TIDMSAC
RNS Number : 5756Q
SacOil Holdings Limited
30 November 2016
SacOil Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1993/000460/06)
JSE share code: SCL AIM share code: SAC
ISIN: ZAE000127460
("SacOil" or "the Company" or "the Group")
Reviewed condensed consolidated interim results for the six
months ended 31 August 2016
HIGHLIGHTS
- Award of crude trading agreement in Nigeria
- Successful offtake of a Nigerian crude allocation of 950 000
barrels (475 000 attributable to SacOil) in June 2016 and a second
allocation of the same quantity post period
- Commencement of a thermal stimulation programme at Lagia
- Partner TOTAL E&P RDC, operator of Block III, successfully
completed the acquisition of 244 km 2D seismic data on the licence
area
- Increased availability of new business development
opportunities
- Conclusion of a settlement agreement relating to the OPL 233
legal disputes
- Post period, commencing an in-depth review of the Lagia
reservoir characterisation for overall field optimisation
Dr Thabo Kgogo, Chief Executive Officer of SacOil commented:
"Notwithstanding the challenging backdrop of volatile global oil
markets for the duration of the first half of this financial year,
we have made positive strides towards the attainment of our key
strategic priorities. Our key focus areas this period were the
expansion of business development activities, optimisation of
production from the Lagia Oil Field ("Lagia"), improvement in the
Group's cost structure, resolution of legacy issues, recovery of
funds owed to the Group, the safe running of our operations and
engagement with stakeholders on strategic issues. We are satisfied
with the progress we have made in each of these initiatives with
the limited resources at the Group's disposal.
The Group has achieved yet another milestone emanating from the
recent addition and integration of our crude trading business in
Nigeria which generated revenue totalling R341 million. This has
contributed to the significant improvement in the operational
performance of the Group and the diversification of revenue streams
in line with the strategy. It is expected that this segment of the
business will continue to provide an additional revenue stream for
the remainder of the year.
In an effort to optimise the production profile of Lagia we
conducted thermal stimulation on existing wells on the field.
Despite these operations, the field's technical performance remains
below expectations and the objective for the remainder of the
financial year is to continue to optimise production from Lagia to
match the existing oil pricing conditions and to ensure that we
achieve a break-even position for the asset. Lagia is complex in
nature and will require some time to unlock the real value of the
asset. More details on these operations can be found in the
operational review below.
Our long-term strategy remains to become a leading sustainable,
profitable and independent African energy company. As such, we
continue to evaluate multiple projects in our quest to acquire
additional cash-generative assets to grow the business. During the
period, in the ordinary course of business, we looked at a large
number of potential target upstream and downstream assets in
Nigeria, Egypt, Tanzania and South Africa. The evaluation of these
assets is ongoing and it is expected that our plan to acquire at
least one asset will be brought to fruition in the near term. The
oil and gas mergers and acquisitions ("M&A") market has seen
vendors become more pragmatic about the valuation of their assets,
resulting in a willingness to divest in the prevailing
environment.
SacOil's Board of directors ("BoD") remains committed to the
resolution of the outstanding litigation matters and the recovery
of funds owed to the Group where realistically obtainable. We
recognise that litigation inherently is a protracted and costly
process, however, to date we have concluded the proceedings
relating to our exit from OPL 233 in Nigeria. We agreed a
settlement with Nigdel United Oil Company which has seen both
parties withdraw their respective claims. This settlement removes
any distraction in relation to our previous participation in OPL
233. The BoD is confident that this is in the best interest of all
our stakeholders, based on the sound legal and financial advice we
have received. The Group continues to pursue legal action against
Transcorp and the Encha Group to recover amounts owed pursuant to
the withdrawal from OPL 281 and under the terms of the written
acknowledgement of debt, respectively. The estimated timeline to
resolve the Transcorp litigation has been deferred, resulting in a
provision for impairment of R48.1 million to account for the time
value of money. The amounts owed to the Group under the
acknowledgement of debt became due and payable on 29 February 2016,
however, Encha has failed to uphold its obligation. Due to the lack
of financial information available to the Group on the financial
position of Encha, we have impaired the amount in full to satisfy
accounting provisions. This does not take away from the fact that
Encha has significant assets that the Group will target for the
recovery of the amount as it continues to progress the legal
matter. Other matters as outlined in more detail in the litigation
section below remain outstanding. The BoD continues to make every
effort to expedite the resolution of these outstanding matters in
order to recover the amounts owed to the Group.
We continued our engagement with various stakeholders on matters
of strategic importance. During June and July 2016 we undertook
marketing roadshows in Johannesburg, Cape Town and London to raise
the profile of the Group and to create an awareness of its
investment case amongst various stakeholders.
We continue to focus on minimising the increase in the Group's
expenditure and have managed to contain a significant component of
our cost base during the period. As a result of additional business
development activities, the ongoing litigation and professional
advisory fees relating to the Lagia thermal stimulation initiative
throughout the period, we incurred an increase in business
development costs, corporate expenses, legal fees and consultation
costs. Our aim is to continue minimising the growth in the overall
cost base without negatively impacting the strategic objectives of
the Group.
As a reputable operator adhering to the highest industry
standards, HSE matters continue to be of the utmost importance to
us. We are pleased to report that there were no minor or major
incidents during the period and the safety records at Lagia and at
our other operations were well above industry standards.
Looking ahead, we are cognisant of the fact that we will need to
obtain scale through the further addition of cash-generative assets
in order to become a business capable of delivering sustainable,
long-term growth for its shareholders. Against the backdrop of
particularly challenging market conditions for the sector, we have
developed a solid platform to grow the Group and continue to make
good headway towards our operational and corporate objectives. We
are pleased with the Public Investment Corporation's additional
investment which saw its shareholding in the Company increase from
42.17% to 68.65% in October 2016. This provides a cornerstone
investor who is supportive of the Group's growth. Whilst the
interim results highlight uncertainties that exist with respect to
the ability of the Group to remain a going concern, the BoD is
confident that the Group has adequate cash resources to cover its
activities until January 2018. The BoD will continue to pursue
cash-generative assets and other sources of funding to ensure that
the deficit which exists in the Group's cash flow forecast to
February 2019 is addressed. Post this period, it is our expectation
that the Group will hold sufficient assets to ensure sustainable
operations. It is also important to highlight that the Group has
maintained its debt-free position.
We thank our stakeholders for their continued support as we
continue to work towards building a sustainable business."
OPERATIONS REVIEW
Lagia, Egypt
Optimisation of production from Lagia remained a key priority
during the first six months of the financial year. This focus
followed completion in the prior year of Phase II of the Lagia
development programme which saw the installation and commissioning
of steam facilities for a thermal recovery process on existing
production wells. Multiple steam cycles were completed during the
period based on varying parameters with the objective to determine
the optimal production of the field. As a result of the complex
nature of development for this asset culminating in excessive water
content and suboptimal steam injection for enhanced oil recovery,
the production performance during the period was below our
expectations for the capability of the field. These developments,
coupled with sustained low oil prices and the attendant market
discount for heavy crude, have led us to undertake an in-depth
review of the Lagia reservoir characterisation for overall field
optimisation. The overall objective of this review is to enable us
to prepare the field for increased recovery and improved economics
in a higher oil price environment. In that regard, the following
initiatives are currently under way:
- optimisation exercise for demulsifier injection to reduce
water in the oil which should contribute to a reduction in the
Group's operating cost base;
- reassessment of the operational cost base to ensure a
break-even position is achieved; and
- the identification of possible zones for water shut-off and
steam injection optimisation following the review of petrophysical
and production data from the wells. This will lead to advancing the
analysis of suitable technologies for heightened oil recovery.
