TIDMSAC
RNS Number : 8774N
SacOil Holdings Limited
21 May 2015
Preliminary audited results
for the year ended 28 February 2015
Highlights
-- Implementation of revised business strategy
- Acquisition of an oil-producing asset in Egypt
- Portfolio rationalisation - exit from OPL 281 and OPL 233 in
Nigeria
-- Settlement agreement related to EERNL loans
-- Strong cash balance
-- Resolution of going concern issue
-- Group repositioned for sustainable growth
Overview
This past financial year has seen the SacOil Board embark on a
turnaround strategy driven by the rationalisation and balancing of
the Group's existing portfolio of assets. The intention of the
turnaround strategy was to ensure that the future business
activities of the Group are focused on exploration and production,
with an income-producing asset. The activities undertaken as part
of this exercise to reposition the Group were:
-- the acquisition by the Group of an oil-producing asset in Egypt;
-- the Group's exit from OPL 281 and OPL 233 in Nigeria; and
-- the restructuring of the debt owed to the Group by Energy
Equity Resources Norway Limited ("EERNL").
The Group reported a loss of R277.0 million (2014: profit of
R9.5 million), basic loss per share of 8.54 cents (2014: earnings
per share of 1.37 cents) and headline loss per share of 4.67 cents
(2014: headline earnings per share of 1.37 cents), for the year
ended 28 February 2015. This was almost entirely attributable to
the other operating costs of R510.1 million (2014: R100.2 million).
These operating costs were primarily a result of the above
transactions undertaken to rationalise the Group's portfolio of
assets and to restructure the EERNL loans to position the Group for
sustainable growth. The Group's loss for the year was partially
off-set by the investment income generated by it and foreign
exchange gains on translation of financial assets arising from the
continued weakening of the Rand.
The reported Group loss for the year, however, needs to be
viewed in the light of the Company being released from the
significant capital commitments related to OPL 233 and OPL 281 that
contributed to the resolution of the material uncertainty related
to the going concern of the Group, as previously reported. In
addition, the above actions will result in the Group's cash
balances of R229.4 million, including restricted cash of R116
million, benefiting from the restricted cash, related to the cash
collateral, being released to the Company on the expiry of the
performance bond on OPL 233 and the receipt of $12.5 million plus
interest from Transcorp related to the OPL 281 exit.
The Group is now in a strong position to further expand its
business activities, supported by a strong cash position, in line
with its new strategy that is focused on income-producing
activities. The Group is also better positioned to see through the
challenging conditions in the industry and should benefit from the
opportunities that will become available for acquisition or
investment.
Dr Kgogo, the Chief Executive Officer, says, "The changes
undertaken in the business in the financial year were critical to
reset the business for sustainable growth in the future and address
the legacy issues that have hampered our future prospects. We see
SacOil's new strategy driving increased shareholder value in the
near term, with Lagia development activities progressing well to
achieve our target of 1 000 barrels by Q4 2015. Our focus will
remain on finding other attractive income-producing or near-term
producing assets for the Group. I look forward to being part of
building a stronger and more profitable SacOil."
Acquisition of an oil-producing asset at Lagia
On 22 October 2014 the Group acquired Mena International
Petroleum Company Limited ("Mena") which owns the producing Lagia
Oil Field for R151.7 million ($14.1 million), settled by a cash
payment of R45.2 million ($4.1 million) and the issue of ordinary
shares in SacOil for R106.5 million ($10.0 million). The
acquisition of Mena was part of the Group's revised strategy to
restructure the portfolio and allows the Group to report its first
oil revenue and producing asset. Lagia is a low-cost producing
asset with good development opportunities.
Mena's contribution to revenue in the current financial year is
minimal at R2.1 million. This is as a result of reporting only
three months' results since the acquisition date, which was further
impacted by the development plan in progress. Consequently Mena
contributed a loss before taxation of R8.6 million to the Group's
overall results. The turnaround of this asset should contribute
well to the Group's revenue and earnings going forward.
The impact of the Mena acquisition on the Group's results at 28
February 2015 is the addition of the first producing oil and gas
assets of R122.9 million. Furthermore, the acquisition increased
other intangible assets by R60.9 million for the right to drill for
petroleum reserves, inventory of R6.6 million, trade receivables of
R6.6 million and cash of R4.5 million. Mena's results are reported
in the Egypt segment in note 3.
Financial performance
Other income
Foreign exchange gains increased in the current financial year
by R31.2 million to R78.6 million (2014: R47.4 million), due to the
continued weakening of the Rand against the US Dollar. Foreign
exchange gains arose on translation of the US Dollar denominated
cash collateral, the contingent consideration receivable and loans
advanced to our partners, EERNL and Divine Inspiration Group
Private Limited ("DIG").
Also contributing to the increase in other income is the gain of
R24.7 million on acquisition of Mena. Mena's net assets at
acquisition date exceeded the purchase price paid by the Group that
reflects the underlying value contributed to the Group.
Other operating costs
Portfolio rationalisation and restructuring of EERNL loans
Other operating costs reflect the impact of the Group's
portfolio rationalisation and restructuring of the EERNL loan.
Other operating costs totalling R420.2 million (2014: R37.9
million) were incurred as follows:
OPL 233
OPL 233 was reclassified as an asset held for sale at 28
February 2015 following the Board's commitment to terminate its
participation in the asset. Pursuant to the termination the
underlying value of the asset represents an amount to be recovered
from Nigdel under the terms of the Farm-In Agreement ("FIA"). The
asset has been impaired by R194.1 million following management's
assessment of the recoveries from Nigdel. The outcome of the
termination negotiations with Nigdel which are currently ongoing
may result in a reversal of part of this impairment in future. The
Group will inform shareholders of the progress on these discussions
as soon as there is certainty on the outcome.
EERNL loan settlement
As announced on 8 April 2015 SacOil and EERNL entered into a
settlement agreement to restructure the settlement terms of the
loans owed to the Group by EERNL for activities related to OPL 281
and OPL 233.
OPL 281
Following the termination of the Group and EERNL's participation
in OPL 281, R220.8 million is due to SacOil and EERNL from
Transcorp ("Transcorp Refund") under the terms of the Farm-In
Agreement. In settlement of the loan relating to OPL 281 EERNL
elected to off-set its 50% share of the Transcorp Refund,
representing the loan initially advanced, as full and final
settlement of the loan outstanding of R183.3 million. Consequently
R73.2 million was written off by the Group with respect to this
loan.
OPL 233
The settlement terms of the loan of R286.4 million advanced by
SacOil to EERNL with respect to OPL 233-related activities provide
for the recovery of this loan as follows:
-- from EERNL's share of the cash collateral, representing the loan initially advanced;
-- from EERNL's share of Oil Mining Licence 113 ("OML 113") future cash flows; and
-- from EERNL's share of amounts to be recovered from Nigdel
following the termination of participation in OPL 233.
The Group expects that it could recover R221.0 million from
these sources. Consequently R65.4 million has been written off as a
bad debt with respect to this loan. An amount of R125.4 million
(2014: R37.9 million on interest receivable) has been provided
against the EERNL loan as doubtful based on the uncertainty of the
outcome related to the OPL 233 recovery from Nigdel. The increase
in the provision for impairment of R87.5 million has been expensed
under other operating expenses.
Contingent consideration
The operations on Block III were temporarily suspended for most
of the financial year due to the civil unrest in the north east of
the DRC, resulting in delays of the work programme by a year.
Consequently the contingent consideration receivable from the
2011/2012 farm-out of Block III has been impaired by R23.8 million
(2014: R22.1 million), representing the impact of the time value of
money on expected future cash flows on the contingent consideration
receivable.
General costs
The remainder of other operating costs increased by R25.9
million to R66.1 million (2014: R40.2 million) primarily due to
Mena's operating costs R7.4 million (2014: RNil) in the period,
once-off acquisition costs of Mena of R8.7 million (2014: RNil) and
business development costs of R2.4 million (2014: RNil).
