TIDMSAC
RNS Number : 7664Z
SacOil Holdings Limited
31 May 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 together with its subsidiaries
"the Group")
PROVISIONAL AUDITED RESULTS
for the year ended 29 February 2016
Overview
The Group continues to make steady progress in its goal to
become a pan-African oil and gas company, despite significant
headwinds in the industry and global economy. Key highlights for
the year ended 29 February 2016 include:
-- Completion of Phase 2 of the development plan at the Lagia Oil Field, Egypt
-- Discovery of producible 24˚ API gravity oil in the Thebes
formation for the Lagia Oil Field
-- Reorganisation of the Group's interest in Block III, in the
Democratic Republic of Congo
-- Granting of a two-year extension to current exploration period of Block III
-- Recovery of US$10 million previously associated with the OPL 233 performance bond
-- Commencement of pre-feasibility studies on the Bioko Oil Terminal project
-- Post-period, award of crude trading allocation in Nigeria
Dr Thabo Kgogo, Chief Executive Officer of SacOil, commented:
"The 2016 financial year was characterised by operational and
strategic progress against a challenging sector backdrop. It was a
year in which we demonstrated our ability to deliver on core
operational objectives and evolved further towards our strategic
goal of becoming a pan-African oil and gas ('O&G') company with
activities across the full industry value chain.
Our core priority for the year was the successful completion of
Phase 2 of the development of the Lagia Oil Field in Egypt. We had
set ourselves a target to achieve a peak production capability of 1
000 bbls/d by the end of the financial year. This was an ambitious
target as we knew the development of this asset would be complex as
a result of the heavy oil in place. Despite the challenges we
encountered we were delighted to announce that we successfully
proved the production capability of the asset in line with our
stated time frame. Having demonstrated the field's capacity, we
have since returned to production levels more suited to the current
oil price environment.
We continue to make good progress with the implementation of our
strategic plan. Late in 2015 we signed a Memorandum of
Understanding with a consortium to conduct a detailed evaluation
for the development of the Bioko Oil Terminal in Equatorial Guinea.
The consortium tables a broad array of competencies, from
engineering, procurement and construction through to international
marketing and trading. Pre-feasibility studies of the project have
commenced, the results of which aim to prove the commercial
viability of the project and will determine the next steps with
regards to SacOil's involvement. The studies are expected to be
completed during the third quarter of the 2016 calendar year.
We recently made the difficult decision to withdraw our
participation in the Mozambique pipeline development during the
pre-feasibility stage of the project, due to certain changes
introduced in the Joint Venture Agreement relating to the
participants in the project, which impacted the equity stake
attributable to SacOil. Accordingly, the Board made the decision
not to proceed as a participant in the project. We wish the parties
well in developing the project over the coming years.
We continue to expand the business into the midstream segment,
with the securing of a 12-month contract for the purchase of crude
oil grades from the Nigerian National Petroleum Corporation for
onward sale. The first lifting of the crude oil is expected to take
place in the middle of June 2016 and should contribute positive
cash flows to the Group over the contract period. . This
diversification of our revenue generation and industry activities
is in line with our previously stated growth strategy and marks a
significant milestone for SacOil.
With respect to the outstanding litigation matters previously
reported on, the SacOil board and management team continue to
defend the claims from Transcorp and Nigdel in relation to the
Group's exit from OPL 281 and OPL 233, respectively. We remain
committed to recovering all amounts owed by Transcorp and Nigdel
and instituting the requisite counterclaims accordingly. Other
litigation matters previously disclosed to shareholders are also
still ongoing.
The SacOil board has now completed the evaluation of the
findings of the previously documented forensic investigation and
has implemented the recommendations provided in the report. The
board has also completed the process of notifying regulatory
authorities of the irregularities identified as it continues to
resolve outstanding legacy issues inherited by the current
management team.
The Group is owed R75.5 million by Encha Energy ("Encha") which
became due and payable on 29 February 2016. This amount remains
unpaid as at the date of this announcement. The Group has been
engaging with Encha since the year end to recover the amount and is
in the process of enforcing its claim to recover these funds.
We thank you, our shareholders, for your continued support of
our vision. Although there remains much to be done to realise the
full potential of our strategy, we expect to accelerate progress in
the coming year by intensifying the SacOil team's efforts to secure
cash generative assets to grow the business."
Operational review
The Lagia development programme was successfully completed under
budget with no HSE incidents reported, resulting in the attainment
of the targeted capability of 1 000bbl/d. We have since scaled back
production to levels more suitable in the current oil price
environment. Post-drilling analysis indicated that the discovery in
the deeper Thebes formation is a lighter crude with higher API
gravity of 24˚ API, when compared to the oil produced from the
Nukhul formation in this field with an API gravity of 11 degrees
API.
With the granting of a two-year extension to the current
exploration period of Block III from 27 January 2016 to 26 January
2018, by the Minister of Hydrocarbons of the Democratic Republic of
Congo ("DRC"), Total E&P RDC ("Total") as operator of Block
III, has commenced with the acquisition of a 2D seismic survey.
This extension sets the platform for the operator to acquire the
seismic data, interpret the results and determine the associated
prospectivity. This seismic acquisition programme is in fulfilment
of the work programme obligations.
Activity on the Group's exploration assets was minimal during
the year as the focus shifted to expending available cash resources
on a cash generative asset.
FINANCE REVIEW
For the year ended 29 February 2016, the Group reported a profit
of R39.6 million (2015: loss of R277.0 million), basic EPS of 1.64
cents (2015: basic loss per share of 8.54 cents) and headline EPS
of 1.04 cents (2015: headline loss per share of 4.67 cents) as it
continued to benefit from the weakening of the Rand which
contributed R154.6 million (2015: R78.6 million) in foreign
exchange gains on the Group's US Dollar denominated financial
assets. Further contributing to this profit were the gain of R103.6
million achieved on the Reorganisation of the Group's holding in
Block III and the non-recurrence of the one off write-downs of
R420.2 million related to the restructuring of the Group's
portfolio of assets in the prior year. The Group's foreign exchange
gains and the gain on Reorganisation are included in other
income.
