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SacOil moves forward on oil and gas projects

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21 Nov 2012

SacOil moves forward on oil and gas projects

Highlights:

  • Successful acquisition of an airborne gravity and magnetic survey on Block III in the Democratic Republic of Congo (“DRC”);
  • OPL 233, Nigeria: Seismic acquisition on part of the block and successful posting of performance bond on OPL 233 in Nigeria;
  • OPL 281, Nigeria: Restructuring of farm in agreement, reducing capex requirement from SacOil in respect to OPL 281 also in Nigeria;
  • Disposal of the non-core Greenhills Plant to management and employees for R7 million;
  • Successful resolution of the Identiguard litigation matter with SacOil awarded judgement in its favour and costs; and
  • Comprehensive loss attributable to SacOil of R12.6 million (2011: R100.1 million restated).

SacOil Holdings Limited (“SacOil”), the independent upstream oil and gas company with a focus on African assets, today released reviewed interim results for the period ended 31 August 2012.

Robin Vela, CEO of SacOil indicated that, “Given the nature of SacOil's business, which requires lump sum upfront capital investment, it is not unusual for there to be significant changes in the financial results from one period to the next and as a result this period includes a comprehensive loss attributable to SacOil of R12.6million which is an improvement from the restated comprehensive loss of R100.1 million for the comparative period.” He goes on to say that much activity has taken place across the three oil assets to bring them closer to production. “The asset closest to production is OPL 233 in Nigeria and a performance bond has been secured on the asset, meaning that additional data can be attained prior to the drilling of a well,” said Vela.

Operational review:
At Block III in the DRC, the operator, Total has successfully acquired an airborne gravity and magnetic survey over the northern part of the block. “Preliminary analysis of the data broadly indicates the existence of the rift graben, similar to adjacent concessions in Uganda,” indicated Vela, however he cautioned that oil and gas exploration is a lengthy process which requires patience and understanding on the part of shareholders and investors.

In April 2012 SacOil procured a US$25 million Performance Bond from Ecobank to assist NIGDEL United Oil Company Limited (“NIGDEL”) to fulfill its obligations under the Production Sharing Contract for OPL 233 in Nigeria. The posting of the bond will enable the acquisition of up to 100km2 3D Ocean Bottom Cable (“OBC”) seismic survey. SacOil will over the next six months analyse the data collected from the Chevron OBC survey and the new OBC survey to be acquired. A gross work programme estimated at US$25 million is planned for the coming year and this involves the acquisition of a 3D OBC survey and the drilling of at least one well.

During February 2012, SacOil agreed to the revised terms for its partnership with Transnational Corporation of Nigeria PLC (“Transcorp”) and Energy Equity Resources (“EER”) on OPL 281 in Nigeria. The revised terms include i) reduced farm-in costs for SacOil from US$16.25 million to US$12.25 million, of which SacOil has already paid US$6.25 million; ii) Transcorp remains the operator and will pay its 60% share of the capex costs to first production as opposed to SacOil and EER carrying 100% of the costs; and iii) Transcorp will post a performance bond to the Nigerian Government. A gross work programme estimated at US$15 million is planned for OPL 281 for the coming year and this involves the analysis of existing 3D Seismic data and the drilling of at least one well.

On 1 November 2012 (outside of the interim reporting period) SacOil announced that it had received US$3.0 million from EER, representing a part repayment of the cash collateral contribution owed to SacOil by EER. Part of the payment was used by SacOil to settle outstanding balances to Yorkville Advisors Global Masters SPV Limited (“YA”).

“We have always considered the Greenhills Manganese Processing Plant to be a non-core asset and the agreed sale of the plant to management and staff, not only frees up monthly operating expenditure for SacOil, but valuable management time too, which can now be directed back into the oil and gas business,” said Vela. Greenhills management have an obligation to provide upfront a minimum of R2.0 million for working capital, invest R5.0 million in capex for the recapitalisation and sustaining of the plant and make a staged payment of R7.0 million to SacOil. The sale was finalised on 15 October 2012.