Investment income
The increase in investment income is primarily attributable to
the interest on the Transcorp Refund of R29.6 million (2014: RNil),
and the interest of R7.0 million (2014: R0.9 million) on the
Group's cash and cash equivalents. The interest on loans to EERNL
contributed R92.3 million (2014: R103.0 million), which has
increased the EERNL financial asset, and interest on other
financial assets contributed R29.2 million (2014: R26.7 million) to
the Group's investment income.
Finance costs
The Group's finance costs of R0.001 million are minimal in the
current financial year (2014: R12.9 million) following the
settlement in the prior year of the Group's debt obligations.
Financial position
Exploration and evaluation assets ("E&E assets")
The decrease in E&E assets is reflective of the portfolio
rationalisation undertaken by the Group. Prior to the termination
of its participation in OPL 233 and OPL 281 the Group invested
R68.8 million (2014: R103.6 million) in OPL 233 for the seismic
survey, and general and administrative ("G&A") expenses. The
Group further invested R0.3 million in Block 1 in Malawi (2014:
R0.4 million in the Botswana assets). As noted under other
operating costs OPL 233 was subsequently reclassified as an asset
held for sale, resulting in a decrease of R215.9 million in E&E
assets. The cost of OPL 281 of R44.1 million, previously reported,
was off-set against the Transcorp Refund, pursuant to the
termination of participation in the asset and treated as a disposal
in terms accounting standards.
Other financial assets
The increase of R21.5 million in other financial assets
(non-current and current) is primarily attributable to the
Transcorp Refund of R220.8 million (2014: RNil), foreign exchange
gains of R52.6 million (2014: R106.4 million) on US Dollar
denominated balances and interest of R121.5 million (2014: R167.8
million) on the EERNL loan, contingent consideration, advance
payment against future services and Greenhills receivable, off-set
by:
-- the EERNL loan settlement of R183.3 million (2014: RNil), bad
debt expense of R65.4 million (2014: RNil) and increase in
impairment provision of R87.5 million (2014: R37.9 million) as
detailed under other operating expenses;
-- the impairment of the contingent consideration receivable of
R23.8 million (2014: R22.1 million), also detailed under other
operating expenses; and
-- the part settlement by EERNL and Greenhills of R13.4 million
(2014: R14.8 million) against amounts outstanding.
Cash and cash equivalents and cash flows
The Group's cash and cash equivalents decreased by R152.2
million to R229.4 million (2014: R381.6 million) during the year
under review, largely due to:
-- expenditure on the OPL 233 seismic survey and G&A costs of R68.8 million;
-- Mena acquisition and transaction costs totalling R45.2 million and R8.7 million, respectively;
-- Development cost of R18.6 million relating to the Lagia oil field; and
-- expenditure on the Group's operating costs of R24.3 million.
The Group's cash inflows benefited from the part repayments of
the EERNL and Greenhills debt of R13.4 million.
The Group's cash and cash equivalents at 28 February 2015
comprise the restricted cash related to the cash collateral of
R116.0 million (2014: R108.1 million) ($10.0 million), short-term
deposits of R106.7 million (2014: RNil) and bank balances of R6.7
million (2014: R273.5 million).
Total shareholders' equity
The Company's stated capital increased by R106.5 million to
R1.216 billion (2014: R1.110 billion), representing the shares
issued for the acquisition of Mena.
The loss attributable to equity holders of the parent for the
year of R269.2 million (2014: profit of R19.6 million) contributed
to the increase in accumulated losses to R448.6 million (2014:
R179.4 million).
The Group's reserves increased by R9.6 million to R15.6 million
(2014: R6.0 million) due to share-based payment expenses of R0.9
million (2014: RNil) and foreign exchange gains on the translation
of Mena operations of R8.7 million (2014: RNil).
The total shareholders' equity has decreased from R948.8 million
to R787.9 million, which represents a 17% decrease in the current
year due to the Group's activities in the year.
Deferred tax liability
The increase of R4.6 million in the deferred tax liability to
R97.1 million (2014: R92.5 million) primarily arises from the
estimated future contingent consideration receivable.
Other financial liabilities
The decrease in other financial liabilities primarily reflects
liabilities due to Nigdel reclassified as liabilities directly
associated with assets held for sale of R21.8 million.
Current tax payable
Tax payable increased by R35.6 million (2014: R82.9 million) due
to interest on taxes outstanding of R23.6 million (2014: R21.4
million) and foreign exchange losses of R13.1 million (2014: R47.5
million), off-set by a prior-year tax overprovision of R1.1 million
(2014: charge of R14.0 million). The foreign taxes are denominated
in US Dollars.
Contractual commitments
The Group's commitments have decreased by R684.5 million (2014:
increase of R308.0 million) following the termination of the
Group's participation in OPL 233 and OPL 281.
Going concern
The last published results of the Group highlighted
uncertainties which cast doubt on the Company's ability to continue
as a going concern. The Board is pleased to inform shareholders
that these uncertainties have been resolved. The portfolio
rationalisation undertaken by the Group had the effect of
eliminating onerous future commitments on OPL 233 and OPL 281 and
resulted in the improvement in the Group's projected future cash
flows consequently addressing the legacy going concern issue.
Further strengthening the Group's future cash flows are the Mena
future cash flows, Transcorp Refund and the release of the cash
collateral which previously secured the OPL 233 performance bond.
The Group will continue to secure other sources of funding to
ensure the Group's existing assets and expansion plans are
adequately funded on a sustainable basis.
The consolidated condensed preliminary financial statements are
presented on a summarised basis.
Prospects
The restructuring of the Group's portfolio of assets and the
resolution of legacy issues has positioned the Group to pursue more
opportunities on the African continent. In the execution of our
revised strategy we will be adding more cash-generative assets,
advancing our exploration assets and progressing studies in
Mozambique. We intend to progress the development of the Lagia Oil
Field and increase production to more than 1 000 barrels per day.
Management will continue to focus on risk management across our
portfolio.
Change in directorate
The following changes to the Board occurred during the year
under review:
-- Roger Rees resigned from the Board of SacOil on 31 May 2014;
-- Dr Thabo Kgogo was appointed to the Board of SacOil on 1 June 2014 in his capacity as the CEO;
-- Bradley Cerff was appointed to the Board of SacOil on 11
August 2014 in his capacity as the Executive Director:
Operations;
-- Tariro Mudzimuirema, the interim Finance Director, resigned
from the Board on 31 January 2015; and
-- Damain Matroos was appointed to the Board of SacOil on 1
February 2015 in his capacity as the Finance Director.
-- Ignatius Sehoole is now classified as an independent Non-executive Director.
Litigation
Joseph Modibane
The Company previously reported on two actions instituted by
Joseph Modibane ("Mr Modibane") in the North Gauteng High Court. In
the first action, Mr Modibane alleged that he was entitled to
receive 105 000 000 SacOil Shares at an issue price of 30 cents per
SacOil share but that the Company unlawfully declined to deliver
the SacOil Shares to him. Consequently Mr Modibane alleges that the
Company's unlawful conduct entitled him to claim damages against
the Company in the amount of R67.2 million plus interest at the
rate of 15.5% per annum from 14 September 2010 to date of
payment.
In a second action, Mr Modibane alleges that the content of the
announcement made by the Company on 15 September 2010, in relation
to the first action was defamatory to him and he claims payment
from the Company of damages in the amount of R80 million, together
with interest at the rate of 15.5% per annum from 22 September 2010
to date of payment.
Based on the information in the Board's possession, the Board is
of the view that the claims have no substance and the Company's
legal advisors are defending both actions. Pleadings have closed in
both actions. Trial dates that were allocated were not convenient.
The actions were therefore, by agreement, removed from the trial
roll. A SENS announcement published on 28 February 2013 reported
that Mr Modibane passed away on 23 February 2013. It remains to be
seen whether an executor for Mr Modibane's estate elects to persist
with the two actions.