These activities will remain the focal point of operations at
Lagia in Q4 of the 2016 calendar year and will require minimal
capital expenditure.
Crude trading, Nigeria
The Nigerian crude trading joint operation with Energy Equity
Resources Norway Limited ("EERNL") generated an additional revenue
stream for the Group following the offtake of a crude allocation of
950 000 barrels in June 2016. SacOil's share of this offtake was
475 000 barrels. The offtake of a second allocation of 950 000
barrels, of which 50% is attributable to SacOil, took place in
September 2016, post the interim reporting period. The joint
operation will continue to seek additional allocations from the
Nigerian National Petroleum Corporation ("NNPC") in line with the
terms of the agreement concluded in April 2016. The Group's right
to acquire crude from the NNPC will expire in March 2017. We are in
the process of applying for the renewal of the crude trading
agreement. Whilst this is dependent on the discretion of the NNPC,
we remain hopeful for a positive outcome from the application
process.
Block III, Democratic Republic of Congo
During June 2016 Total E&P RDC ("TOTAL"), operator of Block
III, successfully completed the acquisition of 244 km of 2D seismic
data and is in the process of interpreting and integrating the data
with previously acquired gravity and magnetic information. It is
expected that the seismic processing and interpretation will be
completed during Q2 of 2017. If possible prospects and an
identifiable well location are established, the plan is to drill a
well shortly thereafter.
As reported previously, the seismic survey did not encroach on
the Virunga National Park. TOTAL continues to carry SacOil's share
of exploration costs relating to Block III under the terms of the
Farm-in Agreement. The licence for Block III will be up for renewal
in January 2018.
Block 1, Malawi
In Malawi, SacOil, as operator, is in the process of finalising
the environmental and social impact assessments as well as the
evaluation and processing of the country-wide gravity and magnetic
data over Block 1. Desktop studies on the area are also under way
which are yielding encouraging results. It is expected that the
studies and assessments will be completed by February 2017. The
licence for Block 1 will be up for renewal in August 2017.
Petroleum Exploration Licences ("PELs") 123, 124 and 125,
Botswana
The environmental and social impact assessment has now been
approved by the Minister of Minerals. Desktop studies of PELs 123,
124 and 125 are ongoing and are expected to be completed by
February 2017. Licences will be up for renewal in June 2017.
Bioko Terminal, Equatorial Guinea
The parties have compiled the pre-feasibility studies and have
made the submission to the Government of Equatorial Guinea for its
consideration, following which the parties will agree on the way to
proceed with the project. The project remains a long-term play
split into two phases. Storage of approximately 680 000 cubic
metres for refined products will be constructed during the first
phase. The subsequent phase will deal with the development of crude
storage.
FINANCIAL REVIEW
The Group generated a loss after tax of R221.4 million (2015:
profit of R2.8 million), a basic loss per share of 6.77 cents
(2015: basic earnings per share of 0.32 cent) and a basic headline
loss per share of 6.77 cents (2015: basic headline earnings per
share of 0.25 cent) for the period ended 31 August 2016. Key
contributing factors were the strengthening of the Rand against the
US Dollar ("US$") which resulted in foreign exchange losses
totalling R61.4 million (2015: R57.5 million in foreign exchange
gains due to the weakening of the Rand) arising from the
revaluation of the Group's US$ denominated assets, the provision
for impairment of R164.0 million with respect to other financial
assets and the underperformance of the Lagia asset. These losses
were partially off-set by an increase of R31.9 million in
investment income for the period.
Revenue and cost of sales
Crude trading
The Group continued to diversify its operations by adding the
crude trading business in Nigeria which generated R340.9 million in
revenue during the period. The gross cost of procuring crude from
the NNPC with respect to the offtake agreement was R338.8 million,
thereby generating a gross profit of R2.1 million for the
period.
Lagia
The challenges experienced, as highlighted within the operations
review, resulted in Lagia contributing lower-than-expected revenue
of R3.2 million (2015: R3.0 million). Cost of sales increased by
R2.7 million to R9.9 million primarily due to higher operating
costs associated with steaming operations.
Other income
Other income at 31 August 2015 included foreign exchange gains
totalling R57.5 million. The strengthening of the Rand against the
US$ during the period generated foreign exchange losses totalling
R61.4 million which have been classified under "other operating
expenses". These losses arose from the revaluation of the Group's
US$ denominated other financial assets.
Investment income
Management continues to pursue the recovery of the receivable
due from Encha Energy ("Encha"). Investment income at 31 August
2016 includes an interest accrual of R40.3 million (2015: RNil)
relating to this receivable as further explained in note 8.
Interest received on the Group's cash and cash equivalents and
interest on other financial assets decreased by R2.2 million and
R6.2 million, respectively. High level overviews of the Group's
cash and cash equivalents, financial assets and progress on the
recovery of the Encha receivable are provided below.
Provision for impairment of other financial assets
The SacOil BoD continues to pursue the recovery of amounts owed
to the Group as disclosed in the litigation section. Provisions for
impairment, in order to comply with accounting and auditing
provisions, have been recognised with respect to the Encha
receivable and Transcorp Refund as indicated in note 8. These
provisions are recorded under "other operating costs".
Other operating costs
Excluding the impact of the foreign exchange losses referred to
above, the provision for impairment of the Transcorp, EERNL and
Encha receivables, business development activities, the
amortisation and depreciation of assets, and the impairment of the
contingent consideration at 31 August 2015, other operating costs
increased by R8.4 million relative to the prior comparative period.
Improved engagement with various stakeholders, ongoing litigation
and consultations regarding the Lagia thermal stimulation
initiative resulted in increased corporate expenses, legal fees and
consultation costs, respectively. The increase in the Group's
remuneration costs is reflective of inflationary salary adjustments
coupled with an increase in headcount in Egypt. A breakdown of the
Group's other operating expenses is provided in note 3.
Oil and gas properties
The investment in the thermal stimulation facilities at Lagia
resulted in additions totalling R6.6 million (29 February 2016:
R55.4 million) to the Group's oil and gas properties. This increase
was off-set by foreign exchange losses of R15.3 million on
translation of foreign operations (29 February 2016: foreign
exchange gains of R46.8 million), disposals totalling R0.2 million
(29 February 2016: RNil) and depletion of R2.6 million (29 February
2016: R2.3 million). Movements in the Group's oil and gas
properties are also provided in note 7.
Other financial assets
As noted above, the Group's other financial assets (current and
non-current) were negatively impacted by the strengthening of the
Rand against the US$ and the provisions for impairment of R48.1
million and R115.8 million against the Transcorp and Encha
receivables, respectively, as disclosed in note 8. Foreign exchange
losses with respect to other financial assets totalled R50.6
million for the period, which were off-set by interest on the Encha
receivable of R40.3 million and interest of R11.6 million arising
from the unwinding of the discount applied to the recognition of
the contingent consideration. The net movement in the Group's other
financial assets during the period was R162.6 million. These assets
are disclosed in note 8.