The results of the Group also reflect the impact of a Lagia
impairment charge of R76.5 million (2015: RNil) emanating from the
decline in oil prices as at 29 February 2016, which affected the
valuation of the Group's oil and gas properties by R56.8 million
and other intangible assets by R19.7 million. The competent person
report has confirmed that the 2P reserves at Lagia have risen from
6.2 million barrels to 6.9 million barrels. As such, the impairment
charge is a reflection of the decline in oil prices, and is offset
by additional foreign exchange gains totalling R61.5 million (2015:
R8.7 million) on the translation of these assets included in other
comprehensive income.
The delay in activities on Block III due to the civil unrest in
the area and in obtaining an extension of the operating licence
resulted in a further impairment of R26.1 million (2015: R23.8
million) of the contingent consideration receivable, as reported in
the interim results, which reflects the deferral of its receipt by
a year. These impairment charges are included under other operating
costs.
Reorganisation of the holding in Block III
("Reorganisation")
Prior to the Reorganisation, Semliki SARL ("Semliki") had a
direct 18.3% participating interest in Block III in the DRC
alongside partners Total E&P RDC (66.7%) ("Total") and the DRC
Government (15%). Semliki was 68% directly owned by RDK Mining
Proprietary Limited ("RDK"), a wholly-owned subsidiary of SacOil,
with the remaining 32% held by Divine Inspiration Group Proprietary
Limited ("DIG").
During the year SacOil initiated a process to reorganise the
holding of its indirect interest in Block III ("the Interest"). The
transaction agreements implementing the Reorganisation were
concluded on 29 February 2016. This resulted in the disposal of the
Group's shareholding in Semliki for $1 (R16) and the incorporation
of SacOil DRC SARL ("SacOil DRC"), in which RDK owns 100% of the
issued shares. The effect of the Reorganisation is the transfer of
the Group's share of assets and liabilities (including the
Interest), previously owned in Semliki, to SacOil DRC, pursuant to
various agreements with DIG. This Reorganisation now enables SacOil
to directly represent its interest in Block III and to have a
direct line of sight of the activities of the block. SacOil DRC has
an effective 12.5% participating interest in Block III.
As part of the Reorganisation, DIG indemnified the Group of
outstanding taxes relating to historical farm-outs of Block III by
Semliki. This contributed to the gain of R103.6 million on the
derecognition of current tax payable by the Group as further
explained in note 9.
Revenue
The Group has continued to invest in the planned development
activities at Lagia to achieve higher production levels. Production
for the year was therefore affected by these development
activities. Although the Group's revenue increased by 127% relative
to the prior year, it remains minimal. Now that Phase 2 of the
planned development activities has been completed we look forward
to optimising the production from the field to establish a
sustained level of production that will grow the revenue of the
Group over the next financial year.
Other operating costs
The management of the Group's costs was a key priority during
the year ended 29 February 2016. Excluding the impact of the
impairment charges totalling R102.6 million (2015: R23.8 million)
and the prior-year write-downs of R420.2 million highlighted above,
the Group's cost base increased by 39% to R91.8 million (2015:
R66.1 million). This increase is primarily attributable to the
inclusion of a full year's operating costs relating to Lagia
relative to only four months since acquisition in the prior
year.
Investment income
During the financial year the Company announced the conclusion
of a settlement agreement with EERNL. The revised terms of the
historical loans advanced to EERNL no longer provide for interest
on the outstanding loans. As such, investment income for the year
decreased by 70%.
Exploration and evaluation ("E&E") assets
Developments in the industry led the Group to defer expenditure
on exploration activities in an effort to prioritise focus on the
Lagia Oil Field which generates cash for the Group. Consequently,
there was minimal expenditure on the Group's E&E assets. The
elimination of DIG's interest in Block III from the Group results
pursuant to the Reorganisation resulted in a decrease in E&E
assets by 32%.
Oil and gas ("O&G") properties
The Group expended R55.4 million on Phase 2 (2015: R7.3 million
on Phase 1) of the Lagia development programme which improved the
Group's production profile and increased O&G properties.
Foreign exchange gains totalling R46.8 million (2015: R5.8 million)
on translation of the US Dollar-based O&G assets also
contributed to an increase in these assets. The impairment charge
of R56.8 million outlined above and depletion charges of R2.3
million (2015: R0.3 million) off-set these increases.
Other financial assets (non-current and current)
The Group's other financial assets ("OFA") are primarily
denominated in US Dollars. The continued weakening of the Rand
contributed R213.4 million (2015: R52.6 million) in foreign
exchange gains on the contingent consideration, loans due from
EERNL and the Transcorp refund. Interest on the unwinding of the
time value discount applied on initial recognition further
increased OFA by R38.0 million (2015: R121.5 million).
The effect of the Reorganisation is that the Group now retains
and reports on only its effective share of assets and liabilities
relating to Block III. As such, R202.7 million of the contingent
consideration attributable to DIG was derecognised on completion of
the Reorganisation. The part repayments of R63.1 million (R14.8
million) by EERNL and Greenhills and the impairment charge of R26.1
million (2015: R23.8 million) further decreased OFA.
The net effect of these transactions on the Group's OFA is a
decrease of R40.5 million (6%) year on year. The Group's OFA are
disclosed in note 6.
Cash and cash equivalents
The Group's balances decreased by R122.4 million as a result of
the capital expenditure of R55.4 million (2015: R7.3 million)
relating to Lagia, business development expenditure of R13.2
million (2015: R18.6 million) and operating costs of R53.8 million
(2015: R24.3 million).
In June 2015, the Group benefited from the part repayment of
R63.1 million ($5 million) of the EERNL loan which was offset by
the settlement of the Group's indebtedness to EERNL. The Company's
subsidiary, SacOil 233 Nigeria Limited held this amount in its bank
account on behalf of EERNL with respect to the cash collateral of
$10 million which previously secured the OPL 233 performance bond.
Upon the release of the cash collateral EERNL utilised these funds
to part settle the loans owed to the Group.