Financial review:
The period under review reflected a loss of R13.7 million from continuing operations, an improvement from the restated loss of R100.4 million for the previous comparable period. This is the result of recognising profit and bonuses receivable on the sale of a 6.66% interest in Block III in the DRC, increases in interest income and foreign exchange gains which were then offset by debt facility /capital raising fees, changes in corporate and general costs and the impairment of the Greenhills Plant.

Discontinued operations pertain to the sale of the Greenhills Plant.

The loss per share from continuing operations amounted to 1.64 cents per share, another improvement on the restated loss per share of 14.71 cents in 2011.

The balance sheet reflects various changes which have taken place over the period, such as the sale of the Greenhills Plant reflected in a decline in property, plant and equipment from R6.1 million (February 2012) to R0.4 million in the current period.

The increase in trade and other receivables from R85.2 million to R195.8 million is primarily a result of loans due from EER of R93.7 million and DIG Oil Proprietary Limited (“DIG”) of R22.5 million.

Total cash generated during the period was R84.3 million, compared to the R6.1 million cash utilised in the previous period, resulting in a balance of R95.1 million as at 31 August 2012.

Cash utilised in operating activities of R115.8 was largely funded through the net impact of the sale of the 6.66% interest in Block III (in DRC) after adjustment for SacOil’s increased holding in Semliki Energy SPRL (“Semliki”). The background to the transaction which is: on 12 March 2012 Total acquired a further 6.66% effective interest in Block III from DIG, a shareholder in Semliki. Pursuant to the acquisition, Total’s holding in Block III increased to 66.66%, whereas SacOil’s effective interest remains unchanged at 12.5%. DIG’s holding reduced to 5.84% and the DRC Government retains a 15.0% interest in the asset. As a result of this transaction, Semliki, a company incorporated in the DRC and through which SacOil and DIG own their interests in Block III, is now owned 68% by SacOil and 32% by DIG.

The increase in cash utilised in operating activities of 76% is reflective of costs associated with the procurement of the performance bond and advances to partners. The decline was worsened through operating losses from the Greenhills Plant which put additional pressure on cash flow.

“The repayment of short term loans by our partners as well as the elimination of operating expenditure associated with the Greenhills Plant should translate into improved cash flows from operations,” said Vela.

Prospects:
Given that the data from the airborne gravity and magnetic survey successfully conducted on Block III (DRC) shows positive trends for oil bearing resources, planning for the acquisition of 2D seismic survey is underway with Total having begun the tendering process. Should positive structures containing oil and gas be present and identified, Total intends to drill an exploration well to determine the presence of oil and/or gas. SacOil expects the results of the 2D seismic survey by Q3 2013.

SacOil expects to have perfected its title to a 20% interest in OPL 233 in Nigeria, to have commenced the OBC exercise on the remainder of the block for which it does not already have the OBC and to issue a resource update by Q1 2013.

SacOil further expects to have entered into a new production sharing agreement with the Nigerian National Petroleum Corporation on OPL 281 in Nigeria, to have perfected its title to a 20% interest in OPL 281, and to have commenced the reprocessing of the existing 3D seismic data by Q1 2013.

In conclusion Vela reiterates that, “The oil and gas exploration space is an exciting al beit time consuming process which requires lump sums of capital investments at each phase as it builds towards production. None-the-less, we as the management of SacOil, remain committed to our projects as data from the various studies and surveys show positive trending results.”

21 November 2012
ENDS

Issued on behalf of:        SacOil Holdings Limited
Contact:                               Robin Vela (CEO)
Tel:                                         011- 575-7232
Website:                              www.sacoilholdings.com

Public Relations:              The Riverbed Agency
Contact:                               Raphala Mogase Account Director
Tel:                                         (011) 783-7903 or 084 607 4647
Email:                                    Raphala@theriverbed.co.za

Investor Relations:         Keyter Rech Investor Solutions
Contact:                               Vanessa Rech
Tel:                                         (011) 447-8656 or 083-307-5600
Email:                                    vrech@kris.co.za
Contact:                               Lynne Bothma
Tel:                                         (011) 447-2993 or 082-920-4395
Email:                                    lynne@kris.co.za

JSE Code:                            SCL

Editors notes:
SacOil Operations:
SacOil has interests in three oil concessions - Block III, Albertine Graben in the Democratic Republic of Congo (“DRC”) and OPL 233 and OPL 281 in Nigeria.