Cash and cash equivalents
The Group utilised R54.9 million (2015: R40.1 million) during
the period on the installation of thermal stimulation facilities at
Lagia (R6.6 million), business development activities (R6.7
million), consulting fees (R6.8 million), corporate costs (R3.7
million), legal fees (R4.5 million), employee costs (R15.6 million)
and other operating expenses (R11.0 million). At 31 August 2016 the
Group's cash balances stood at R52.4 million, sufficient for its
activities for at least the next 12 twelve months.
Other
Movements in the Group's exploration and evaluation assets,
other intangible assets, property, plant and equipment,
inventories, trade receivables, deferred tax liability and trade
and other payables were not significant for the period under
review.
LITIGATION UPDATE
OPL 281
As previously reported, SacOil 281 Nigeria Limited ("SacOil
281") terminated its participation with Transnational Corporation
of Nigeria Plc ("Transcorp"), the operator of OPL 281.
SacOil 281 contributed US$12.5 million towards farm-in fees on
28 February 2011, which fees contractually were to be refunded with
interest by Transcorp pursuant to the termination. Notwithstanding
the receipt of Transcorp's acknowledgement of its refund
obligation, SacOil 281 subsequently received notice from Transcorp
that its termination of the Farm-out and Participation Agreement
("FoPA") in December 2014 was wrongful and amounted to a
repudiation of the FoPA. As provided for in the FoPA, SacOil 281
filed a notice for arbitration with the Nigerian Chartered
Institute of Arbitrators, Nigerian branch on 28 August 2015 to
recover its farm-in and related fees plus interest thereon.
On 18 June 2015 Transcorp in response filed the following two
court applications in the High Court: Lagos State: (i) alleging the
repudiation of the FoPA by SacOil 281, claiming the sum of US$50
million as special damages for wrongful termination; and (ii)
challenging the validity, applicability and appointment of
arbitrators and the arbitration clause in the FoPA. SacOil 281
opposed these proceedings and on 31 May 2016 the High Court: Lagos
State ruled against SacOil 281 on "matter (ii)" but granted SacOil
281 leave to appeal on 30 June 2016. The appeal was scheduled to be
mentioned on 28 November 2016 with a probable hearing during
mid-2017. Both parties have agreed to defer the court date in order
to discuss a possible settlement. In the event that the Group is
unable to reach a settlement with Transcorp, our Nigerian counsel
remains confident that SacOil 281's prospects to successfully
overturn the court a quo's ruling in the Court of Appeal remain
very good; and that the likelihood of Transcorp succeeding in its
claim for US$50 million is low as assignment was not obtained, nor
has evidence of production been provided. The arbitration date
would be around the first half of 2018 should an amicable
settlement not be reached. We will update our shareholders in due
course regarding the outcome of settlement negotiations with
Transcorp.
Mr Joseph Modibane
Two actions were instituted by Mr Joseph Modibane against the
Company. In the first action he claimed R67.2 million plus interest
and costs on the basis that he was entitled to damages pursuant to
a breach of an agreement. In the second action he claimed R80
million plus interest and costs on the basis that he was defamed by
an announcement published by the Company. The Company is defending
both actions. A SENS announcement published on 28 February 2013
indicated that Mr Modibane passed away and it remains to be seen
whether an executor of Mr Modibane's estate elects to persist with
the two actions.
Mr Robin Vela
The Company instituted legal action against Mr Robin Vela (its
former CEO) in which it claimed an amount of R3.3 million together
with interest in respect of taxes that became due to the South
African Revenue Service 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 R0.3 million allegedly owing in respect of unpaid leave, an
amount of R2.8 million allegedly due in respect of a bonus and an
amount of R16.9 million allegedly owing in respect of the breach of
a share option agreement. In addition, Mr Vela is also claiming
interest on these amounts. Both parties have delivered their
discovery affidavits.
1 November 2016 was allocated as a trial date, but because our
counsel was not available on the date allocated, by agreement
between the parties, the matter was removed from the trial roll of
1 November 2016. The Company awaits the allocation of a trial
date.
Mr Richard Linnell
Mr Richard Linnell (the Company's former Chairman) instituted
legal action against the Company during September 2016 in which Mr
Linnell claims, amongst other matters, payment of R14.7 million
together with interest and the reinstatement of 12.6 million share
options which the Company contends have lapsed. The Company is
defending the action and a plea on behalf of the Company will in
due course be delivered.
Encha Group Limited and Encha Energy Proprietary Limited
The Company instituted legal action against Encha Energy
Proprietary Limited ("Encha Energy") and Encha Group Limited
("Encha Group") to claim the payment of R115.8 million (inclusive
of interest) under the terms of the written acknowledgement of debt
provided by Encha Energy, and in respect of which Encha Group bound
itself as surety. The action is defended and the defendants have
delivered their pleas. The Company awaits the allocation of a trial
date.
OPL 233
The matter has been settled as disclosed in note 15.
OUTLOOK
The volatility within the global oil markets is expected to
persist and will require us to continue to operate at low oil
prices. Over the next few months we will continue to aggressively
pursue the acquisition of cash-generative assets to ensure the
sustainability of the Group whilst also finalising the in-depth
review of the Lagia reservoir characterisation. We remain hopeful
that the NNPC will grant the Group a renewal of the crude trading
agreement which will enable us to grow that segment of the
business. Cost containment and the resolution of legacy issues will
also remain key focus areas.
GOING CONCERN
The Group continues to rely on its ability to successfully raise
further financing to fund future working capital and business
development needs. The Board remains reasonably confident that it
will manage the material uncertainties that exist which are
highlighted in note 14 to the condensed consolidated interim
results. The condensed consolidated interim results have therefore
been prepared on a going concern basis.
CHANGE IN DIRECTORATE
The following directors resigned from the BoD of SacOil:
Bradley Cerff on 25 July 2016
Steve Muller on 16 September 2016
Danladi Verheijen on 19 September 2016
ABOUT SACOIL
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.