Current tax payable
The tax indemnity provided by DIG and Semliki as part of the
Reorganisation effectively eliminated R199.5 million in taxes
payable. These taxes had historically been incurred by Semliki
pursuant to a farm-out of Block III which solely benefited DIG.
Commitments
The Group's capital commitments have decreased by 41% following
the completion of Phase 2 of the Lagia development plan.
GOING CONCERN
The Board has performed an assessment of the Group's operations
relative to available cash resources and is confident that the
Group is able to continue operating for the next 12 months. The
Group's summarised provisional consolidated audited financial
statements presented have been prepared on a going concern
basis.
CHANGES IN DIRECTORATE
Mr Gontse Moseneke did not offer himself for re-election as a
Non-executive director at the Annual General Meeting of the Company
held on 1 October 2015. He subsequently retired as a director of
the Company with effect from 1 October 2015.
LITIGATION
Litigation proceedings previously disclosed to shareholders are
still ongoing. The Group continues to defend the claims made by
Transcorp, Nigdel, Mr Joe Modibane and Mr Robin Vela, as previously
disclosed.
OUTLOOK
We continue to make good progress with the implementation of our
strategic plan. The challenges that exist in the sector are likely
to continue over the next 12 months and will require us to continue
to operate effectively at a lower oil price. As a result of our
stable financial position, which is underpinned by a diverse
portfolio with near term revenue generation potential and no debt,
as well as the Board's strategy to diversify the Company's
operations, SacOil remains in a strong position to see out this
period and emerge stronger. Through an improved focus on Corporate
Governance under the current management team combined with the
support of its institutional shareholder register, SacOil is able
to mitigate the risks and challenges that currently exist and will
continue to look for opportunities to grow into a sustainable,
pan-African integrated energy company.
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 and downstream operations. 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.
SUMMARISED PROVISIONAL CONSOLIDATED AUDITED STATEMENT OF
COMPREHENSIVE INCOME
2016 2015
Note R'000 R'000
Revenue 4 746 2 095
--------------------------------------- ---- -------- --------
Cost of sales (15 286) (3 225)
--------------------------------------- ---- -------- --------
Gross loss (10 540) (1 130)
--------------------------------------- ---- -------- --------
258 103
Other income 239 334
--------------------------------------- ---- -------- --------
(194 (510
Other operating costs 429) 106)
--------------------------------------- ---- -------- --------
(407
Profit/(loss) from operations 53 270 902)
--------------------------------------- ---- -------- --------
Investment income 46 744 158 052
--------------------------------------- ---- -------- --------
Finance costs (4) (1)
--------------------------------------- ---- -------- --------
(249
Profit/(loss) before taxation 100 010 851)
--------------------------------------- ---- -------- --------
(60 (27
Taxation 422) 178)
--------------------------------------- ---- -------- --------
(277
Profit/(loss) for the year 39 588 029)
--------------------------------------- ---- -------- --------
Other comprehensive income:
--------------------------------------- ---- -------- --------
Items that may be reclassified to
profit or loss in subsequent periods:
--------------------------------------- ---- -------- --------
Exchange differences on translation
of foreign operations 61 460 8 717
--------------------------------------- ---- -------- --------
Other comprehensive income for the
year net of taxation 61 460 8 717
--------------------------------------- ---- -------- --------
Total comprehensive income/(loss) 101 (268
for the year 048 312)
--------------------------------------- ---- -------- --------
Profit/(loss) attributable to:
--------------------------------------- ---- -------- --------
(269
Equity holders of the parent 53 584 216)
--------------------------------------- ---- -------- --------
(13
Non-controlling interest 996) (7 813)
--------------------------------------- ---- -------- --------
(277
Profit/(loss) for the year 39 588 029)
--------------------------------------- ---- -------- --------
Total comprehensive income/(loss)
attributable to:
--------------------------------------- ---- -------- --------
115 (260
Equity holders of the parent 044 499)
--------------------------------------- ---- -------- --------
(13
Non-controlling interest 996) (7 813)
--------------------------------------- ---- -------- --------
Total comprehensive income/(loss) 101 (268
for the year 048 312)
--------------------------------------- ---- -------- --------
Earnings/(loss) per share
--------------------------------------- ---- -------- --------
Basic (cents) 4 1.64 (8.54)
--------------------------------------- ---- -------- --------
Diluted (cents) 4 1.64 (8.54)
--------------------------------------- ---- -------- --------
SUMMARISED PROVISIONAL CONSOLIDATED AUDITED STATEMENT OF
FINANCIAL POSITION
2016 2015
Notes R'000 R'000
ASSETS
-------------------------------------- ----- ------- -------
Non-current assets
-------------------------------------- ----- ------- -------
Exploration and evaluation assets 50 975 75 950
-------------------------------------- ----- ------- -------
166 122
Oil and gas properties 5 030 870
-------------------------------------- ----- ------- -------
253 345
Other financial assets 6 799 753
-------------------------------------- ----- ------- -------
Property, plant and equipment 1 075 343
-------------------------------------- ----- ------- -------
Other intangible assets 7 57 845 61 096
-------------------------------------- ----- ------- -------
529 606
Total non-current assets 724 012
-------------------------------------- ----- ------- -------
Current assets
-------------------------------------- ----- ------- -------
383 331
Other financial assets 6 145 641
-------------------------------------- ----- ------- -------
Inventories 9 330 6 642
-------------------------------------- ----- ------- -------
Trade and other receivables 3 405 7 153
-------------------------------------- ----- ------- -------
107 229
Cash and cash equivalents 349 431
-------------------------------------- ----- ------- -------
503 574
Total current assets 229 867
-------------------------------------- ----- ------- -------
Asset held for sale - 21 840
-------------------------------------- ----- ------- -------
1 032 1 202
Total assets 953 719
-------------------------------------- ----- ------- -------
EQUITY AND LIABILITIES
-------------------------------------- ----- ------- -------
Shareholders' equity
-------------------------------------- ----- ------- -------
1 216 1 216
Stated capital 8 504 504
-------------------------------------- ----- ------- -------
Reserves 77 963 15 607
-------------------------------------- ----- ------- -------
(375 (448
Accumulated loss 253) 655)
-------------------------------------- ----- ------- -------
Equity attributable to equity holders 919 783
of parent 214 456
-------------------------------------- ----- ------- -------
Non-controlling interest - 4 417
-------------------------------------- ----- ------- -------
919 787
Total shareholders' equity 214 873
-------------------------------------- ----- ------- -------
Liabilities
-------------------------------------- ----- ------- -------
Non-current liabilities
-------------------------------------- ----- ------- -------
Deferred tax liability 78 526 97 146
