assets, will be recognised as development infrastructure
assets.
Farm-in and transaction fees
OPL 233
A farm-in fee of R112.9 million (28 February 2014: R114.3
million (US$10.6 million)) is due to Nigdel United Oil Company
Limited ("Nigdel") following the formal approval by the Nigerian
Government of the assignment of title to SacOil 233 Nigeria Limited
in relation to OPL 233. The existence of the possible obligation to
Nigdel will be confirmed by the occurrence of an uncertain future
event, being the verification of the award of title, which process
is not wholly within the control of SacOil. A transaction fee of
R26.6 million (28 February 2014: R27.0 million (US$2.5 million)) is
also due to Energy Equity Resources (Norway) Limited ("EERNL")
following the assignment of title to OPL 233, pursuant to the
provisions of the Master Joint Venture Agreement. The fee payable
to EER will be off-set against the loan receivable from EERNL, when
the award of title has been verified, if this occurs prior to the
settlement of the loan.
OPL 281
A farm-in fee of R127.8 million (28 February 2014: R129.4
million (US$12 million)) is due to Transnational Corporation of
Nigeria Limited upon the formal approval by the Nigerian Government
of the assignment of title to SacOil 281 Nigeria Limited in
relation to OPL 281. A transaction fee of R26.6 million (28
February 2014: R27.0 million (US$2.5 million)) is due to EERNL upon
the assignment of title to OPL 281, pursuant to the provisions of
the Master Joint Venture Agreement.
12. Dividends
The Board has resolved not to declare any dividends to
shareholders for the period under review.
13. Subsequent events
Acquisition of 100% interest in the Lagia oil field, onshore
Sinai Peninsula, Egypt
Shareholders are referred to the announcement issued on SENS and
RNS on 10 September 2014 wherein the Company announced that it had
entered into a sale and purchase agreement dated 9 September 2014
(the "Agreement") to acquire a Cyprus-registered exploration and
production company, Mena International Petroleum Company Ltd
("MIP"), from Mena International Petroleum Holdings Company Ltd
(the "Seller"), a wholly-owned subsidiary of TSX Venture listed as
Mena Hydrocarbons Inc. (TSXV:MNH) ("Mena Hydrocarbons") (the
"Acquisition"). MIP has a 100% interest in the development lease
for the Lagia oil field, covering an area of approximately 32
square kilometres on the Sinai Peninsula in Egypt. The Lagia oil
field is at a development stage with heavy oil (16 - 18 degrees
API) in shallow reservoirs and light oil potential in deeper
reservoirs. The assets include existing production facilities and
oil storage for 3 000 barrels of oil. The completion of the
Acquisition is expected to occur on or about 31 October 2014. The
full announcements are available on the SacOil website:
www.sacoilholdings.com.
Loan advanced to EERNL
On 20 October 2014, the repayment of the loan due from EERNL was
extended to 30 November 2014. As part of the extension terms, EERNL
agreed to pay interest of 32% on the outstanding loan and to accept
the interest on the non-cash component of the loan previously
disputed.
The loan is secured by EERNL's shares in its subsidiary, EER233
Nigeria, which holds a 20% interest in OPL 233. The loan has not
been impaired in full as the value of the security exceeds the
carrying value of the loan.
14. Going concern
The Company continues to remain dependent on its ability to
obtain sufficient funding to sustain operations and complete its
exploration projects. While the Company has been successful in
raising financing in the past, there can be no absolute assurance
that it will be able to do so in future. As noted in note 13, the
repayment of the loan advanced to EERNL has been extended to 30
November 2014, whilst EERNL undergoes its own recapitalisation,
which will enable it to settle in full the loan owed to SacOil.
Whilst this would be the best outcome for the Company, given the
implications of default by EERNL, it is difficult to determine with
certainty the outcome of the planned recapitalisation and,
consequently, the settlement of the loan owed to SacOil. Should
EERNL default on 30 November 2014, the Company will acquire an
additional 20% interest in OPL 233, being the security provided for
the debt, which will double SacOil's funding commitments for the
OPL 233 asset. The disposal of this additional interest would not
be expected to occur immediately upon default given the seismic
survey that is still under way. The cash flow projections to
February 2016 include cash inflows from EERNL totalling R201.0
million (US$18.0 million).
The above conditions give rise to material uncertainties which
may cast significant doubt about the
Company's ability to continue as a going concern and, therefore,
that it may be unable to realise its assets and discharge its
liabilities in the normal course of business. The Board remains
reasonably confident that it will manage the material uncertainties
that exist, as such the financial statements have been prepared on
the basis of accounting policies applicable to a going concern.
This basis presumes that funds will be available to finance future
operations and that the realisation of assets and settlement of
liabilities, contingent obligations and commitments will occur in
the ordinary course of business.
By order of the Board
Dr Thabo Kgogo
Chief Executive
Johannesburg
4 November 2014
CORPORATE INFORMATION
Registered office and physical address:
2nd Floor, The Gabba, Dimension Data Campus, 57 Sloane Street,
Bryanston, 2021
Postal address:
PostNet Suite 211, Private Bag X75, Bryanston, 2021
Contact details:
Tel: +27 (0) 11 575 7232 | Fax: +27 (0) 11 576 2258
E-mail: info@sacoilholdings.com | Website:
www.sacoilholdings.com
Directors:
Dr Thabo Kgogo (Chief Executive Officer), Tariro Mudzimuirema
(Finance Director),
Bradley Cerff (Executive Director), Tito Mboweni**, Mzuvukile
Maqetuka**, Stephanus Muller**,
Vusi Pikoli**, Ignatius Sehoole*, Gontse Moseneke*, Danladi
Verheijen*, Titilola Akinleye*
* Non-executive Director
** Independent Non-executive Directors
Advisers:
Company Secretary:
Fusion Corporate Secretarial Services (Proprietary) Limited
Transfer Secretaries South Africa:
Link Market Services South Africa (Proprietary) Limited
Transfer Secretaries United Kingdom:
Computershare Investor Services (Jersey) Limited
Corporate Legal Advisers:
Norton Rose Fullbright South Africa
Auditors:
Ernst & Young Inc.
JSE Sponsor:
Nedbank Capital, a division of Nedbank Limited
For further information please contact:
finnCap Limited (Nominated Adviser
and Broker)
Matthew Robinson / Christopher Raggett +44 (0) 20 7220 0500
FirstEnergy Capital (Financial Adviser
and Joint Broker UK)
Majid Shafiq / Travis Inlow +44 (0) 20 7448 0200
Instinctif Partners London (UK Investor
Relations)
David Simonson / Anca Spiridon +44 (0)20 7457 2020
Instinctif Partners Johannesburg (SA
Investor Relations)
Nicholas Williams / Fred Cornet +27 (0)11 447 3030
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FSSFLLFLSEIF
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