Consolidated Statement of Comprehensive
Income
---------------------------------------- ----- ----------- -----------
Reviewed Reviewed
Six months Six months
to to
31 August 31 August
2016 2015
Notes R R
---------------------------------------- ----- ----------- -----------
344 121 3 001
Revenue 617 496
---------------------------------------- ----- ----------- -----------
(348 (7 179
Cost of sales 721 804) 407)
---------------------------------------- ----- ----------- -----------
(4 600 (4 177
Gross loss 187) 911)
---------------------------------------- ----- ----------- -----------
60 720
Other income 399 077 459
---------------------------------------- ----- ----------- -----------
(275 363 (59 921
Other operating costs 570) 946)
---------------------------------------- ----- ----------- -----------
(279 564 (3 379
Operating loss 3 680) 398)
---------------------------------------- ----- ----------- -----------
54 932 23 073
Investment income 4 952 720
---------------------------------------- ----- ----------- -----------
(224 631 19 694
(Loss)/profit before taxation 728) 322
---------------------------------------- ----- ----------- -----------
3 197 (16 921
Taxation 132 224)
---------------------------------------- ----- ----------- -----------
(221 2 773
(Loss)/profit for the period 434 596) 098
---------------------------------------- ----- ----------- -----------
Other comprehensive (loss)/income:
---------------------------------------- ----- ----------- -----------
Items that may be reclassified to
profit or loss in subsequent periods:
---------------------------------------- ----- ----------- -----------
Exchange differences on translation (11 669 25 271
of foreign operations 350) 170
---------------------------------------- ----- ----------- -----------
Other comprehensive (loss)/income (11 669 25 271
for the year net of taxation 350) 170
---------------------------------------- ----- ----------- -----------
Total comprehensive (loss)/income (233 28 044
for the period 103 946) 268
---------------------------------------- ----- ----------- -----------
(Loss)/profit attributable to:
---------------------------------------- ----- ----------- -----------
(221 10 558
Equity holders of the parent 434 596) 602
---------------------------------------- ----- ----------- -----------
(7 785
Non-controlling interest - 504)
---------------------------------------- ----- ----------- -----------
(221 2 773
434 596) 098
---------------------------------------- ----- ----------- -----------
Total comprehensive (loss)/income
attributable to:
---------------------------------------- ----- ----------- -----------
(233 35 829
Equity holders of the parent 103 946) 772
---------------------------------------- ----- ----------- -----------
(7 785
Non-controlling interest - 504)
---------------------------------------- ----- ----------- -----------
(233 28 044
103 946) 268
---------------------------------------- ----- ----------- -----------
(Loss)/earnings per share
---------------------------------------- ----- ----------- -----------
Basic (cents) 6 (6.77) 0.32
---------------------------------------- ----- ----------- -----------
Diluted (cents) 6 (6.77) 0.32
---------------------------------------- ----- ----------- -----------
Consolidated Statement of Financial
Position
------------------------------------ ----- ---------- ------------
Reviewed Audited
As at As at
31 August 29 February
2016 2016
Notes R R
------------------------------------ ----- ---------- ------------
Assets
------------------------------------ ----- ---------- ------------
Non-current assets
------------------------------------ ----- ---------- ------------
51 049 50 973
Exploration and evaluation assets 820 446
------------------------------------ ----- ---------- ------------
154 543 166 030
Oil and gas properties 7 486 112
------------------------------------ ----- ---------- ------------
472 330 253 799
Other financial assets 8 341 364
------------------------------------ ----- ---------- ------------
49 877 57 845
Other intangible assets 781 420
------------------------------------ ----- ---------- ------------
1 298 1 077
Property, plant and equipment 362 478
------------------------------------ ----- ---------- ------------
729 099 529 725
Total non-current assets 790 820
------------------------------------ ----- ---------- ------------
Current assets
------------------------------------ ----- ---------- ------------
1 983 383 144
Other financial assets 8 876 684
------------------------------------ ----- ---------- ------------
8 650 9 329
Inventories 535 655
------------------------------------ ----- ---------- ------------
3 018 3 404
Trade and other receivables 121 645
------------------------------------ ----- ---------- ------------
52 414 107 349
Cash and cash equivalents 365 463
------------------------------------ ----- ---------- ------------
66 066 503 228
Total current assets 897 447
------------------------------------ ----- ---------- ------------
795 166 1 032
Total assets 687 954 267
------------------------------------ ----- ---------- ------------
Equity and Liabilities
------------------------------------ ----- ---------- ------------
Shareholders' equity
------------------------------------ ----- ---------- ------------
1 216 1 216
Stated capital 503 883 503 883
------------------------------------ ----- ---------- ------------
66 415 77 961
Reserves 977 913
------------------------------------ ----- ---------- ------------
(596 (375
Accumulated loss 688 014) 253 418)
------------------------------------ ----- ---------- ------------
686 231 919 212
Total shareholders' equity 846 378
------------------------------------ ----- ---------- ------------
Liabilities
------------------------------------ ----- ---------- ------------
Non-current liabilities
------------------------------------ ----- ---------- ------------
75 328 78 526
Deferred tax liability 897 029
------------------------------------ ----- ---------- ------------
75 328 78 526
Total non-current liabilities 897 029
------------------------------------ ----- ---------- ------------
Current liabilities
------------------------------------ ----- ---------- ------------
20 755 22 365
Trade and other payables 124 040
------------------------------------ ----- ---------- ------------
12 850 12 850
Current tax payable 820 820
------------------------------------ ----- ---------- ------------
33 605 35 215
Total current liabilities 944 860
------------------------------------ ----- ---------- ------------
108 934 113 741
Total liabilities 841 889
------------------------------------ ----- ---------- ------------
795 166 1 032
Total equity and liabilities 687 954 267
------------------------------------ ----- ---------- ------------
3 269 3 269
Number of shares in issue 836 208 836 208
------------------------------------ ----- ---------- ------------
Net asset value per share (cents) 20.99 28.11
------------------------------------ ----- ---------- ------------
Net tangible asset value per share
(cents) 17.90 24.78
------------------------------------ ----- ---------- ------------
Consolidated Statement of Changes in Equity
----------------------------------------------------------------------------------------------------------------------
Total equity
attributable
Foreign Share- to equity Non-
currency based holders controlling
Stated translation payment Total Accumu-lated of interest Total
capital reserve reserve reserves loss the parent ("NCI") equity
R R R R R R R R
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Balance at
29 February 1 216 70 176 7 785 77 961 (375 253 919 212 919 212
2016 503 883 479 434 913 418) 378 - 378
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Changes in
equity:
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Loss for the (221 434 (221 434 (221 434
period - - - - 596) 596) - 596)
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Other
comprehensive
loss for the (11 669 (11 669 (11 669 (11 669
period - 350) - 350) - 350) - 350)
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Total
comprehensive
loss for the (11 669 (11 669 (221 434 (233 103 (233 103
period - 350) - 350) 596) 946) - 946)
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Share options
issued - - 123 414 123 414 - 123 414 - 123 414
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
(11 669 (11 545 (221 434 (232 980 (232 980
Total changes - 350) 123 414 936) 596) 532) - 532)
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Balance at 1 216 58 507 7 908 66 415 (596 688 686 231 686 231
31 August 2016 503 883 129 848 977 014) 846 - 846
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Balance at
28 February 1 216 8 716 6 889 15 606 (448 654 783 455 4 417 787 873
2015 503 883 621 847 468 565) 786 649 435
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Changes in
equity:
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Profit/(loss) 10 558 10 558 (7 785 2 773
for the period - - - - 602 602 504) 098
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Other
comprehensive
income for 25 271 25 271 25 271 25 271
the period - 170 - 170 - 170 - 170
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Total
comprehensive
income/(loss) 25 271 25 271 10 558 35 829 (7 785 28 044
for the period - 170 - 170 602 772 504) 268
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
25 271 25 271 10 558 35 829 (7 785 28 044
Total changes - 170 - 170 602 772 504) 268
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Balance at 1 216 33 987 6 889 40 877 (438 095 819 285 (3 367 815 917
31 August 2015 503 883 791 847 638 963) 558 855) 703
------------------ --------- ------------ -------- --------- ------------ ------------- ------------ ---------
Consolidated Statement of Cash Flows
--------------------------------------------- ----------- -----------
Reviewed Reviewed
Six months Six months
to 31 to 31
August August
2016 2015
R R
--------------------------------------------- ----------- -----------
Cash flows from operating activities
--------------------------------------------- ----------- -----------
(50 338 (40 467
Cash used in operations 910) 306)
--------------------------------------------- ----------- -----------
2 951 5 191
Interest income 017 403
--------------------------------------------- ----------- -----------
(47 387 (35 275
Net cash used in operating activities 893) 903)
--------------------------------------------- ----------- -----------
Cash flows from investing activities
--------------------------------------------- ----------- -----------
Purchase of exploration and evaluation
assets (476 219) (435 121)
--------------------------------------------- ----------- -----------
Purchase of property, plant and equipment (446 364) (908 104)
--------------------------------------------- ----------- -----------
(6 624 (6 474
Purchase of oil and gas properties 622) 274)
--------------------------------------------- ----------- -----------
Purchase of other intangible assets - (204 103)
--------------------------------------------- ----------- -----------
61 091
Receipts from loans and receivables - 500
--------------------------------------------- ----------- -----------
(7 547 53 069
Net cash (used in)/from investing activities 205) 898
--------------------------------------------- ----------- -----------
Cash flows from financing activities
--------------------------------------------- ----------- -----------
(57 888
Repayment of other financial liabilities - 500)
--------------------------------------------- ----------- -----------
(57 888
Net cash used in financing activities - 500)
--------------------------------------------- ----------- -----------
Total movement in cash and cash equivalents (54 935 (40 094
for the period 098) 505)
--------------------------------------------- ----------- -----------
Foreign exchange gains on cash and cash 6 440
equivalents - 069
--------------------------------------------- ----------- -----------
Cash and cash equivalents at the beginning 107 349 229 431
of the period 463 001
--------------------------------------------- ----------- -----------
Cash and cash equivalents at the end of 52 414 195 776
the period 365 565
--------------------------------------------- ----------- -----------
1 Basis of preparation
The condensed consolidated interim financial statements of the
Group, comprising SacOil Holdings Limited and its subsidiaries
(together "the Group"), for the six months ended 31 August 2016,
have been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB"), the preparation and disclosure requirements of IAS 34 -
Interim Financial Reporting, the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee, the Financial
Pronouncements as issued by the Financial Reporting Standards
Council, the Listings Requirements of the JSE Limited and in the
manner required by the South African Companies Act No. 71, 2008 (as
amended). Accordingly, certain information and footnote disclosures
normally included in annual financial statements prepared in
accordance with IFRS, as issued by the IASB, have been omitted or
condensed as is normal practice.