-------------------------------------- ----- ------- -------
Total non-current liabilities 78 526 97 146
-------------------------------------- ----- ------- -------
Current liabilities
-------------------------------------- ----- ------- -------
Other financial liabilities - 57 889
-------------------------------------- ----- ------- -------
212
Current tax payable 12 851 417
-------------------------------------- ----- ------- -------
Trade and other payables 22 362 25 554
-------------------------------------- ----- ------- -------
295
Total current liabilities 35 213 860
-------------------------------------- ----- ------- -------
113 393
Total liabilities 739 006
-------------------------------------- ----- ------- -------
Liabilities directly associated with
asset held for sale - 21 840
-------------------------------------- ----- ------- -------
1 032 1 202
Total equity and liabilities 953 719
-------------------------------------- ----- ------- -------
3 269 3 269
Number of shares in issue (000's) 836 836
-------------------------------------- ----- ------- -------
Net asset value per share (cents) 28.11 24.10
-------------------------------------- ----- ------- -------
Net tangible asset value per share
(cents) 26.55 21.77
-------------------------------------- ----- ------- -------
SUMMARISED PROVISIONAL CONSOLIDATED AUDITED STATEMENT OF CHANGES
IN EQUITY
Total
equity
attributable
to equity
Stated Foreign Share- holders Non-
capital currency based of controlling
(Note translation payment Total Accumulated the interest Total
8) reserve reserve reserves loss parent ("NCI") equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1
28 February 109 6 6 (179 936 12 948
2014 977 - 002 002 427) 552 218 770
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Changes in
equity:
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Loss for the (269 (269 (7 (277
year - - - - 216) 216) 813) 029)
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Other comprehensive
income for 8 8
the year - 717 - 717 - 8 717 - 8 717
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Total comprehensive
income/(loss) 8 8 (269 (260 (7 (268
for the year - 717 - 717 216) 499) 813) 312)
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
106 106 106
Issue of shares 527 - - - - 527 - 527
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Share options
issued - - 888 888 - 888 - 888
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Acquisition
of non-controlling
interest - - - - (12) (12) 12 -
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
106 8 9 (269 (153 (7 (160
Total changes 527 717 888 605 228) 096) 801) 897)
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Balance at 1
28 February 216 8 6 15 (448 783 787
2015 504 717 890 607 655) 456 4 417 873
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Changes in
equity:
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Profit/(loss) 53 (13 39
for the year - - - - 53 584 584 996) 588
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Other comprehensive
income for 61 61 61 61
the year - 460 - 460 - 460 - 460
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Total comprehensive
income/(loss) 61 61 115 (13 101
for the year - 460 - 460 53 584 044 996) 048
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Share options
issued - - 896 896 - 896 - 896
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Acquisition
of non-controlling 19 (19
interest - - - - 19 818 818 818) -
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Disposal of
Semliki (note 29 29
9) - - - - - - 397 397
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
61 62 135 (4 131
Total changes - 460 896 356 73 402 758 417) 341
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
Balance at 1
29 February 216 70 7 77 (375 919 919
2016 504 177 786 963 253) 214 - 214
-------------------- -------- ------------ -------- --------- ----------- ------------- ------------ -------
SUMMARISED PROVISIONAL CONSOLIDATED AUDITED STATEMENT OF CASH
FLOWS
2016 2015
Notes R'000 R'000
Cash flows from operating activities
--------------------------------------------- ------ -------- --------
(81 (39
Cash used in operations 375) 130)
--------------------------------------------- ------ -------- --------
Interest income 8 756 6 962
--------------------------------------------- ------ -------- --------
Finance costs (4) (1)
--------------------------------------------- ------ -------- --------
(72 (32
Net cash used in operating activities 623) 169)
--------------------------------------------- ------ -------- --------
Cash flows from investing activities
--------------------------------------------- ------ -------- --------
Purchase of property, plant and equipment (1 063) (234)
--------------------------------------------- ------ -------- --------
Purchase of exploration and evaluation (69
assets (873) 119)
--------------------------------------------- ------ -------- --------
(55
Purchase of oil and gas properties 5 444) (7 270)
--------------------------------------------- ------ -------- --------
Purchase of other intangible assets 7 (409) (136)
--------------------------------------------- ------ -------- --------
(44
Acquisition of subsidiary - 540)
--------------------------------------------- ------ -------- --------
Disposal of subsidiary 9 (107) -
--------------------------------------------- ------ -------- --------
Payments received for other financial 63 13
assets 088 461
--------------------------------------------- ------ -------- --------
Net cash from/(used in) investing (107
activities 5 192 838)
--------------------------------------------- ------ -------- --------
Cash flows from financing activities
--------------------------------------------- ------ -------- --------
(20
Settlement of borrowings - 461)
--------------------------------------------- ------ -------- --------
Proceeds from other financial liabilities - 420
--------------------------------------------- ------ -------- --------
Repayments of other financial liabilities (61 -
092)
--------------------------------------------- ------ -------- --------
(61 (20
Net cash used in financing activities 092) 041)
--------------------------------------------- ------ -------- --------
Total movement in cash and cash equivalents (128 (160
for the year 523) 048)
--------------------------------------------- ------ -------- --------
Foreign exchange gains on cash and
cash equivalents 6 441 7 899
--------------------------------------------- ------ -------- --------
Cash and cash equivalents at the 229 381
beginning of the year 431 580
--------------------------------------------- ------ -------- --------
Cash and cash equivalents at the 107 229
end of the year 349 431
--------------------------------------------- ------ -------- --------
NOTES
1 BASIS OF PREPARATION
The summarised provisional consolidated audited financial
statements of the Group for the year ended 29 February 2016 have
been prepared in accordance with the Group's accounting policies,
which comply with the recognition and measurement criteria of
International Financial Reporting Standards, and the presentation
and disclosure requirements of IAS 34 - Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the Financial Reporting
Pronouncements as issued by Financial Reporting Standards Council,
the Listings Requirements of the JSE Limited for provisional
reports and the Companies Act of South Africa (No. 71 of 2008, as
amended). The accounting policies applied in the preparation of the
results for the year ended 29 February 2016 are consistent with
those adopted in the financial statements for the year ended 28
February 2015 except as noted below.