Robin Vela
The Company instituted legal action against Robin Vela (its
former CEO) in which it claimed an amount of R3,324,524 together
with interest in respect of taxes that became due to the South
African Revenue Services and which were not deducted from the
salary that was paid to him by the Company, during his tenure as
CEO.
Mr Vela is defending the action and has also raised three
counterclaims in the action, in terms of which he claims an amount
of R280,749 allegedly owing in respect of unpaid leave; an amount
of R2,784,948 allegedly due in respect of a bonus and an amount of
R16,881,459 allegedly owing in respect of the breach of a share
option agreement. In addition, Mr Vela is also claiming interest on
these amounts. The Company is defending the counterclaims.
Consolidated condensed preliminary
statement of financial position
2015 2014
Note R R
-------------------------------- ---- --------- ---------
Assets
-------------------------------- ---- --------- ---------
Non-current assets
-------------------------------- ---- --------- ---------
Exploration and evaluation 75 949 266 809
assets 565 536
-------------------------------- ---- --------- ---------
122 869
Oil and gas properties 708 -
-------------------------------- ---- --------- ---------
345 753 433 344
Other financial assets 7 287 048
-------------------------------- ---- --------- ---------
Property, plant and equipment 344 706 247 207
-------------------------------- ---- --------- ---------
61 095
Other intangible assets 540 175 476
-------------------------------- ---- --------- ---------
606 012 700 576
Total non-current assets 806 267
-------------------------------- ---- --------- ---------
Current assets
-------------------------------- ---- --------- ---------
331 641 222 542
Other financial assets 7 018 359
-------------------------------- ---- --------- ---------
6 641
Inventories 663 -
-------------------------------- ---- --------- ---------
7 152
Trade and other receivables 505 649 764
-------------------------------- ---- --------- ---------
229 431 381 579
Cash and cash equivalents 001 766
-------------------------------- ---- --------- ---------
574 866 604 771
Total current assets 187 889
-------------------------------- ---- --------- ---------
21 839
Asset held for sale 6 945 -
-------------------------------- ---- --------- ---------
1 202 718 1 305
Total assets 938 348 156
-------------------------------- ---- --------- ---------
Equity and Liabilities
-------------------------------- ---- --------- ---------
Shareholders' equity
-------------------------------- ---- --------- ---------
1 216 503 1 109 977
Stated capital 9 883 054
-------------------------------- ---- --------- ---------
15 606 6 001
Reserves 468 847
-------------------------------- ---- --------- ---------
(448 654 (179 426
Accumulated loss 565) 156)
-------------------------------- ---- --------- ---------
Equity attributable to 783 455 936 552
equity holders of parent 786 745
-------------------------------- ---- --------- ---------
4 417 12 218
Non-controlling interest 649 476
-------------------------------- ---- --------- ---------
787 873 948 771
Total shareholders' equity 435 221
-------------------------------- ---- --------- ---------
Liabilities
-------------------------------- ---- --------- ---------
Non-current liabilities
-------------------------------- ---- --------- ---------
97 146 92 498
Deferred tax liability 476 394
-------------------------------- ---- --------- ---------
97 146 92 498
Total non-current liabilities 476 394
-------------------------------- ---- --------- ---------
Current liabilities
-------------------------------- ---- --------- ---------
57 888 74 167
Other financial liabilities 500 311
-------------------------------- ---- --------- ---------
212 416 176 856
Current tax payable 721 253
-------------------------------- ---- --------- ---------
25 553 13 054
Trade and other payables 861 977
-------------------------------- ---- --------- ---------
295 859 264 078
Total current liabilities 082 541
-------------------------------- ---- --------- ---------
393 005 356 576
Total liabilities 558 935
-------------------------------- ---- --------- ---------
Liabilities directly associated 21 839
with asset held for sale 6 945 -
-------------------------------- ---- --------- ---------
1 202 718 1 305 348
Total equity and liabilities 938 156
-------------------------------- ---- --------- ---------
3 269 836 3 086 169
Number of shares in issue 208 261
-------------------------------- ---- --------- ---------
Net asset value per share
(cents) 24.10 30.74
-------------------------------- ---- --------- ---------
Net tangible asset value
per share (cents) 21.77 22.10
-------------------------------- ---- --------- ---------
Consolidated condensed preliminary
statement of comprehensive income
2015 2014
Note R R
---------------------------------- ---- --------- --------
2 095
Revenue 339 -
---------------------------------- ---- --------- --------
(3 225
Cost of sales 015) -
---------------------------------- ---- --------- --------
(1 129
Gross loss 676) -
---------------------------------- ---- --------- --------
103 334 47 350
Other income 136 527
---------------------------------- ---- --------- --------
(510 106 (100 247
Other operating costs 001) 072)
---------------------------------- ---- --------- --------
(407 901 (52 896
Loss from operations 541) 545)
---------------------------------- ---- --------- --------
158 052 130 555
Investment income 007 693
---------------------------------- ---- --------- --------
(12 931
Finance costs (1 469) 875)
---------------------------------- ---- --------- --------
(249 851 64 727
(Loss)/profit before taxation 003) 273
---------------------------------- ---- --------- --------
(27 178 (55 212
Taxation 233) 656)
---------------------------------- ---- --------- --------
(Loss)/profit for the (277 029 9 514
year 236) 617
---------------------------------- ---- --------- --------
Other comprehensive income:
---------------------------------- ---- --------- --------
Items that may be reclassified
to profit or loss in subsequent
periods:
---------------------------------- ---- --------- --------
Exchange differences on
translation of foreign 8 716
operations 621 -
---------------------------------- ---- --------- --------
Other comprehensive income 8 716
for the year net of taxation 621 -
---------------------------------- ---- --------- --------
Total comprehensive (loss)/income (268 312 9 514
for the year 615) 617
---------------------------------- ---- --------- --------
(Loss)/profit attributable
to:
---------------------------------- ---- --------- --------
Equity holders of the (269 216 19 594
parent 457) 296
---------------------------------- ---- --------- --------
(7 812 (10 079
Non-controlling interest 779) 679)
---------------------------------- ---- --------- --------
(Loss)/profit for the (277 029 9 514
year 236) 617
---------------------------------- ---- --------- --------
Total comprehensive (loss)/income
attributable to:
---------------------------------- ---- --------- --------
Equity holders of the (260 499 19 594
parent 836) 296
---------------------------------- ---- --------- --------
(7 812 (10 079
Non-controlling interest 779) 679)
---------------------------------- ---- --------- --------
Total comprehensive (loss)/income (268 312 9 514
for the year 615) 617
---------------------------------- ---- --------- --------
(Loss)/earnings per share
---------------------------------- ---- --------- --------
Basic (cents) 4 (8.54) 1.37
---------------------------------- ---- --------- --------
Diluted (cents) 4 (8.54) 1.36
---------------------------------- ---- --------- --------
Consolidated condensed preliminary
statement of changes in equity
Total equity
attributable
to
Stated Foreign equity Non-
capital currency Share-based holders controlling
(Note translation payment Total Accumulated of the interest Total
9) reserve reserve reserves loss parent ("NCI") equity
R R R R R R R R
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Balance at 28 534 (219 341 153 363 451
February 2013 172 123 - 26 681 469 26 681 469 700 074) 518 22 298 155 673
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Changes in
equity:
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Profit/(loss) 19 594 (10 079
for the year - - - - 296 19 594 296 679) 9 514 617
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Total
comprehensive
income/(loss) 19 594 (10 079
for the year - - - - 296 19 594 296 679) 9 514 617
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
575 575 804 575 804
Issue of shares 804 931 - - - - 931 - 931
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Share options (20 679 (20 679 20 679
lapsed - - 622) 622) 622 - - -
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
575 (20 679 (20 679 40 273 595 399 (10 079 585 319
Total changes 804 931 - 622) 622) 918 227 679) 548
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Balance at 28 1 109 (179 936 552 948 771
February 2014 977 054 - 6 001 847 6 001 847 426 156) 745 12 218 476 221
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Changes in
equity:
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Loss for the (269 (269 216 (277 029
year - - - - 216 457) 457) (7 812 779) 236)
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Other
comprehensive
income for the
year - 8 716 621 - 8 716 621 - 8 716 621 - 8 716 621
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Total
comprehensive
(loss)/income (269 (260 499 (268 312
for the year - 8 716 621 - 8 716 621 216 457) 836) (7 812 779) 615)
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
106 106 526 106 526
Issue of shares 526 829 - - - - 829 - 829
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Share options
issued - - 888 000 888 000 - 888 000 - 888 000
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Acquisition of
non-controlling (11
interest - - - - 952) (11 952) 11 952 -
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