Principal accounting policies
The same accounting policies, presentation and methods of
computation have been followed in these condensed consolidated
interim financial statements of the Group as those applied in the
preparation of the Group's annual financial statements for the year
ended 29 February 2016. The following improvements arising from the
IASB's annual improvements projects and the amendments to IFRS
listed below, effective for financial periods beginning after 1
January 2016, were effective for the first time during this interim
period and did not have an impact on the Group's results:
- Amendments to IAS 1 - Disclosure Initiative
- Amendments to IFRS 10, IFRS 12 and IAS 28 - Investment
Entities: Applying the Consolidation Exemption
- Amendment to IFRS 11 - Joint Arrangements, regarding
acquisition of an interest in a joint operation
- Amendment to IAS 16 - Property, Plant and Equipment and IAS 38
- Intangible Assets, regarding depreciation and amortisation
- Amendment to IAS 16 - Property, Plant and Equipment and IAS 41
- Agriculture, regarding bearer plants
- Amendment to IFRS 10 and IAS 28 regarding the sale or
contribution of assets between an investor and its associate or
joint venture
- Amendment to IAS 27 - Separate Financial Statements, regarding
the equity method
- Amendment to IFRS 14 - Regulatory Deferral Accounts
- Improvement to IFRS 5 - Non-current Asset Held for Sale and
Discontinued Operations
- Improvement to IFRS 7 - Financial Instruments: Disclosures
- Improvement to IAS 19 - Employee Benefits
Details pertaining to the amendments or improvements referred to
above are provided in the Group annual financial statements for the
year ended 29 February 2016.
The amendment to IAS 34 - Interim Financial Reporting has been
applied in the preparation of these condensed consolidated interim
financial statements and other financial information in the interim
financial report. The amendment clarifies what is meant by the
reference in the standard to "information disclosed elsewhere in
the interim financial report" and further requires a
cross-reference from the interim financial statements to the
location of that other financial information.
These condensed consolidated interim results have been prepared
on a going concern basis.
All monetary information is presented in the functional currency
of the Company, which is the South African Rand.
Notes to oil and gas disclosure
In accordance with AIM Guidelines Willem de Meyer, Group
Executive: Strategy and Business Development, is the qualified
person who has reviewed the technical information contained in this
news release. Willem has 34 years' experience in the oil and gas
industry with a B.Sc (Hons) degree in geophysics and a Masters
Degree in Commerce focused on Mineral Economics. He is also
registered with the South African Council for Natural Scientific
Professions ("SACNASP").
2 Preparation of the condensed consolidated interim financial
statements and the auditors' review report
The directors take full responsibility for the preparation of
these condensed consolidated interim financial statements of the
Group for the six months ended 31 August 2016. The condensed
consolidated interim financial statements have been prepared under
the supervision of the Chief Financial Officer, Damain Matroos CA
(SA).
These condensed consolidated interim financial statements have
been reviewed by Ernst & Young Inc., the Group's auditors. A
copy of the auditors' unqualified review opinion, which includes an
emphasis of matter paragraph for the going concern matters noted in
note 14, is available for inspection at the registered office of
the Company.
31 August 31 August
2016 2015
Notes R R
-------------------------------------- ----- --------- ---------
3 Operating loss
-------------------------------------- ----- --------- ---------
Provision for impairment of financial (163 974 (26 082
assets 144) 765)
----------------------------------------- ----- --------- ---------
Gain on remeasurement of asset 3 221
held for sale - 937
----------------------------------------- ----- --------- ---------
(61 369 57 498
Foreign exchange (losses)/gains 036) 522
----------------------------------------- ----- --------- ---------
Bad debts recovered 399 077 -
-------------------------------------- ----- --------- ---------
(3 724 (2 146
Corporate costs 220) 633)
----------------------------------------- ----- --------- ---------
(1 800 (1 242
External auditors' remuneration 209) 293)
----------------------------------------- ----- --------- ---------
(1 780 (1 242
Audit fees 009) 293)
----------------------------------------- ----- --------- ---------
Other services (20 200) -
-------------------------------------- ----- --------- ---------
(102
Internal auditors' remuneration 055) (78 520)
----------------------------------------- ----- --------- ---------
(15 602 (14 051
Employee benefit expense 080) 527)
----------------------------------------- ----- --------- ---------
Accounting fees - (25 000)
----------------------------------------- ----- --------- ---------
(6 763 (3 657
Consulting fees 284) 527)
----------------------------------------- ----- --------- ---------
(6 714 (776
Business development 119) 565)
----------------------------------------- ----- --------- ---------
(4 473 (2 383
Legal fees 597) 706)
----------------------------------------- ----- --------- ---------
(1 921 (2 679
Travel and accommodation 365) 415)
----------------------------------------- ----- --------- ---------
(5 917 (4 100
Depreciation and amortisation 378) 114)
----------------------------------------- ----- --------- ---------
(2 624 (1 104
Oil and gas properties 7 991) 215)
----------------------------------------- ----- --------- ---------
(225 (149
Property, plant and equipment 480) 605)
----------------------------------------- ----- --------- ---------
(399
Exploration and evaluation assets 845) -
-------------------------------------- ----- --------- ---------
(2 667 (2 846
Other intangible assets 062) 294)
----------------------------------------- ----- --------- ---------
(1 345 (1 046
Rentals - premises 786) 968)
----------------------------------------- ----- --------- ---------
(445 (366
Broker's fees 959) 153)
----------------------------------------- ----- --------- ---------
(123
Share-based payment expense 414) -
-------------------------------------- ----- --------- ---------
4 Investment income
-------------------------------------- ----- --------- ---------
40 334
Interest receivable - loans 716 -
-------------------------------------- ----- --------- ---------
Interest received - cash and cash 2 951 5 191
equivalents 017 382
----------------------------------------- ----- --------- ---------
11 647 17 882
Interest on financial assets 219 338
----------------------------------------- ----- --------- ---------
54 932 23 073
952 720
----------------------------------------- ----- --------- ---------
Interest from loans of R40.3 million is attributable
to the accrual of interest on the receivable outstanding
from Encha Energy which is disclosed in note 8.