The Group has adopted the amendments to IFRS 2 - Share-based
Payments which clarifies the definition of a "vesting condition".
The vesting condition under the Group Share Option Scheme is for
employees to remain in service.
The Group further adopted the amendment to IFRS 8 - Operating
Segments. Disclosures required by this amendment are provided in
note 3.
These summarised provisional consolidated audited financial
statements have been prepared on a going concern basis.
All monetary information is presented in the functional currency
of the Company, being South African Rand.
2 AUDITORS' AUDIT REPORT
The directors take full responsibility for the preparation of
these summarised provisional consolidated audited financial
statements. These summarised provisional consolidated audited
financial statements for the year ended 29 February 2016 have been
prepared under the supervision of the Chief Financial Officer, Mr
Damain Matroos CA(SA). These summarised provisional consolidated
audited financial statements, which have been derived from the
audited consolidated annual financial statements for the year ended
29 February 2016 and with which they are consistent in all material
respects, have been audited by Ernst & Young Inc. Their
unmodified audit opinions on the consolidated financial statements
and on the summarised provisional consolidated audited financial
statements are available for inspection at the registered office of
the Company. The auditor's report does not necessarily report on
all the information contained in this report. Shareholders are
therefore advised that, in order to obtain a full understanding of
the nature of the auditor's engagement, they should obtain a copy
of the auditor's report together with the accompanying consolidated
audited financial statements from the Company's registered
office.
3 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, DRC, Botswana and Malawi. Operations in South
Africa relate to head office activities of the Group that include
the general management, financing and administration of the
Group.
South
Egypt Nigeria DRC Malawi Botswana Africa Eliminations Consolidated
2016 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
4
Revenue 746 - - - - - - 4 746
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
(15
Cost of sales 286) - - - - - - (15 286)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
(10 (10
Gross loss 540) - - - - - - 540)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
52 106 136 (36 258
Other income - 496 026 - - 554 837) 239
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Investment 26 19
income - 383 426 - - 935 - 46 744
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Finance costs - - - - - (4) - (4)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Other operating (98 (31 (28 (2 (70 36 (194
expenses 158) 327) 975) - 711) 095) 837 429)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
(65 (60
Taxation - - 706) - - 5 284 - 422)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
(Loss)/profit (108 21 37 (2 91
for the year 698) 552 771 - 711) 674 - 39 588
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Segment assets 223 246 263 (204 529
- non-current 440 - 884 259 146 949 954) 724
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Segment assets 28 152 321 503
- current 791 916 32 - 2 488 - 229
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Segment liabilities (117 (162 (3 204 (78
- non-current 297) - 794) - 389) - 954 526)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Segment liabilities (6 (28 (35
- current 321) (281) - - - 611) - 213)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Egypt Nigeria DRC Malawi Botswana South Eliminations Consolidated
Africa
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
2015 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
2
Revenue 095 - - - - - - 2 095
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
(3
Cost of sales 225) - - - - - - (3 225)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
(1
Gross loss 130) - - - - - - (1 130)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
31 6 87 (22 103
Other income - 384 993 - 6 757 806) 334
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Investment 29 22 117 (11 158
income - 595 486 - - 455 484) 052
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Finance costs - - (1) - - - - (1)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Other operating (8 (13 (23 (478 13 (510
expenses 182) 265) 775) - (500) 067) 683 106)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
(30 (27
Taxation - - 117) - - 2 939 - 178)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
(Loss)/profit (9 47 (24 (269 (20 (277
for the year 312) 714 414) - (494) 916) 607) 029)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Segment assets 203 312 1 238 (148 606
- non-current 074 - 042 197 387 163 851) 012
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Segment assets 17 226 41 288 574
- current 852 456 776 - 1 782 - 867
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Segment liabilities (19 (59 (165 (2 148 (97
- non-current 315) 294) 312) - - 076) 851 146)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Segment liabilities (6 (57 (171 (59 (295
- current 457) 917) 582) - - 904) - 860)
-------------------- ------ ------- ------ ------ -------- ------- ------------ ------------
Business segments
The operations of the Group comprise one class of business,
being oil and gas exploration and production. The activities
currently undertaken in Mozambique and Equatorial Guinea related to
the Mozambican pipeline and the development of the Bioko Oil
Terminal, respectively, are not significant at this stage and have
not been separately disclosed. These activities therefore do not
meet the recognition criteria for operating segments.
Revenue
The Group's reported revenue is generated from one customer, the
Egyptian General Petroleum Corporation ("EGPC") with respect to oil
sales. This revenue is attributed to the Egypt segment.
Taxation - Egypt
No income or deferred tax has been accrued by Mena as the
Concession Agreement between the EGPC, the Ministry of Petroleum
and Mena provides that the EGPC is responsible for the settlement
of income tax on behalf of Mena, out of EGPC's share of petroleum
produced. The Group has elected the net presentation approach in
accounting for this deemed income tax. Under this approach Mena's
revenue is not grossed up for income tax payable by EGPC on behalf
of Mena. Consequently, no income or deferred tax is accrued.
