Updated Trading Statement for the six month period ended 31 August 2016
30 Nov 2016
SACOIL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/000460/06)
JSE Share Code: SCL AIM Share Code: SAC
(“SacOil” or “the Company” or “the Group”)
UPDATED TRADING STATEMENT FOR THE SIX MONTH PERIOD ENDED 31 AUGUST 2016
Shareholders are referred to the announcement released on the Johannesburg Stock Exchange News Service (“SENS”) and the Regulatory News Service of the London Stock Exchange (“RNS”) on 18 November 2016 in which the Company advised that earnings per share and headline earnings per share for the six months ended 31 August 2016 are expected to be at least 20% lower relative to the prior comparative period (“the Announcement”). The Announcement indicated that the Company would provide a more detailed trading statement which would highlight reasons for this deviation as set out below.
Foreign exchange losses
A significant component of the Group’s asset base is denominated in United States Dollars (“US$”). The recovery of the Rand against the US$ during the period resulted in foreign exchange losses of R62 million which eroded this asset base. Future developments within the currency markets will continue to impact the Group’s assets. In comparison, the results of the Group for the six months ended 31 August 2015 included foreign exchange gains totalling R57.5 million arising from the weakening of the Rand against the US$ during the period. These gains which arose from the revaluation of the US$ asset base contributed to the overall profit recorded by the Group for the period ended 31 August 2015.
Provision for impairment of financial assets
The SacOil Board of directors continues to pursue the recovery of US$19.1 million (R277.4 million as at 31 August 2016) owed to the Group by Transcorp pursuant to the termination of the Group’s participation in OPL281. Inherently litigation is a protracted process which often leads to delays in the resolution of outstanding matters. Our legal counsel has estimated that the matter will likely be resolved during the first half of 2018. This delay has affected the valuation of the receivable and a provision for impairment of R48.1 million has been recognised to take into account the impact of the time value of money.
For the duration of the Encha Acknowledgement of Debt Agreement (“the Agreement”), as provided for therein, the Company received certificates from Encha's auditors which confirmed at each reporting date that the net asset value of the Encha Group exceeded R100 million as a basis to support the recoverability of the amount owed. Since the expiry of the Agreement and the subsequent default by Encha on its obligations, this information has not been made available to the Company to enable a complete assessment of the financial position of the Encha Group. Information available to enable an assessment of the recoverability of the R115.8 million owed to the Company as at 31 August 2016 was therefore limited to information available in the public domain on Encha's asset base. This information however does not provide visibility of Encha's liabilities to enable a complete assessment of the net asset position as at 31 August 2016. A provision for impairment of R115.8 million has therefore been raised.
The results of the Group as at 31 August 2015 included an impairment provision of R26 million with respect to the Block III contingent consideration receivable relative to the Encha and Transcorp impairment provision of R164 million as highlighted above.
In an effort to optimise the production profile of the Lagia Oil Field in Egypt, we conducted thermal stimulation on existing wells on the field. Despite these operations, the field’s technical performance remains below expectations. Financial performance of the asset was also negatively affected by the developments in the global markets with respect to oil prices and exchange rates which resulted in Lagia contributing lower than expected revenue of R3.2 million despite an increase of R2.7 million in operating costs associated with steaming operations.
As a result of the above, shareholders are advised that the basic loss per share is expected to be between 6.76 cents and 6.79 cents, representing a decrease of between 2192% and 2202% from the basic earnings per share of 0.32 cents recorded for the six months ended 31 August 2015.
The basic headline loss per share, which excludes the impact of any re-measurements of assets or liabilities, is also expected to be between 6.76 cents and 6.79 cents, representing a decrease of between 2781% and 2794% from the basic headline earnings per share of 0.25 cents recorded for the six months ended 31 August 2015.
The net asset value per share as at 31 August 2016 is expected to be between 19.58 cents and 22.39 cents, a decrease of between 20% and 30% when compared to the net asset value per share of 28.11 cents at 29 February 2016.
The results for the six months ended 31 August 2016 will be released on SENS and RNS on Wednesday, 30 November 2016.
The financial information on which this trading statement is based has not been reviewed, audited or reported on by the Company's external auditors. This statement is issued in compliance with paragraph 3.4(b) of the Listings Requirements of the JSE Limited.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
PSG Capital Proprietary Limited
30 November 2016
For further information please contact:
SacOil Holdings Limited
+27 (0)10 591 2260
finnCap Limited (Nominated Adviser and broker)
Christopher Raggett and James Thompson
+44 (0) 20 7220 0500
FirstEnergy Capital (Joint broker)
Hugh Sanderson / David van Erp
+44 (0) 20 7448 0200
Buchanan (Financial PR adviser) - UK
Ben Romney / Chris Judd / Madeleine Seacombe
+44 (0)20 7466 5000
SacOil is a South African based independent African oil and gas company, dual-listed on the JSE and AIM. The Company has a diverse portfolio of assets spanning production in Egypt; exploration and appraisal in the Democratic Republic of Congo, Malawi and Botswana; and midstream projects including crude trading in Nigeria and a terminal project in Equatorial Guinea. Our focus as a Group is on delivering energy for the African continent by using Africa’s own resources to meet the significant growth in demand expected over the next decade. The Company continues to evaluate industry opportunities throughout Africa as it seeks to establish itself as a leading, full-cycle pan-African oil and gas company.