----------------------------------------------------------------------
5 Segmental reporting
------------------------------------------------------------------------------------------------------------------
The Group operates in six geographical locations which form the basis of
the information evaluated by its chief operating decision-maker. For management
purposes the Group is organised and analysed by these locations. These locations
are: South Africa, Egypt, Nigeria, the DRC, Botswana and Malawi. Operations
in South Africa relate to head office activities of the Group which include
the general management, financing and administration of the Group.
------------------------------------------------------------------------------------------------------------------
South Africa Egypt Nigeria DRC Malawi Botswana Elimi-nations Consoli-dated
R R R R R R R R
--------------- ------------ --------- ---------- ---------- ------- --------- ------------- -------------
For the six
months ended
31 August
2016
--------------- ------------ --------- ---------- ---------- ------- --------- ------------- -------------
3 211 340 909 344 121
Revenue - 927 690 - - - - 617
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
(9 916 (338 (348 721
Cost of sales - 452) 805 352) - - - - 804)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Gross (6 704 2 104
(loss)/profit - 525) 338 - - - - (4 600 187)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
2 799 (2 751
Other income 303 - 280 545 - - 70 765 536) 399 077
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Investment 45 980 8 952 54 932
income 359 - - 593 - - - 952
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Other operating (209 350 (13 956 (40 982 (13 032 (793 (275 363
expenses 324) 565) 162) 978) - 077) 2 751 536 570)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
3 197
Taxation - - - 132 - - - 3 197 132
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Loss for the (160 570 (20 661 (38 597 (722 (221 434
period 662) 090) 279) (883 253) - 312) - 596)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment assets 373 921 204 091 114 641 238 891 (202 926 729 099
- non-current 939 042 492 312 97 776 382 977 748) 790
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment assets 48 086 17 914 66 066
- current 562 349 33 897 27 910 - 4 179 - 897
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment
liabilities (118 685 (155 680 (3 890 202 926 (75 328
- non-current - 214) - 159) - 272) 748 897)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment
liabilities (26 106 (7 038 (33 605
- current 592) 511) - - - (460 841) - 944)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
For the six
months ended
31 August
2015
--------------- ------------ --------- ---------- ---------- ------- --------- ------------- -------------
3 001
Revenue - 496 - - - - - 3 001 496
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
(7 179 (7 179
Cost of sales - 407) - - - - - 407)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
(4 177
Gross loss - 911) - - - - - (4 177 911)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
32 828 20 945 11 565 (4 673 60 720
Other income 188 55 192 842 114 - - 877) 459
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Investment 10 296 12 393 23 073
income 772 - 382 949 999 - - - 720
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Other operating (29 386 (7 080 (749 (26 083 (1 296 (59 921
expenses 523) 238) 438) 610) - 014) 4 673 877 946)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
5 284 (22 205 (16 921
Taxation 191 - (212) 203) - - - 224)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Profit/(loss) 19 022 (11 202 20 579 (24 329 (1 296
for the period 628 957) 141 700) - 014) - 2 773 098
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment assets 384 868 213 938 334 446 1 196 (336 452 598 819
- non-current 684 488 - 786 742 821 669 691) 678
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment assets 396 746 22 329 126 734 47 935 593 746
- current 936 432 660 768 - - - 796
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment assets
- asset held 25 061 25 061
for sale - - 882 - - - - 882
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment
liabilities (38 681 (178 545 (2 207 115 401 (104 032
- non-current (1) 231) - 060) - 275) 361 206)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment
liabilities (53 131 (7 668 (211 242 (272 616
- current 310) 518) (132 857) 630) - (441 250) - 565)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Segment
liabilities
- liabilities
directly
associated
with asset (25 061 (25 061
held for sale 882) - - - - - - 882)
------------------ ------------ --------- ---------- ---------- ------- --------- ------------- -------------
Business segments
The operations of the Group comprise oil and gas exploration and production,
and crude trading. The activities currently undertaken in Equatorial Guinea
with respect to the development of the Bioko Terminal are not significant
at this stage and have not been separately disclosed. These activities therefore
do not meet the recognition criteria for reportable segments.
Revenue
The Group's reported revenue is generated from the Egyptian General Petroleum
Corporation ("EGPC") and Trafigura Pte Limited, with respect to oil sales
and crude trading, respectively. These revenues are attributed to the Egypt
and Nigeria segments, respectively.
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.
---------------------------------------------------------------------------------------------------------------------
31 August 31 August
2016 2015
R R
----------------------------------------------- ---------- ---------
6 (Loss)/earnings per share
----------------------------------------------- ---------- ---------
Basic (cents) (6.77) 0.32
-------------------------------------------------- ---------- ---------
Diluted (cents) (6.77) 0.32
-------------------------------------------------- ---------- ---------
(Loss)/profit for the period used in
the calculation of the basic and diluted (221 10 558
(loss)/earnings per share 434 596) 602
-------------------------------------------------- ---------- ---------
Weighted average number of ordinary
shares used in the calculation of basic 3 269 3 269
(loss)/earnings per share 836 208 836 208
-------------------------------------------------- ---------- ---------
Issued shares at the beginning of the 3 269 3 269
reporting period 836 208 836 208
-------------------------------------------------- ---------- ---------
Effect of shares issued during the reporting
period (weighted) - -
----------------------------------------------- ---------- ---------
Add: Dilutive share options 148 718 -
-------------------------------------------------- ---------- ---------
Weighted average number of ordinary
shares used in the calculation of diluted 3 269 3 269
(loss)/earnings per share 984 926 836 208
-------------------------------------------------- ---------- ---------
Headline (loss)/earnings per share
----------------------------------------------- ---------- ---------
Basic (cents) (6.77) 0.25
-------------------------------------------------- ---------- ---------
Diluted (cents) (6.77) 0.25
-------------------------------------------------- ---------- ---------
Reconciliation of headline (loss)/earnings
----------------------------------------------- ---------- ---------
(Loss)/profit attributable to equity (221 10 558
holders of the parent 434 596) 602
-------------------------------------------------- ---------- ---------
Adjusted for:
----------------------------------------------- ---------- ---------
Gain on remeasurement of asset held (3 221
for sale - 937)
-------------------------------------------------- ---------- ---------
Tax effect of adjustment - 902 142
-------------------------------------------------- ---------- ---------
(221 8 238
Headline (loss)/earnings for the period 434 596) 807
-------------------------------------------------- ---------- ---------
R
----------------------------------------------- ---------- ---------
7 Oil and gas properties
----------------------------------------------- ---------- ---------
Cost
----------------------------------------------- ---------- ---------
123 144
At 1 March 2015 421
-------------------------------------------------- ---------- ---------
55 444
Additions 498
-------------------------------------------------- ---------- ---------
46 833
Translation of foreign operations 512
-------------------------------------------------- ---------- ---------
225 422
At 29 February 2016 431
-------------------------------------------------- ---------- ---------