106 (269 (153 096 (160 897
Total changes 526 829 8 716 621 888 000 9 604 621 228 409) 959) (7 800 827) 786)
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Balance at 28 1 216 (448 783 455 787 873
February 2015 503 883 8 716 621 6 889 847 15 606 468 654 565) 786 4 417 649 435
---------------- --------- ----------- ----------- ----------- ----------- ------------ ------------ ----------
Consolidated condensed preliminary
statement of cash flows
2015 2014
R R
------------------------------ ------------ ------------
Cash flows from operating
activities
------------------------------ ------------ ------------
Cash used in operations (39 130 214) (39 133 285)
------------------------------ ------------ ------------
Interest income 6 961 514 889 724
------------------------------ ------------ ------------
Finance costs (1 469) (1 324 143)
------------------------------ ------------ ------------
Tax (paid)/received (23) 32 404
------------------------------ ------------ ------------
Net cash used in operating
activities (32 170 192) (39 535 300)
------------------------------ ------------ ------------
Cash flows from investing
activities
------------------------------ ------------ ------------
Purchase of property, plant
and equipment (234 488) (71 426)
------------------------------ ------------ ------------
Purchase of exploration
and evaluation assets (69 118 676) (63 026 602)
------------------------------ ------------ ------------
Purchase of oil and gas
properties (7 270 438) -
------------------------------ ------------ ------------
Purchase of other intangible
assets (135 899) (86 956)
------------------------------ ------------ ------------
Acquisition of subsidiary (44 540 236) -
------------------------------ ------------ ------------
Payments received for other
financial assets 13 463 071 14 793 124
------------------------------ ------------ ------------
Net cash used in investing (107 836
activities 666) (48 391 860)
------------------------------ ------------ ------------
Cash flows from financing
activities
------------------------------ ------------ ------------
337 273
Proceeds on share issue - 662
------------------------------ ------------ ------------
Settlement of borrowings (20 461 137) -
------------------------------ ------------ ------------
Proceeds from other financial
liabilities 420 209 18 670 494
------------------------------ ------------ ------------
Net cash (used in)/from
financing activities (20 040 928) 355 944 156
------------------------------ ------------ ------------
Total movement in cash and
cash equivalents for the (160 047
year 786) 268 016 996
------------------------------ ------------ ------------
Foreign exchange gains on
cash and cash equivalents 7 899 021 19 530 354
------------------------------ ------------ ------------
Cash and cash equivalents
at the beginning of the
year 381 579 766 94 032 416
------------------------------ ------------ ------------
Cash and cash equivalents
at the end of the year 229 431 001 381 579 766
------------------------------ ------------ ------------
Notes
1 Basis of preparation
The consolidated condensed preliminary financial statements of
the Group for the year ended 28 February 2015 have been prepared in
accordance with the Group's accounting policies, which comply with
the recognition and measurement criteria of International Financial
Reporting Standards, and the presentation and disclosure
requirements of IAS 34 - Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices
Committee, the Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council, the Listings Requirements of
the JSE Limited and the Companies Act of South Africa (No.71 of
2008, as amended). The accounting policies applied in the
preparation of the results for the year ended 28 February 2015 are
consistent with those adopted in the financial statements for the
year ended 28 February 2014 except as noted below.
The Group has adopted the amendment to IAS 36 - Impairment of
Assets. The application of this standard has not had a material
impact on the measurement of assets and liabilities of the Group,
but will result in additional disclosures.
These consolidated condensed preliminary financial statements
have been prepared on a going concern basis.
All monetary information is presented in the functional currency
of the Company, being South African Rand.
2 Auditor's audit report
The directors take full responsibility for the preparation of
these consolidated condensed preliminary financial statements. They
have been prepared under the supervision of Marius Damain Matroos
CA (SA). These consolidated condensed preliminary financial
statements have been audited by Ernst & Young Inc., the Group's
auditors. The audit report is available for inspection at the
Company's registered office together with the consolidated
condensed preliminary financial statements identified in the
auditors' report.
The audit report on the consolidated condensed preliminary
financial statements includes an "Other Legal and Regulatory
Requirements" paragraph which highlights reportable irregularities
previously identified as disclosed in note 13.
3 Segmental reporting
The Group operates in six geographical locations, which form the
basis of the information evaluated by the Group's chief
decision-maker. For management purposes the Group is organised and
analysed by these locations. These locations are: South Africa,
Egypt, Nigeria, DRC, Botswana and Malawi. Operations in South
Africa relate to head office activities of the Group that include
the general management, financing and administration of the
Group.
South
Egypt Nigeria DRC Malawi Botswana Africa Consolidated
R R R R R R R
---------------- ------ ------- ------ ------ -------- ------- ------------
2015
---------------- ------ ------- ------ ------ -------- ------- ------------
2
095 2 095
Revenue 339 - - - - - 339
---------------- ------ ------- ------ ------ -------- ------- ------------
(3
Cost of 225 (3 225
sales 015) - - - - - 015)
---------------- ------ ------- ------ ------ -------- ------- ------------
(1
129 (1 129
Gross loss 676) - - - - - 676)
---------------- ------ ------- ------ ------ -------- ------- ------------
41 53
038 8 964 331 103
Other income - 776 255 - - 105 334 136
---------------- ------ ------- ------ ------ -------- ------- ------------
29 22 105
Investment 594 486 971 158
income - 807 077 - - 123 052 007
---------------- ------ ------- ------ ------ -------- ------- ------------
Finance (1
costs - - 274) - - (195) (1 469)
---------------- ------ ------- ------ ------ -------- ------- ------------
(7 (23 (478
Other operating 430 (333 775 (500 066 (510
expenses 208) 572) 428) - 183) 610) 106 001)
---------------- ------ ------- ------ ------ -------- ------- ------------
(30
117 2 939 (27
Taxation - (22) 465) - - 254 178 233)
---------------- ------ ------- ------ ------ -------- ------- ------------
(Loss)/profit (8 70 (22 (315
for the 559 299 443 (500 825 (277
year 884) 989 835) - 183) 323) 029 236)
---------------- ------ ------- ------ ------ -------- ------- ------------
Segment
assets
---------------- ------ ------- ------ ------ -------- ------- ------------
183 312 1 108
759 042 196 386 627 606 012
- non-current 646 - 259 742 548 611 806
---------------- ------ ------- ------ ------ -------- ------- ------------
17 226 41 288
852 456 776 1 780 574 866
- current 480 059 214 - 420 014 187
---------------- ------ ------- ------ ------ -------- ------- ------------
Segment
liabilities
---------------- ------ ------- ------ ------ -------- ------- ------------
(95 (2
070 076 (97
- non-current - - 394) - - 082) 146 476)
---------------- ------ ------- ------ ------ -------- ------- ------------
(6 (57 (171 (59
456 917 581 903 (295
- current 929) 444) 513) - - 196) 859 082)
---------------- ------ ------- ------ ------ -------- ------- ------------
3 Segmental reporting (continued)
South
Nigeria DRC Malawi Botswana Africa Consolidated
R R R R R R
-------------------- ------- ------ ------ -------- ------- ------------
2014
-------------------- ------- ------ ------ -------- ------- ------------
12 25 47
9 722 441 187 350
Other income 354 074 - - 099 527
-------------------- ------- ------ ------ -------- ------- ------------
20 109 130
Investment 872 499 183 555
income 310 497 - - 886 693
-------------------- ------- ------ ------ -------- ------- ------------
(12 (12
931 931
Finance costs - - - - 875) 875)
-------------------- ------- ------ ------ -------- ------- ------------
(22 (77 (100
Other operating (199 149 (10 887 247
expenses 450) 316) - 381) 925) 072)
-------------------- ------- ------ ------ -------- ------- ------------
(37 (17 (55
32 378 866 212
Taxation 404 904) - - 156) 656)
-------------------- ------- ------ ------ -------- ------- ------------
10 (26 25
Profit/(loss) 427 587 (10 685 9 514
for the year 618 649) - 381) 029 617
-------------------- ------- ------ ------ -------- ------- ------------
Segment assets
-------------------- ------- ------ ------ -------- ------- ------------
191 295 212 700
159 859 896 386 273 576
- non-current 973 426 740 548 580 267
-------------------- ------- ------ ------ -------- ------- ------------
108 38 457 604
144 929 697 771
- current 436 675 - - 778 889
-------------------- ------- ------ ------ -------- ------- ------------
Segment liabilities
-------------------- ------- ------ ------ -------- ------- ------------
(88 (3 (92
597 901 498
- non-current - 261) - - 133) 394)
-------------------- ------- ------ ------ -------- ------- ------------
(53 (136 (73 (264
973 593 510 078
- current 973) 804) - - 764) 541)
-------------------- ------- ------ ------ -------- ------- ------------
Business segments
The operations of the Group comprise one class of business,
being oil and gas exploration and production. The activities
currently undertaken in Mozambique related to the Mozambican
pipeline are not significant at this stage and have not been
separately disclosed. These activities therefore do not meet the
recognition criteria for operating segments.