2016 2015
R'000 R'000
--- ----------------------------------------------------- ------- --------
4 EARNINGS/(LOSS) PER SHARE
--- ----------------------------------------------------- ------- --------
Basic (cents) 1.64 (8.54)
--------------------------------------------------------- ------- --------
Diluted (cents) 1.64 (8.54)
--------------------------------------------------------- ------- --------
Profit/(loss) attributable to equity
holders of the parent used in the calculation 53 (269
of the basic and diluted loss per share 584 216)
--------------------------------------------------------- ------- --------
Weighted average number of ordinary shares
used in the calculation of basic earnings/(loss) 3 269 3 151
per share (000's) 836 081
--------------------------------------------------------- ------- --------
Issued shares at the beginning of the 3 269 3 086
reporting period (000's) 836 169
--------------------------------------------------------- ------- --------
Effect of shares issued during the reporting 64
period (weighted) (000's) - 912
--------------------------------------------------------- ------- --------
Add: Dilutive share options (000's) 901 -
--- ----------------------------------------------------- ------- --------
Weighted average number of ordinary shares
used in the calculation of diluted earnings/(loss) 3 270 3 151
per share (000's) 737 081
--------------------------------------------------------- ------- --------
Headline earnings/(loss) per share
--- ----------------------------------------------------- ------- --------
Basic (cents) 1.04 (4.67)
--------------------------------------------------------- ------- --------
Diluted (cents) 1.04 (4.67)
--------------------------------------------------------- ------- --------
Reconciliation of headline earnings/(loss)
--- ----------------------------------------------------- ------- --------
Profit/(loss) attributable to equity 53 (269
holders of the parent 584 216)
--------------------------------------------------------- ------- --------
Adjusted for:
--- ----------------------------------------------------- ------- --------
Impairment of non-current asset held 194
for sale - 066
--------------------------------------------------------- ------- --------
56
Impairment of oil and gas assets 849 -
--- ----------------------------------------------------- ------- --------
19
Impairment of other intangible assets 659 -
--- ----------------------------------------------------- ------- --------
Write-off of property, plant and equipment 5 -
--- ----------------------------------------------------- ------- --------
(24
Gain on acquisition of subsidiary - 718)
--------------------------------------------------------- ------- --------
Gain on reorganisation of interest in (103
Block III 624) -
--- ----------------------------------------------------- ------- --------
(47
Tax effects of adjustments 7 591 417)
--------------------------------------------------------- ------- --------
34 (147
Headline earnings/(loss) 064 285)
--------------------------------------------------------- ------- --------
Total
R'000
5 OIL AND GAS PROPERTIES
---------------------------------- --------
Cost
---------------------------------- --------
At 1 March 2014 -
---------------------------------- --------
110
Acquisition of Mena 063
------------------------------------- --------
Additions 7 270
------------------------------------- --------
Translation of foreign operations 5 812
------------------------------------- --------
123
At 28 February 2015 145
------------------------------------- --------
123
At 1 March 2015 145
------------------------------------- --------
Additions 55 444
------------------------------------- --------
Translation of foreign operations 46 833
------------------------------------- --------
225
At 29 February 2016 422
------------------------------------- --------
Depletion and impairment
---------------------------------- --------
At 1 March 2014 -
---------------------------------- --------
Depletion (275)
------------------------------------- --------
At 28 February 2015 (275)
------------------------------------- --------
At 1 March 2015 (275)
------------------------------------- --------
(56
Impairment (note 10) 849)
------------------------------------- --------
Depletion (2 268)
------------------------------------- --------
(59
At 29 February 2016 392)
------------------------------------- --------
Net book value
---------------------------------- --------
At 28 February 2014 -
---------------------------------- --------
122
At 28 February 2015 870
------------------------------------- --------
166
At 29 February 2016 030
------------------------------------- --------
The depletion charge for 2016 represents a full year of
depletion of the oil and gas asset. The depletion charge for 2015
represents the portion since the acquisition of the oil and gas
properties in October 2014.
Details pertaining to the impairment charge are provided in note
10
2016 2015
R'000 R'000
6 OTHER FINANCIAL ASSETS
------------------------------------------- ------- -------
Non-current:
------------------------------------------- ------- -------
Deferred consideration on disposal
of Greenhills Plant(1) - 1 718
---------------------------------------------- ------- -------
Advance payment against future services(2) - 68 627
---------------------------------------------- ------- -------
Loan due from EERNL(3) 57 484 37 732
---------------------------------------------- ------- -------
Contingent consideration(4) 196 315 237 676
---------------------------------------------- ------- -------
253 799 345 753
---------------------------------------------- ------- -------
Current:
------------------------------------------- ------- -------
Loan due from EERNL(3) 173 571 183 243
---------------------------------------------- ------- -------
Loan due from DIG(5) - 51 037
---------------------------------------------- ------- -------
Transcorp refund(6) 305 764 220 824
---------------------------------------------- ------- -------
Advance payment against future services(2) 75 490 -
---------------------------------------------- ------- -------
Deferred consideration on disposal
of Greenhills Plant(1) 1 891 1 891
---------------------------------------------- ------- -------
556 716 456 995
---------------------------------------------- ------- -------
(173 (125
Less: Provision for impairment(3) 571) 354)
---------------------------------------------- ------- -------
383 145 331 641
---------------------------------------------- ------- -------
636 944 677 394
---------------------------------------------- ------- -------
(1) The last instalment of R2.0 million of the deferred
consideration, due in October 2016, has been reclassified as short
term. The present value of this future receivable is R1.9
million.
(2) The amount due represents Encha Energy's indebtedness to SacOil Holdings Limited under the Acknowledgement of Debt Agreement concluded between the two parties on 28 February 2013. The financial asset recognised at 29 February 2016 is R75.5 million (2015: R68.6 million) representing the present value of this receivable. Interest amounting to R6.9 million (2015: R6.3 million) arising from the unwinding of the discount applied to the future receivable on initial recognition, has been included in investment income. The receivable was due on 29 February 2016 and has been classified as short term. Refer to note 15 for further details on this loan.
(3) At 29 February 2016 the long-term loan receivable of R57.5
million (2015: R37.7 million) represents the present value of
future amounts (R80.2 million (2015: R57.9 million) ($5 million))
due from EERNL, to be recovered from its share of OML 113's cash
flows expected in 2019 and 2020. Interest amounting to R4.4 million
(2015: RNil million) arising from the unwinding of the discount
applied to the future receivable on initial recognition has been
included in investment income in profit or loss. Foreign exchange
gains totalling R15.3 million (2015: R13.0 million) have been
recognised in other income on profit or loss in relation to this
long-term loan.