225 422
At 1 March 2016 431
-------------------------------------------------- ---------- ---------
6 624
Additions 622
-------------------------------------------------- ---------- ---------
(234
Disposals 234)
-------------------------------------------------- ---------- ---------
(15 252
Translation of foreign operations 023)
-------------------------------------------------- ---------- ---------
216 560
At 31 August 2016 796
-------------------------------------------------- ---------- ---------
Depletion and impairment
----------------------------------------------- ---------- ---------
(274
At 1 March 2015 713)
-------------------------------------------------- ---------- ---------
(56 850
Impairment 000)
-------------------------------------------------- ---------- ---------
(2 267
Depletion 606)
-------------------------------------------------- ---------- ---------
(59 392
At 29 February 2016 319)
-------------------------------------------------- ---------- ---------
(59 392
At 1 March 2016 319)
-------------------------------------------------- ---------- ---------
(2 624
Depletion 991)
-------------------------------------------------- ---------- ---------
(62 017
At 31 August 2016 310)
-------------------------------------------------- ---------- ---------
Net book value
----------------------------------------------- ---------- ---------
166 030
At 29 February 2016 112
-------------------------------------------------- ---------- ---------
154 543
At 31 August 2016 486
-------------------------------------------------- ---------- ---------
31 August 29 February
2016 2016
R R
------------------------------------------- ---------- ------------
8 Other financial assets
------------------------------------------- ---------- ------------
Non-current
------------------------------------------- ---------- ------------
188 322 196 315
Contingent consideration(1) 245 073
---------------------------------------------- ---------- ------------
277 432
Transcorp Refund(2) 413 -
---------------------------------------------- ---------- ------------
54 725 57 484
Loan due from EERNL 111 291
---------------------------------------------- ---------- ------------
520 479 253 799
769 364
---------------------------------------------- ---------- ------------
(48 149
Less: Provision for impairment(4) 428) -
---------------------------------------------- ---------- ------------
472 330 253 799
341 364
---------------------------------------------- ---------- ------------
Current
------------------------------------------- ---------- ------------
305 763
Transcorp Refund(2) - 874
---------------------------------------------- ---------- ------------
157 488 173 571
Loan due from EERNL(5) 557 324
---------------------------------------------- ---------- ------------
115 824 75 490
Advance payment against future services(3) 716 000
---------------------------------------------- ---------- ------------
Deferred consideration on disposal of 1 983 1 890
Greenhills Plant 876 810
---------------------------------------------- ---------- ------------
275 297 556 716
149 008
---------------------------------------------- ---------- ------------
(273 (173
Less: Provision for impairment(4) 313 273) 571 324)
---------------------------------------------- ---------- ------------
1 983 383 144
876 684
---------------------------------------------- ---------- ------------
474 314 636 944
Total 217 048
---------------------------------------------- ---------- ------------
The Transcorp Refund and the advance payment against
future services are currently the subject of protracted
legal proceedings.
(1) The contingent consideration represents SacOil
DRC's right to receive cash from Total upon the occurrence
of certain future events under the terms of the Farm-in
Agreements concluded in 2011 and 2012. The agreements
were concluded between Total and Semliki. Pursuant
to the reorganisation completed in the prior financial
year SacOil's interest in Block III and its rights
under the various agreements relating to the asset
were transferred to SacOil DRC. The valuation assumptions
for the contingent consideration are consistent with
those applied at 29 February 2016. The movement in
the contingent consideration is attributable to imputed
interest of R9.0 million (29 February 2016: R26.4
million) and a foreign exchange loss of R16.9 million
(29 February 2016: R91.1 million foreign exchange
gain).
(2) An update on the Transcorp arbitration is provided
in the Litigation section of the commentary. As noted
in the update, SacOil and Transcorp are negotiating
a possible settlement with respect to the receivable
of R277.4 million. The decrease in the receivable
during the period is attributable to foreign exchange
losses of R28.3 million due to the strengthening
of the Rand (29 February 2016: foreign exchange gain
of R84.9 million). The receivable has been reclassified
as long term as it is estimated that the Transcorp
litigation will likely be resolved during 2018.
(3) The amount due represents Encha Energy's indebtedness
to SacOil Holdings Limited ("Encha Debt") under the
Acknowledgement of Debt Agreement ("Agreement") concluded
between the two parties on 28 February 2013. This
debt became due and payable on 29 February 2016 and
remains unpaid as at the date of the condensed consolidated
interim financial statements. The financial asset
recognised at 31 August 2016 is R115.8 million (29
February 2016: R75.5 million) representing the advance
of R75.5 million and interest totalling R40.3 million
(29 Feburary 2016: RNil) calculated at the prime
rate plus 3% ("default interest"). The Agreement
provides for the accrual of default interest on the
amount outstanding from 28 February 2013 until such
time the debt is paid in full.
(4) The SacOil Board of directors ("BoD") continues
to pursue the recovery of the Transcorp Refund. 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.
The EERNL receivable of R157.5 million (29 February
2016: R173.6 million) has been provided for pending
the finalisation of the settlement agreement with
Nigdel United Oil Company ("Nigdel"). The settlement
agreement with EERNL provided for the recovery of
this amount from Nigdel. As disclosed in note 15,
the settlement agreement with Nigdel was subsequently
concluded on 11 October 2016.
For the duration of the Agreement referred to above,
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 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.
(5) The movement in the loan due from EERNL is attributable
to foreign exchange losses totalling R16.1 million
(29 February 2016: foreign exchange gain of R48.2
million)
------------------------------------------------------------------------
9 Financial instruments
-----------------------------------------------------------------------------------------
The fair values of cash and cash equivalents and
trade and other payables approximate carrying values
due to the short-term maturities of these instruments.
Other financial assets are evaluated by the Group
at measurement date based on inputs such as interest
and exchange rates, country-specific factors and
creditworthiness of debtors.
Valuation techniques and assumptions applied to measure
fair values:
-----------------------------------------------------------------------------------------
Carrying value Fair value
---------------- ---------------------- ---------------------- ---------- -----------
Financial 31 August 29 February 31 August 29 February Valuation Significant
instrument 2016 2016 2016 2016 technique inputs
---------------- --------- ----------- --------- ----------- ---------- -----------
Weighted
Discounted average
Other financial 474 314 636 944 368 867 540 851 cash flow cost of
assets(1) 217 048 773 344 model capital
------------------- --------- ----------- --------- ----------- ---------- -----------
(1) In terms of SacOil's accounting policies and
IAS 39 - 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 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 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 Level Total
1 2 3 R
R R R
-------------------------- ------ ------- -------- --------
Other financial assets
-------------------------- ------ ------- -------- --------
368 867 405 275
At 31 August 2016 - - 773 658
-------------------------- ------ ------- -------- --------
540 851 540 851
At 29 February 2016 - - 344 344
-------------------------- ------ ------- -------- --------
There were no transfers between levels during the
period. The Group's own non-performance risk at 31
August 2016 was assessed to be insignificant.