Revenue
The Group's reported revenue is generated from a single customer
(the Egyptian General Petroleum Corporation), with respect to oil
sales. This revenue is attributed to the Egypt segment.
Taxation - Egypt
No income or deferred tax has been accrued by Mena as the
Concession Agreement between the EGPC, the Ministry of Petroleum
and Mena provides that the EGPC is responsible for the settlement
of income tax on behalf of Mena, out of EGPC's share of petroleum
produced. The Group has elected the net presentation approach in
accounting for this deemed income tax. Under this approach Mena's
revenue is not grossed up for income tax payable by EGPC on behalf
of Mena. Consequently, no income or deferred tax is accrued.
2015 2014
R R
--------------------------------- ----------- -----------
4 (Loss)/earnings per share
--------------------------------- ----------- -----------
Basic (cents) (8.54) 1.37
------------------------------------ ----------- -----------
Diluted (cents) (8.54) 1.36
------------------------------------ ----------- -----------
(Loss)/profit attributable
to equity holders of the
parent used in the calculation
of the basic and diluted (269 216
loss per share 457) 19 594 296
------------------------------------ ----------- -----------
Weighted average number
of ordinary shares used
in the calculation of basic 3 151 081 1 435 074
(loss)/earnings per share 689 830
------------------------------------ ----------- -----------
Issued shares at the beginning 3 086 169 953 340
of the reporting period 261 791
------------------------------------ ----------- -----------
Effect of shares issued
during the reporting period 481 734
(weighted) 64 912 428 039
------------------------------------ ----------- -----------
Add: Dilutive share options - 1 618 673
------------------------------------ ----------- -----------
Weighted average number
of ordinary shares used
in the calculation of diluted 3 151 081 1 436 693
(loss)/earnings per share 689 503
------------------------------------ ----------- -----------
Headline (loss)/earnings
per share
--------------------------------- ----------- -----------
Basic (cents) (4.67) 1.37
------------------------------------ ----------- -----------
Diluted (cents) (4.67) 1.36
------------------------------------ ----------- -----------
Reconciliation of headline
(loss)/earnings
--------------------------------- ----------- -----------
(Loss)/profit attributable
to equity holders of the (269 216
parent 457) 19 594 296
------------------------------------ ----------- -----------
Adjusted for:
--------------------------------- ----------- -----------
Impairment of assets held 194 065
for sale 780 -
--------------------------------- ----------- -----------
Gain on acquisition of (24 718
subsidiary 054) -
--------------------------------- ----------- -----------
(47 417
Tax effects of adjustments 363) -
------------------------------------ ----------- -----------
(147 286
Headline (loss)/earnings 094) 19 594 296
------------------------------------ ----------- -----------
5 Business combinations
On 22 October 2014 the Group acquired 100% of the share capital
of Cyprus-registered exploration and production company, Mena
International Petroleum Company Limited ("Mena"), which holds 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. Mena was acquired to grow and balance the
Group's existing portfolio of assets by adding reserves and
production. As a result of the acquisition the Group now generates
revenue from an oil-producing asset and operates in a new
geographical location.
The Group issued 183 666 947 SacOil ordinary shares as part
consideration for the acquisition of Mena. The fair value of the
shares was based on the published share price of SacOil shares on
22 October 2014, which was 58 cents. The resulting value of the
shares issued was R106 526 829 ($10.0 million). The Group further
paid a cash consideration of R45 200 315 ($4.1 million) as share
capital in Mena to settle outstanding liabilities. The fair value
of the consideration transferred was therefore R151 727 144.
The following table summarises the consideration paid for Mena
and the provisional fair values of assets acquired and liabilities
assumed:
Provisional fair
values
recognised on
acquisition
R
-------------------------------- ----------------
Oil and gas properties 110 062 658
-------------------------------- ----------------
Other intangible assets 59 668 026
-------------------------------- ----------------
Inventories 6 026 074
-------------------------------- ----------------
Trade and other receivables 43 506 640
-------------------------------- ----------------
Cash and cash equivalents 660 079
-------------------------------- ----------------
Total identifiable assets
at fair value 219 923 477
-------------------------------- ----------------
Borrowings (20 461 137)
-------------------------------- ----------------
Trade and other payables (23 017 142)
-------------------------------- ----------------
Total identifiable net assets
at fair value 176 445 198
-------------------------------- ----------------
Gain on bargain purchase (24 718 054)
-------------------------------- ----------------
Total consideration transferred 151 727 144
-------------------------------- ----------------
The fair values disclosed are provisional as at 28 February 2015
due to the complexity of the acquisition and the fact that the
assessment of the underlying reserves acquired is still being
finalised. As a result the final fair values may differ. The review
of the fair value of the assets and liabilities acquired will be
completed within 12 months of the acquisition of the asset.
The fair value of trade and other receivables is R43.5 million
representing the gross contractual amounts receivable. None of the
trade and other receivables were impaired at the acquisition date
as it was expected that the full contractual amounts would be
collected. These receivables were subsequently collected as at the
date of the consolidated condensed preliminary financial
statements.
A gain on acquisition of Mena of R24.7 million has been
recognised in "other income" in profit or loss.
From 22 October 2014 to 28 February 2015 Mena contributed R2.1
million to Group revenue and R8.6 million to Group loss. If the
acquisition of Mena had taken place at the beginning of the year,
Group revenue for the 2015 year would have been R2.8 million and
Mena would have contributed a profit of R97.6 million to the Group
results, thereby reducing the Group loss to R163.8 million.
Acquisition-related costs of R8.7 million have been charged to
"other operating costs" in profit or loss. Mena's net assets at
acquisition date exceeded the purchase price paid by the Group.
The cash outflow at acquisition is as follows:
Group Company
R R
----------------------- ------ ----------
45 200
Cash paid 315 45 200 315
----------------------- ------ ----------
Net cash acquired with (660
the subsidiary 079) -
----------------------- ------ ----------
44 540
Net cash outflow 236 45 200 315
----------------------- ------ ----------
Taxation
No income or deferred tax has been accrued by Mena as the
Concession Agreement between the EGPC, the Ministry of Petroleum
and Mena provides that the EGPC is responsible for the settlement
of income tax on behalf of Mena, out of EGPC's share of petroleum
produced. The Group has elected the net presentation approach in
accounting for this deemed income tax. Under this approach Mena's
revenue is not grossed up for income tax payable by EGPC on behalf
of Mena. Consequently, no income or deferred tax is accrued.