During the year EERNL repaid $5.0 million of the short-term loan
from its share of the cash collateral. The remainder of the loan is
expected to be recovered within a year from recoveries from Nigdel
pursuant to the termination of EERNL's and SacOil's participation
in OPL 233. The recovery from Nigdel of R173.6 million (2015:
R125.4 million) has been provided for pending the finalisation of
arbitration proceedings. The increase in the loan and the
impairment provision of R48.2 million is attributable to foreign
exchange losses as the amount provided for is denominated in US
Dollars.
SacOil agreed to an interest freeze on the outstanding loans
from 30 November 2014. The loans are denominated in US Dollars.
(4) The Farm-In Agreement between Semliki and Total provides for
a cash payment by Total to Semliki upon the occurrence of certain
future events ("contingent consideration"). As there is a
contractual right to receive cash from Total, Semliki has
historically recognised a financial asset in its statement of
financial position. The asset was initially recognised at its fair
value. Subsequently, the financial asset meets the definition of a
loan and receivable, and is accounted for at amortised cost taking
into account interest revenue and currency movements. At each
reporting date SacOil revises its estimate of receipts from the
financial asset in line with the requirements of IAS 39. Included
in the statement of comprehensive income at 29 February 2016 is an
impairment loss of R26.1 million (2015: R23.8 million) representing
the write-down of future expected cash flows from the contingent
consideration for the Block III farm-outs in March 2011 and March
2012. The write-down, which is reflective of the time value of
money, arose as a result of the delays in activities on Block III
due to civil unrest in the area and in obtaining an extension to
the operating licence. The extension has, however, now been
granted. Consequently, this defers the receipt of the contingent
consideration by a year. A deferred tax charge amounting to R36.6
million (2015: R6.5 million) was recognised in the statement of
comprehensive income. At 29 February 2016 SacOil's rights to the
contingent consideration, previously held through Semliki, were
transferred to SacOil DRC SARL in line with the reorganisation
described in note 9. The assumptions used to measure the contingent
consideration are detailed below:
Probability of exploration success (single
well) 26%
---------------------------------------------- ------------
Probability of at least one success from two
wells 45%
---------------------------------------------- ------------
Probability of successful completion given
exploration success 89%
---------------------------------------------- ------------
Discount rate 10%
---------------------------------------------- ------------
First Investment Decision Date ("FID") 28 February
2021
---------------------------------------------- ------------
First Oil Date ("FOD") 28 February
2025
---------------------------------------------- ------------
Valuation date 29 February
2016
---------------------------------------------- ------------
Contingent consideration
---------------------------------------------- ------------
$29 000
FID 000
---------------------------------------------- ------------
$25 000
FOD 000
---------------------------------------------- ------------
Should the probability factors applied to the valuation model be
increased or decreased by 10%, all other variables held constant,
post-tax profit would have been R45.5 million (2015: R55.2 million)
higher and R45.5 million (2015: R55.2) million lower,
respectively.
(5) The loan comprised the taxes recoverable from DIG with
respect to the capital gains tax payable by Semliki on the farm-out
of the 6.67% interest in Block III in March 2012, which transaction
was initiated by and solely benefited DIG. The loan was interest
free, unsecured, has no fixed repayment terms and was denominated
in US Dollars. On 29 February 2016 the Group completed the
restructuring of its holding in Block III as detailed in note 9,
which resulted in the elimination of its obligations relating to
these foreign taxes. Consequently, the asset previously recognised
to reflect the recovery of taxes payable by the Group from DIG has
been derecognised.
(6) The Transcorp Refund represents amounts recoverable from
Transcorp under the provisions of the Farm-in Agreement (""FIA""),
following the termination of SacOil 281's participation in OPL 281.
SacOil paid R44.1 million ($6.25 million) on behalf of its
subsidiary SacOil 281 and R43.6 million ($6.25 million) on behalf
of EER 233 Nigeria Limited for a signature bonus and other costs
relating to OPL 281, which contractually will be refunded by
Transcorp with interest, on the signature bonus component, at 20%
per annum. The FIA provides for the accrual of interest between the
date of payment of these amounts and the date of exit from the
asset, being 3 December 2014. As such there is no interest accrued
in the current year. Under the terms of the settlement agreement
concluded with EERNL in 2015 EERNL ceded its share of the refund as
settlement of the OPL 281 loan owed to SacOil.
At 29 February 2016 the Company receivable of R152.9 million
(2015: R110. 4 million) with respect to the above transactions
represents SacOil's entitlement to EERNL's share of the Transcorp
refund. The Group's receivable of R305.8 million (2015: R220.8
million) further includes SacOil 281's share of the refund.
Pursuant to the exit SacOil will not have future commitments and
obligations associated with the appraisal of OPL 281.
The fair value of other financial assets is given in note
11.
Other
Computer intangible
software assets Total
R'000 R'000 R'000
7 OTHER INTANGIBLE ASSETS
---------------------------------------- --------- ----------- --------
Cost
---------------------------------------- --------- ----------- --------
At 28 February 2014 272 - 272
------------------------------------------- --------- ----------- --------
Additions 136 - 136
------------------------------------------- --------- ----------- --------
Acquisition of Mena - 59 668 59 668
------------------------------------------- --------- ----------- --------
Translation of foreign operations - 3 075 3 075
------------------------------------------- --------- ----------- --------
At 28 February 2015 408 62 743 63 151
------------------------------------------- --------- ----------- --------
Additions 409 - 409
------------------------------------------- --------- ----------- --------
Translation of foreign operations - 22 272 22 272
------------------------------------------- --------- ----------- --------
At 29 February 2016 817 85 015 85 832
------------------------------------------- --------- ----------- --------
Accumulated depreciation and impairment
---------------------------------------- --------- ----------- --------
At 28 February 2014 (96) - (96)
------------------------------------------- --------- ----------- --------
Amortisation (106) (1 853) (1 959)
------------------------------------------- --------- ----------- --------
At 28 February 2015 (202) (1 853) (2 055)
------------------------------------------- --------- ----------- --------
Impairment (note 10) - (19 659) (19 659)
------------------------------------------- --------- ----------- --------
Amortisation (179) (6 094) (6 273)
------------------------------------------- --------- ----------- --------
At 29 February 2016 (381) (27 606) (27 987)
------------------------------------------- --------- ----------- --------
At 28 February 2014 176 - 176
------------------------------------------- --------- ----------- --------
At 28 February 2015 206 60 890 61 096
------------------------------------------- --------- ----------- --------
At 29 February 2016 436 57 409 57 845
------------------------------------------- --------- ----------- --------
The Group's other intangible assets arose from the acquisition
of Mena in the prior year. Mena owns the Lagia Oil Field. The
Petroleum Concession Agreement gives Mena the right to drill for
petroleum reserves.