---------------------------------------------------------------
31 August 31 August
2016 2015
R R
--- ----------------------------------------- ---------- ------------
10 Commitments and liabilities
--- ----------------------------------------- ---------- ------------
Commitments
--- ----------------------------------------- ---------- ------------
Exploration and evaluation assets -
work programme commitments - due within 1 665 54 510
12 months 000 935
--------------------------------------------- ---------- ------------
Exploration and evaluation assets -
work programme commitments - due within 44 698 25 649
13 to 48 months 778 134
--------------------------------------------- ---------- ------------
46 363 80 160
778 069
--------------------------------------------- ---------- ------------
Exploration and evaluation activities will be funded
from current cash resources and funds from future
capital-raising initiatives.
--- -------------------------------------------------------------------
31 August 29 February
2016 2016
R R
--- ----------------------------------------- ---------- ------------
Contingent liabilities
--- ----------------------------------------- ---------- ------------
117 115 95 772
Cost carry arrangement with Total 084 505
--------------------------------------------- ---------- ------------
117 115 95 772
084 505
--------------------------------------------- ---------- ------------
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. Semliki's rights attributable to SacOil
were subsequently assigned to SacOil DRC as part
of the reorganisation concluded on 29 February 2016.
Total will be entitled to recover these costs, being
SacOil DRC'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 31 August 2016 Total has incurred R117.1 million
(29 February 2016: R95.8 million) of costs on behalf
of SacOil DRC. 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.
-----------------------------------------------------------------------
31 August 31 August
2016 2015
R R
--- ------------------------------------------ ---------- ----------
11 Related parties
--- ------------------------------------------ ---------- ----------
Key management compensation
--- ------------------------------------------ ---------- ----------
Non-executive directors:
--- ------------------------------------------ ---------- ----------
2 011 1 550
Fees 593 000
---------------------------------------------- ---------- ----------
Executive directors:
--- ------------------------------------------ ---------- ----------
4 812 4 590
Salaries 572 226
---------------------------------------------- ---------- ----------
Other key management:
--- ------------------------------------------ ---------- ----------
4 213 4 566
Salaries 967 289
---------------------------------------------- ---------- ----------
11 038 10 706
Total key management compensation 132 515
---------------------------------------------- ---------- ----------
12 Litigation
--- ------------------------------------------ ---------- ----------
The Group is, from time to time, involved in various
claims and legal proceedings arising in the ordinary
course of business. The Board believes, based on
its judgement and advice obtained from legal counsel,
that the Group has valid claims for the matters under
arbitration or litigation. A change in one or more
of these judgements, although not anticipated, would
significantly affect the Group's results. Provision
is made for all liabilities which are expected to
materialise and contingent liabilities are disclosed
when the outflows are possible.
----------------------------------------------------------------------
13 Dividends
--- ------------------------------------------ ---------- ----------
The Board has resolved not to declare
dividends to shareholders for the period
under review.
---------------------------------------------- ---------- ----------
14 Going concern
--- ------------------------------------------ ---------- ----------
The Company incurred a net loss for the period ended
31 August 2016 of R221.4 million (2015 net profit:
R2.8 million). The results of the Group continue
to be affected by developments in the global markets
with respect to oil prices and exchange rates as
well as lower-than-expected performance of the Lagia
asset for the reasons highlighted in the operations
and finance reviews. Consequently, the Group's operations
have not delivered expected cash flows which has
resulted in a net cash outflow of R54.9 million for
the period ending 31 August 2016 (31 August 2015:
R40.1 million) from operations, business development
activities and overhead costs. The Group's cash and
cash equivalents at 31 August 2016 total R52.4 million
which management have forecasted to adequately cover
the activities of the Group until January 2018 representing
a 15-month period from the date of these condensed
consolidated interim results. The adequacy of the
available cash for the time period noted above is
dependent on the group achieving forecasted production
volumes at Lagia, holding costs in line with forecasts,
and stability in factors such as oil price and exchange
rates at forecasted values.
Availability of funding for the Group's activities
beyond January 2018
A deficit of R64.0 million exists in the Group's
cash flow forecast to February 2019 ("the Forecast").
Unfavourable developments in the global oil and currency
markets have contributed to this deficit together
with the modifications made to the Lagia production
profile given the challenges highlighted in the operations
review. The Forecast does not take into account the
upside that could arise from the recovery of funds
owed to the Group as disclosed in note 8.
The BoD is constantly considering various strategies
to grow the Group to ensure it generates cash flows
to sustain operations. Whilst mitigating actions
are in place, these are in the initial stages such
that the value to be added to the Group cannot as
yet be demonstrated as a basis to support the going
concern assertion at 31 August 2016.
The impact of developments in the global oil and
foreign exchange markets on the performance of the
Group
The crude extraction industry is one that requires
a long-term investment mindset as well as reliance
on uncontrollable macroeconomic performance indicators
such as the oil price and the US$ exchange rate.
Should production at Lagia increase significantly
as planned, the effect of these variables will be
more significant on the financial performance of
the Group as a whole. Further, the Group is still
in the exploration phase for certain of the rights
that it holds. Should these explorations prove successful,
there is significant upside available in the forecasted
financial position and performance.
These conditions give rise to a material uncertainty
which may cast doubt about the Group's ability to
continue as a going concern and therefore that it
may be unable to realise its assets and discharge
its liabilities in the normal course of business.
The Board remains reasonably confident that it will
manage the material uncertainties that exist, accordingly
the financial statements have been prepared on the
basis of accounting policies applicable to a going
concern. This basis presumes that funds will be available
to finance future operations and that the realisation
of assets and settlement of liabilities will occur
in the ordinary course of business.
----------------------------------------------------------------------
15 Events after the reporting period
--- ------------------------------------------ ---------- ----------
On 11 October 2016 SacOil entered into a settlement
agreement with Nigdel United Oil Company Limited
whereupon both parties withdrew their respective
litigation and arbitration claims. Details pertaining
to these claims were provided in the 2016 Integrated
Annual Report.
On 17 October 2016 the Public Investment Corporation
(SOC) Limited ("PIC"), acting on behalf of the Government
Employees Pension Fund ("GEPF") acquired the total
interests in the securities of the Company held by
Westglamry Limited and Newdel Holdings Limited, such
that the resulting total interest in the securities
of the Company held by the PIC on behalf of the GEPF
amounts to 68.65% of the total issued share capital
of the Company. Previously the PIC held 42.14% of
the issued share capital of the Company.
----------------------------------------------------------------------
On behalf of the Board
Tito Mboweni Dr Thabo Kgogo Damain Matroos
Chairman Chief Executive Officer Chief Financial Officer
Johannesburg
30 November 2016
-----------------------------------------------------------------------
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), Damain Matroos (Chief
Financial Officer), Tito Mboweni (Chairman)*, Mzuvukile Maqetuka*,
Vusi Pikoli*,
Ignatius Sehoole*, Titilola Akinleye**
* Independent non-executive directors ** Non-executive
director
Advisers
Company Secretary Fusion Corporate Secretarial Services
Proprietary Limited
Transfer Secretaries (South Africa) Link Market Services South Africa Proprietary Limited
Transfer Secretaries (United Kingdom) Computershare Investor Services (Jersey) Limited
Corporate Legal Advisers Norton Rose Fullbright South Africa
Auditors Ernst & Young Inc.
JSE Sponsor PSG Capital Proprietary Limited
Investor Relations (UK) Buchanan Communications Limited
AIM Nominated Adviser finnCap Limited
This information is provided by RNS
The company news service from the London Stock Exchange
END
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