6 Non-current assets held for sale
On 27 February 2015 the SacOil Board endorsed a plan to
investigate the termination of the Group's participation in OPL 233
in Nigeria. The termination is in line with the balancing and
rationalising of the Group's portfolio of assets with the aim to
restructure the Group's future capital requirements to focus on
cash-generative assets and low-risk exploration assets. The Farm-In
Agreement provides for the recovery of costs incurred on the asset
upon termination. It is expected that the process to give effect to
the termination in accordance with the Farm-In Agreement will be
completed by 31 August 2015. The non-current asset held for sale
and the liabilities associated with this asset at 28 February 2015
are outlined below:
2015
R
---------------------------------- ----------
Asset held for sale
---------------------------------- ----------
Exploration and evaluation assets
- OPL 233 Nigeria 21 839 945
---------------------------------- ----------
Liabilities directly associated
with the asset held for sale
---------------------------------- ----------
(21 839
Nigdel 945)
---------------------------------- ----------
Prior to classification as an asset held for sale, OPL 233 was
recognised as an E&E asset in the accounting records of the
Company's subsidiary SacOil 233 Nigeria Limited. Consequently OPL
233 was recognised as an asset by the Group and not the Company. An
asset held for sale is therefore reported at Group level only.
SacOil 233 Nigeria Limited's obligations are funded by SacOil
Holdings Limited. The Nigdel liability associated with OPL 233 is
recognised by SacOil Holdings Limited and, consequently, the Group.
The liability directly associated with the asset held for sale is
therefore reported for both Group and Company results.
Immediately before the classification as an asset held for sale
OPL 233 had a carrying amount of R215.9 million. An impairment loss
of R194.1 million was recognised to reduce the carrying amount of
the asset to the fair value less costs to sell. Based on a
preliminary assessment and pending the outcome of termination
negotiations with Nigdel, the Group expects to recover R21.8
million which will be off-set against the Group's indebtedness to
Nigdel. The impairment loss was recognised in the statement of
comprehensive income under other operating costs.
2015 2014
R R
---------------------------------- ----------- ------------
7 Other financial assets
---------------------------------- ----------- ------------
Non-current
---------------------------------- ----------- ------------
Deferred consideration
on disposal of Greenhills
Plant(1) 1 718 470 3 281 164
------------------------------------- ----------- ------------
Advance payment against
future services(2) 68 627 273 62 388 430
------------------------------------- ----------- ------------
Loan due from EERNL(3) 37 731 560 146 181 302
------------------------------------- ----------- ------------
Contingent consideration(4) 237 675 984 221 493 152
------------------------------------- ----------- ------------
345 753 287 433 344 048
------------------------------------- ----------- ------------
Current
---------------------------------- ----------- ------------
Loan due from EERNL(3) 183 242 921 210 835 454
------------------------------------- ----------- ------------
Loan due from DIG(5) 51 036 906 47 694 469
------------------------------------- ----------- ------------
Transcorp receivable(6) 220 824 802 -
------------------------------------- ----------- ------------
Deferred consideration
on disposal of Greenhills
Plant(1) 1 890 810 1 890 811
------------------------------------- ----------- ------------
456 995 439 260 420 734
------------------------------------- ----------- ------------
(125 354
Less: Provision for impairment(3) 421) (37 878 375)
------------------------------------- ----------- ------------
331 641 018 222 542 359
------------------------------------- ----------- ------------
677 394 305 655 886 407
------------------------------------- ----------- ------------
1 The deferred consideration represents the present value of the
remaining consideration for the Greenhills Plant which was sold in
October 2012. As the future consideration receivable is R4.0
million receivable in October 2015 and October 2016 in equal
instalments of R2.0 million each, the present value recognised at
28 February 2015 is R3.6 million (2014: R5.2 million). At 28
February 2015, R3.0 million has been received with respect to this
disposal.
2 The amount due represents Encha Energy's indebtedness to
SacOil Holdings Limited under the Acknowledgement of Debt Agreement
concluded between the two parties on 28 February 2013. As the
future value of this asset is R75.5 million, the financial asset
recognised at 28 February 2015 is R68.6 million (2014: R62.4
million), representing the present value of this future receivable.
Interest amounting to R6.3 million (2014: R5.7 million) arising
from the unwinding of the discount applied to the future receivable
on initial recognition has been included in investment income.
3 On 26 March 2015 SacOil and EERNL restructured the settlement
of the outstanding loans as detailed in note 14. As a result of the
restructuring and termination of participation in OPL 281 by both
parties the long-term loan due from EERNL attributable to OPL 281
was off-set against EERNL's share of the Transcorp Refund (see
footnote 6) as full and final settlement of this liability. This
resulted in a write-off of R73.2 million due to the interest
differential between the Transcorp Refund and the EERNL loan. Prior
to the settlement agreement the long-term loan accrued interest at
25% per annum and was denominated in US Dollars.
The restucturing of the repayment of the loans also means that
part of the short-term loan which relates to OPL 233 is
reclassified as long term, representing the settlement of the loans
from the OML 113 cash flows expected in 2019 and 2020. At 28
February 2015, R37.7 million has been recognised with respect to
this receivable, being the present value of future payments
totalling R57.9 million ($5 million).
An amount of R65.4 million has been written off as a bad debt
expense following management's assessment of the recovery
mechanisms in the settlement agreement, which specifies the
recovery options available to the Group. The remainder of the
short-term loan is expected to be recovered within a year from
EERNL's share of the cash collateral and recoveries from Nigdel
pursuant to the termination of EERNL's participation in OPL 233.
The recovery from Nigdel of R125.4 million has been provided for
pending the finalisation of exit negotiations. This resulted in an
increase in the provision for impairment by R87.5 million. Both
expenses have been recognised under other operating costs.
SacOil agreed to an interest freeze on the outstanding loan from
30 November 2014. Prior to this the loan accrued interest at 32%.
The loan is denominated in US Dollars.
4 The Farm-In Agreement between Semliki and Total provides for a
cash payment by Total to Semliki upon the occurrence of certain
future events ("contingent consideration"). As there is a
contractual right to receive cash from Total, Semliki has
recognised a financial asset in its statement of financial
position. The asset was initially recognised at its fair value.
Subsequently the financial asset meets the definition of a loan and
receivable, and is accounted for at amortised cost, taking into
account interest revenue and currency movements. At each reporting
date SacOil revises its estimate of receipts from the financial
asset in line with the requirements of IAS 39. Included in the
statement of comprehensive income at 28 February 2015 is an
impairment loss of R23.8 million (2014: R22.1 million) representing
the write-down of future expected cash flows from the contingent
consideration for the Block III farm-outs in March 2011 and March
2012. The write-down was necessitated by the delay in activities on
Block III related to civil unrest and the deferred receipt of the
contingent consideration, and is reflective of the time value of
money. A deferred tax charge amounting to R6.5 million (2014: a
credit of R16.0 million) was recognised in the statement of
comprehensive income. The assumptions used to measure the
contingent consideration are detailed below:
Probability of exploration
success (single well) 26%
------------------------------------- -----------
Probability of at least one
success from two wells 45%
------------------------------------- -----------
Probability of successful completion
given exploration success 89%
------------------------------------- -----------
Discount rate 10%
------------------------------------- -----------
First Investment Decision Date 28 February
("FID") 2020
------------------------------------- -----------
28 February
First Oil Date ("FOD") 2024
------------------------------------- -----------
28 February
Valuation date 2015
------------------------------------- -----------
First contingent consideration
------------------------------------- -----------
$42 549
FID 000
------------------------------------- -----------
$36 680
FOD 000
------------------------------------- -----------
Second contingent consideration
------------------------------------- -----------
$4 635
FID 000
------------------------------------- -----------
$6 660
FOD 000
------------------------------------- -----------
Should the probability factors applied to the valuation model be
increased or decreased by 10%, all other variables held constant,
post-tax loss would have been R55.2 million (2014: R51.4 million)
lower and R55.2 million (2014: R51.4 million) higher,
respectively.
