31 May 2017

SacOil Completes Transformational Acquisition of Controlling Interest in Afric Oil Group

SacOil, the South African based independent African oil and gas company that is focussed on the full oil and gas value chain, is pleased to announce that is has fulfilled all conditions precedent relating to the acquisition of a controlling interest in Afric Oil, via the acquisition of Phembani Oil Proprietary Limited (“Phembani Oil”) from Gentacure Proprietary Limited (“Gentacure”) and its holding company, Moopong Investments Holdings Proprietary Limited (“Moopong”) (“the Acquisition”).

SacOil will have a 71% direct interest in Afric Oil Group (“Afric Oil”), one of the largest independent fuel distributors in South Africa, targeting distribution of circa 45 million of fuel product (diesel, petrol and paraffin) monthly to a diversified client base that include local and national government, mining, construction, transport, manufacturing, parastatals, resellers and agricultural clients.

The acquisition provides SacOil with its first operational footprint in South Africa, as well as entry into Zimbabwe. SacOil’s diverse portfolio now comprises of operated production activities in Egypt, exploration in Democratic Republic of Congo, alongside partner TOTAL E&PRDC, Malawi and Botswana, a crude trading allocation with Nigerian National Petroleum Company and fuel distribution operations in Southern Africa.

The final consideration for the Acquisition has been adjusted downwards from R200 million as previously announced to R183.45 million, consisting of an initial consideration of R128.49 million and contingent consideration of R54.96 million. The cash component of the initial consideration is R39 million that is due and payable on closing of the Acquisition and a contingent cash payment of R2.26 million due 12 months after the Acquisition. The initial consideration of R89.49 million will be settled in shares on closing of the Acquisition and the contingent consideration of R52.7 million will be settled 12 months after the closing of the Acquisition. The pricing basis for the issue of the shares is as set out in the announcement on 6 March 2017 and the price used for the issue of 690m at a price of 20.9c that represents a 10% discount to the 90 day VWAP.

On 31 May 2017, SacOil secured an equity bridge loan from Gemcorp Africa Fund I Limited, a company based in Mauritius. The loan is repayable in 12 months from the proceeds of a rights issue which the Board has committed to undertake within the next 12 months. The loan is secured by a cession in security of the rights offer proceeds, bears interest at 8.5% per annum and was arranged at a fee of 2%. The loan will be utilised to fund the acquisition of Phembani Oil and for working capital for general corporate purposes of the Group.

Commenting on the acquisition, CEO Dr Thabo Kgogo said:

“Completion of this acquisition represents the first chapter in the next book of SacOil’s story.  The impact of this acquisition on the Company’s operational and financial profile is truly transformational, and takes us a large step closer to achieving our strategic goal of becoming a leading pan-African player with operations along the full industry value chain.  Afric Oil’s operations further balances our portfolio with a greater emphasis on lower-risk, revenue generating assets.  Following completion of this transaction, we will now work closely with Afric Oil’s quality management team in delivering an ambitious growth strategy and enhancing profitability post completion of Afric Oil’s acquisitions of Big Red and Forever Fuels earlier in the year.”

26 May 2017

Updated Trading Statement for the Year ended 28 February 2017.

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 8 May 2017 in which the Company advised that earnings per share and headline earnings per share for the year ended 28 February 2017 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 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$”).  The strengthening of the Rand against the US$ during the period resulted in foreign exchange losses of R125 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 year ended 29 February 2016 included foreign exchange gains totalling R155 million arising from the weakening of the Rand against the US$ during the period.  These gains which arose from the revaluation of the US$ denominated asset base contributed to the overall profit recorded by the Group for the year ending 28 February 2016.

Provision for impairment of financial assets

The SacOil board of directors continues to pursue the recovery of US$19 million (R249 million as at 28 February 2017) owed to the Group by Transcorp pursuant to the termination of the Group’s participation in OPL281.  Our legal counsel has estimated that the matter will likely be resolved during the second half of 2018.  This continued delay has affected the valuation of the receivable and a provision for impairment of R55 million has been recognised to take into account the impact of the time value of money.The Group has commenced a legal process to recover R116 million owed by Encha, however, as reported in our interim results the amount was fully impaired due to limited public information available to determine Encha's net asset position as a basis to support the recovery of the amount owed.  A provision for impairment of R116 million has therefore been raised.The results of the Group as at 28 February 2017 therefore include an impairment provision of R171 million relating to the Transcorp and Encha receivables as highlighted above. The board of directors remains confident in its ability to recover these amounts owed.

Reversal of provision for impairment of financial assets

Although the performance at Lagia fell below expectations, future estimates of oil prices and related costs have supported the reversal of R62 million of the Lagia impairment loss, compared to the impairment charge of R77 million in 2016.Developments on Block III in the DRC have supported the reversal of the contingent bonus impairment of R31.8 million primarily due to changes in the estimated First Investment Date (“FID”) and First Oil Date (“FOD”) attributable to Block III (2016: FID: 2021, FOD: 2025). The fact that an agreement has been reached on the route of the oil export pipeline from Uganda has removed some of the timing risk.

Financial performance

As a result of the above, shareholders are advised that the basic loss per share for the year ended 28 February 2017, is expected to be between 6.31 cents and 6.64 cents, representing a decrease of between 485% and 505% from the basic earnings per share of 1.64 cents recorded for the year ended 29 February 2016.The basic headline loss per share for the year ended 28 February 2017, which excludes the impact of any re-measurements of assets or liabilities, is expected to be between 7.74 cents and 7.95 cents, representing a decrease of between 844% and 864% from the basic headline earnings per share of 1.04 cents recorded for the year ended 29 February 2016.The net asset value per share as at 28 February 2017 is expected to be between 18.23 cents and 23.85 cents, a decrease of between 15% and 35% when compared to the net asset value per share of 28.11 cents at 29 February 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.