5 The loan comprises the taxes recoverable from DIG with respect
to the capital gains tax payable by Semliki on the farm-out of the
6.67% interest in Block III in March 2012, which transaction was
initiated by and solely benefited DIG. The loan is interest free,
unsecured, has no fixed repayment terms and is denominated in US
Dollars. The Group is in the process of restructuring its holding
in Block III, which will result in the elimination of the Group's
foreign taxes as these taxes will become the liabilities of DIG.
Consequently this will eliminate DIG's indebtedness to the Group.
The restructuring is expected to be finalised by 31 August
2015.
6 The Transcorp Refund represents amounts recoverable from
Transcorp under the provisions of the FIA following the termination
of SacOil 281's participation in OPL 281. SacOil paid R44.1 million
($6.25 million) on behalf of its subsidiary, SacOil 281, and R43.6
million ($6.25 million) on behalf of EER 233 Nigeria Limited for a
signature bonus and other costs relating to OPL 281, which
contractually will be refunded by Transcorp with interest on the
signature bonus component at 20% per annum. EERNL has ceded its
share of the refund as settlement of the OPL 281 loan owed to
SacOil as detailed in note 14 and footnote 3. Consequently R110.4
million has been recognised as a receivable from Transcorp by
SacOil under the terms of the settlement agreement. A further
R110.4 million has been recognised by SacOil 281 in line with the
provisions of the FIA. Pursuant to the exit SacOil will not have
future commitments and obligations associated with the appraisal of
OPL 281. Furthermore, the farm-in fee which would have been payable
to Transcorp and the transaction fee which would have been payable
to Energy Equity Resources Norway Limited of US$12 million and
US$2.5 million respectively, as disclosed in the prior year
commitments (note 10), are no longer due and payable.
At 28 February 2015 the Company receivable of R110.4 million
with respect to the above transactions represents SacOil's
entitlement to EERNL's share of the Transcorp Refund. The Group
receivable of R220.8 million further includes SacOil 281's share of
the refund.
8 Fair value measurement
Carrying value Fair value
---------------------- ------------------------ ------------------------
2015 2014 2015 2014
R R R R
---------------------- ----------- ----------- ----------- -----------
Loans and receivables
---------------------- ----------- ----------- ----------- -----------
Other financial
assets(1) 677 394 305 655 886 407 590 452 903 589 512 367
---------------------- ----------- ----------- ----------- -----------
1 In terms of SacOil's accounting policies and IAS39 - Financial
Instruments: Recognition and Measurement ("IAS 39") these financial
instruments are carried at amortised cost and not at fair value,
given that SacOil intends to collect the cash flows from these
instruments when they fall due over the life of the instrument.
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.
Fair value
at
28 February
2015 Valuation Significant
Asset R technique inputs
-------------------- ------------ ----------------- ---------------------
Other financial 590 452 903 Discounted Weighted average
assets cash flow cost of capital
model
-------------------- ------------ ----------------- ---------------------
Asset held 21 839 945 Undiscounted Non-performance
for sale cash flows risk
due to the
short term
maturity
of this asset
-------------------- ------------ ----------------- ---------------------
Fair value
at
22 October
2014 Valuation Significant
Assets/(Liabilities) R technique inputs
-------------------- ------------ ----------------- ---------------------
Other 59 668 026 Multi-period Weighted average
intangible excess earnings cost of capital,
assets method useful life,
forecast revenue,
EBITDA margin
and attrition
rate
-------------------- ------------ ----------------- ---------------------
Oil and 110 062 658 Discounted Weighted average
gas properties cash flow cost of capital
model
-------------------- ------------ ----------------- ---------------------
Inventories 6 026 074 Discounted Weighted average
cash flow cost of capital
model
-------------------- ------------ ----------------- ---------------------
Trade Undiscounted
and other cash flows
receivables due to the
short term
maturity Non-performance
43 506 640 of this asset risk
-------------------- ------------ ----------------- ---------------------
Cash and Undiscounted
cash equivalents cash flows
due to the
short term
maturity Non-performance
660 079 of this asset risk
-------------------- ------------ ----------------- ---------------------
Borrowings Discounted
cash flow Weighted average
(20 461 137) model cost of capital
-------------------- ------------ ----------------- ---------------------
Undiscounted
cash flows
due to the
Trade short term
and other maturity Non-performance
payables (23 017 142) of this asset risk
-------------------- ------------ ----------------- ---------------------
The Group's own non-performance risk as at 28 February 2015 was
assessed to be insignificant.
Fair value hierarchy
The following table presents the Group's assets not measured at
fair value in the statement of financial position, but 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
Level 1 Level 2 3 Total
----------------- ------- ------- ---------- -----------
Other financial 590 590 452
assets - - 452 903 903
----------------- ------- ------- ---------- -----------
Asset held for 21 839
sale - - 945 21 839 945
----------------- ------- ------- ---------- -----------
At 22 October
2014
----------------- ------- ------- ---------- -----------
Other intangible 59 668
assets - - 026 59 668 026
----------------- ------- ------- ---------- -----------
Oil and gas 110 110 062
properties - - 062 658 658
----------------- ------- ------- ---------- -----------
6 026
Inventories - - 074 6 026 074
----------------- ------- ------- ---------- -----------
Trade and other 43 506
receivables - - 640 43 506 640
----------------- ------- ------- ---------- -----------
Cash and cash 660
equivalents - - 079 660 079
----------------- ------- ------- ---------- -----------
(20 (20 461
Borrowings - - 461 137) 137)
----------------- ------- ------- ---------- -----------
Trade and other (23 (23 017
payables - - 017 142) 142)
----------------- ------- ------- ---------- -----------
There were no transfers between any
levels during the year.
------------------------------------------------------------
9 Stated capital
Number Stated
Date Issued to of shares capital
-------------- --------------------- ---------- -----------
Balance at 953 340 534 172
1 March 2013 791 123
------------------------------------- ---------- -----------
3 October
2013 N Gutta* 2 777 777 691 244
-------------- --------------------- ---------- -----------
29 January 1 246 601 336 582
2014 Various** *** 549 418
-------------- --------------------- ---------- -----------
30 January 641 840 173 297
2014 Westglamry Limited** 797 015
-------------- --------------------- ---------- -----------
30 January Newdel Holdings 241 608
2014 Limited** 347 65 234 254
-------------- --------------------- ---------- -----------
Balance at
28 February 3 086 169 1 109 977
2014 261 054
------------------------------------- ---------- -----------
Balance at 3 086 169 1 109 977
1 March 2014 261 054
------------------------------------- ---------- -----------
22 October Mena Hydrocarbons 183 666 106 526
2014 Incorporated** 947 829
-------------- --------------------- ---------- -----------
Balance at
28 February 3 269 836 1 216 503
2015 208 883
------------------------------------- ---------- -----------
* General issue
** Specific issue
*** Shares issued to various shareholders
under the terms of the rights offer
that closed on 27 January 2014. 1 219
302 642 (98%) of these shares were
issued to the Government Employees
Pension Fund.
--------------------------------------------------------------
10 Commitments and contingent liabilities
2015 2014
R R
--------------------------------- --------- -----------
Commitments
--------------------------------- --------- -----------
Exploration and evaluation
assets - work programme
commitments - due within 68 660
12 months 750 130 425 256
--------------------------------- --------- -----------
Exploration and evaluation
assets - work programme
commitments - due within 19 500
13 to 48 months 334 642 206 667
--------------------------------- --------- -----------
88 161
084 772 631 923
--------------------------------- --------- -----------
Exploration and evaluation
commitments will be funded
through a combination of
existing cash, and if required,
debt and equity funding.
--------------------------------- --------- -----------
Contingent liabilities
--------------------------------- --------- -----------
Performance bond on OPL
233 issued by Ecobank in
respect of OPL 233 exploration 173 665
activities(1) 500 161 841 000
--------------------------------- --------- -----------
Cost carry arrangement 96 612
with Total(2) 847 36 508 805
--------------------------------- --------- -----------
Farm-in and transaction
fees on receipt of title 141 341
to OPL 233(3) - 140
--------------------------------- --------- -----------
Farm-in and transaction
fees on receipt of title 156 446
to OPL 281(4) - 300
--------------------------------- --------- -----------
270 496 137
278 347 245
--------------------------------- --------- -----------
10 Commitments and contingent liabilities (continued)
1 Performance bond
In April 2012 the Group posted a R289.4 million (2014: R269.7
million) ($25.0 million) performance bond to support the work
programme on OPL 233. This performance bond is secured by a R116.0
million (2014: R108.1 million) ($10 million) cash collateral. 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. This performance bond
expired on 2 May 2015.
2 Cost carry arrangement
The Farm-In Agreement between Semliki and Total provides for a
carry of costs by Total on behalf of Semliki on Block III. Total
will be entitled to recover these costs, being Semliki's share of
the production 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 28 February
2015 Total has incurred R96.6 million (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.
3 Farm-in and transaction fees - OPL 233
At 28 February 2015, OPL 233 was classified as an asset held for
sale and the SacOil Board was committed to a plan to investigate
the termination of participation in the asset. Subsequent to the
year-end SacOil informed Nigdel of its decision to terminate
participation in OPL 233. Consequently SacOil will not have any
future commitments and obligations associated with the appraisal of
OPL 233. Furthermore, the farm-in fee which would have been payable
to Nigdel and the transaction fee which would have been payable to
Energy Equity Resources Norway Limited of US$10.6 million and
US$2.5 million respectively, as disclosed in the prior-year
commitments, are no longer due and payable.
4 Farm-in and transaction fees - OPL 281
On 3 December 2014 SacOil terminated its participation in OPL
281. Consequently SacOil will not have any future commitments and
obligations associated with the appraisal of OPL 281. Furthermore,
the farm-in fee which would have been payable to Transcorp and the
transaction fee which would have been payable to Energy Equity
Resources Norway Limited of US$12 million and US$2.5 million
respectively, as disclosed in the prior-year commitments, are no
longer due and payable.
11 Related parties
2015 2014
Key management compensation R R
---------------------------- ------ ---------
Non-executive directors:
---------------------------- ------ ---------
2 796
Fees 665 1 644 216
---------------------------- ------ ---------
Executive directors:
---------------------------- ------ ---------
13 074
Salaries 814 3 087 500
---------------------------- ------ ---------
Other key management:
---------------------------- ------ ---------
4 641
Salaries 152 5 889 500
---------------------------- ------ ---------
12 Dividends
The Board has resolved not to declare any dividends to
shareholders for the period under review.
13 Reportable irregularities
As announced to shareholders in the 31 August 2014 interim
results, The Board of SacOil engaged Ernst & Young Inc. ("EY")
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 Blocks I and II in the DRC, amongst other matters.
Based on matters raised in the preliminary forensic report EY,
the Company's external auditors, reported to the Independent
Regulatory Board for Auditors ("IRBA") on 31 October 2014 that they
had reason to believe that reportable irregularities committed by
previous members of management had taken place. The reportable
irregularities related to matters which did not affect the current
year financial results. On 28 November 2014, having completed
additional work on the matters identified, EY subsequently informed
the IRBA that the reportable irregularities were no longer
continuing.
The forensic investigation represents a key step taken by the
Board to address historical governance issues. The investigation is
now at an advanced stage and the SacOil Board is reviewing the
results of the investigation.
14 Events after the reporting period
The following events took place from the period 1 March 2015 to
the date of this report:
EER loan
On 26 March 2015 SacOil and EERNL signed a settlement agreement
to restructure the repayment of the outstanding loans detailed in
note 7. The salient terms of the agreement are outlined below:
Long-term loans outstanding with respect to OPL 281
-- The EERNL Group nominated a SacOil bank account for the
repayment of the full amount due from Transcorp as full and final
settlement of any amounts advanced to the EERNL Group by SacOil in
respect of OPL 281. This will effectively return $12.5 million plus
interest to SacOil of which $6.25 million represents the amount
ceded to SacOil by EERNL as repayment of the OPL 281 loan.
-- SacOil will indemnify the EERNL Group against any and all
costs incurred or sustained as a result of any counterclaims by
Transcorp; in return, EERNL Group has ceded its rights to SacOil
281 relating to any claims that it has against Transcorp.
Short-term loans outstanding with respect to OPL 233
The repayment of the loan relating to OPL 233 has been
restructured as follows:
-- interest freeze from 30 November 2014 on the outstanding loan
balance of US24.2 million;
-- EERNL Group's right to the US$2.5 million promote fee,
payable by SacOil to EERNL Group upon receipt of government
approval for the assignment of interest in OPL 233, is set off
against the outstanding balance on the loans;
-- any and all proceeds subsequently received by EERNL Group
through its involvement in OPL 233 to be allocated to the repayment
of the loans;
-- if, at the time of first oil production from OML 113 there
continues to be sums outstanding pursuant to the loans, 50% of the
net OML 113 cash flow amounts - after providing for the debt
service costs, capital expenditure and other operating costs
relating to OML 113 - received by EERNL will be paid to SacOil
semi-annually to reduce the outstanding loans, up to US$5
million.
General
-- The settlement agreement terminates the Master Joint Venture
Agreement between SacOil and EERNL, dated 24 September 2010,
including all rights and obligations consequent thereto.
OPL 233
Pursuant to the Board's decision to investigate the termination
of the Group's participation in OPL 233 SacOil officially notified
Nigdel of its decision to terminate on 19 May 2015. SacOil paid
$21.3 million for capex, borrowing and general costs, which costs
are recoverable under the provisions of the Farm-In Agreement.
Pursuant to the exit SacOil will not have future commitments and
obligations associated with the appraisal of OPL 233. Furthermore,
the farm-in fee which would have been payable to Nigdel and the
transaction fee which would have been payable to Energy Equity
Resources Norway Limited of US$10.6 million and US$2.5 million
respectively, as disclosed in the prior-year commitments, are no
longer due and payable.
On behalf of the Board
Tito Mboweni
Chairman
Dr Thabo Kgogo
Chief Executive Officer
Marius Damain Matroos
Finance Director
Johannesburg
20 May 2015
Corporate information
Registered office and physical address:
1st Floor, 12 Culross Road, Bryanston, 2021
Postal address:
PostNet Suite 211
Private Bag X75, Bryanston, 2021
Contact details:
Tel: +27 (0) 10 591 2260
Fax: +27 (0) 10 591 2268
E-mail: info@sacoilholdings.com
Website: www.sacoilholdings.com
Directors:
Dr Thabo Kgogo (Chief Executive Officer), Marius Damain Matroos
(Finance Director), Bradley Cerff (Executive Director),
Tito Mboweni (Chairman)*, Mzuvukile Maqetuka*, Gontse
Moseneke**, Stephanus Muller*, Vusi Pikoli*, Ignatius Sehoole*,
Danladi Verheijen**, Titilola Akinleye**
* Independent Non-executive Directors
** 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 Fulbright South Africa
Auditors
Ernst & Young Inc.
JSE Sponsor
PSG Capital Proprietary Limited
AIM Nominated Adviser
finnCap Limited
Investor Relations
Instinctif Partners Limited (London and Johannesburg)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GUGDURBDBGUB
Sacoil (LSE:SAC)
Historical Stock Chart
From May 2024 to Jun 2024
Sacoil (LSE:SAC)
Historical Stock Chart
From Jun 2023 to Jun 2024