Details pertaining to the impairment charge are provided in note
10.
8 STATED CAPITAL
---------------- ------------------ ---------- ---------- --------
Number Stated
Nature of shares capital
Date Issued to of issue 000's R'000
Balance at 1 3 086 1 109
March 2014 169 977
------------------------------------------------ ---------- --------
Mena Hydrocarbons Specific 183 106
22 October 2014 Incorporated issue 667 527
---------------- ------------------ ------------- ---------- --------
Balance at 28 3 269 1 216
February 2015 836 504
------------------------------------------------ ---------- --------
Balance at 29 3 269 1 216
February 2016 836 504
------------------------------------------------ ---------- --------
9 REORGANISATION OF INTEREST IN BLOCK III
2016
Background
Prior to the Reorganisation, Semliki had a direct 18.3%
participating interest in Block III in the DRC alongside partners
Total E&P RDC (66.7%) ("Total") and the DRC Government (15%).
Semliki was 68% directly owned by RDK Mining Proprietary Limited
(""RDK"") with the remaining 32% held by Divine Inspiration Group
Proprietary Limited (""DIG""). RDK is a wholly-owned subsidiary of
SacOil.
Reorganisation
During the year SacOil initiated a process to reorganise the
holding of its indirect interest in Block III (""the Interest"").
The transaction agreements implementing the Reorganisation were
concluded on 29 February 2016. This resulted in the disposal of the
Group's shareholding in Semliki SARL (""Semliki"") for $1 (R16) and
the incorporation of SacOil DRC SARL (""SacOil DRC""), in which RDK
owns 100% of the issued shares. The effect of the Reorganisation is
the transfer of the Group's share of assets and liabilities
(including the Interest), previously owned in Semliki, to SacOil
DRC, pursuant to various agreements with DIG. This Reorganisation
now enables SacOil to represent its interest in Block III directly
and to have a direct line of sight of the activities of the
block.
The following table summarises the impact of the Reorganisation
on the results of the Group measured at the carrying amount of the
assets and liabilities disposed or transferred.
2016
R'000
Disposal of Semliki:
----------------------------------------------- --------
(74
Exploration and evaluation assets 366)
----------------------------------------------- --------
(329
Contingent consideration 097)
----------------------------------------------- --------
(57
Loan due from DIG 729)
----------------------------------------------- --------
Cash and cash equivalents (107)
----------------------------------------------- --------
(29
Non-controlling interest 397)
----------------------------------------------- --------
131
Deferred tax liability 639
----------------------------------------------- --------
Loans from Group companies 84 268
----------------------------------------------- --------
272
Current tax payable 206
----------------------------------------------- --------
Total identifiable net liabilities disposed
at carrying amount (2 583)
----------------------------------------------- --------
Plus: Transfer of assets and liabilities to
SacOil DRC:
----------------------------------------------- --------
Exploration and evaluation assets 50 569
----------------------------------------------- --------
196
Contingent consideration 315
----------------------------------------------- --------
(78
Deferred tax liability 526)
----------------------------------------------- --------
(84
Loans from Group companies 268)
----------------------------------------------- --------
Total identifiable net assets recognised 84 090
----------------------------------------------- --------
Plus: Impact of the Reorganisation on SacOil's
assets and liabilities(1) :
----------------------------------------------- --------
(12
Other financial assets 190)
----------------------------------------------- --------
Current tax payable 34 307
----------------------------------------------- --------
Net identifiable liabilities derecognised at
carrying amount 22 117
----------------------------------------------- --------
103
Total impact of the Reorganisation 624
----------------------------------------------- --------
(103
Total gain on Reorganisation of Interest 624)
----------------------------------------------- --------
Total consideration transferred(2) -
----------------------------------------------- --------
(1) DIG has indemnified the Group of tax obligations pertaining
to the farm-out of a portion of Block III to Total in March 2011
and March 2012 which has resulted in the derecognition of current
tax payable. Consequently, the asset previously recognised to
reflect the recovery of taxes payable by the Group from DIG, under
this indemnity, has simultaneously been derecognised.
(2) Amount less than R1 000.
The gain on Reorganisation of R103.6 million has been recognised
in "other income" in profit or loss.
2016
R'000
The cash outflow on Reorganisation is as follows:
--- -------------------------------------------------- -------
Cash received -
--- -------------------------------------------------- -------
Net cash retained in Semliki 107
------------------------------------------------------ -------
Net cash outflow 107
------------------------------------------------------ -------
10 IMPAIRMENT OF NON-CURENT ASSETS 2016
--- -------------------------------------------------- -------
R'000
--- -------------------------------------------------- -------
Impairment losses:
--- -------------------------------------------------- -------
Oil and gas properties (note 5) 56 849
------------------------------------------------------ -------
Other intangible assets (note 7) 19 659
------------------------------------------------------ -------
76 508
------------------------------------------------------ -------
The Group's oil and gas properties and other intangible assets
form part of a single cash-generating unit ("CGU"). This CGU falls
within the Egypt reportable segment (note 3). The trigger for
impairment testing for the current year was the decline in oil
prices, which significantly affected the revenue of the Group. This
decline occurred subsequent to the acquisition of Mena in October
2014.
In assessing whether an impairment is required the carrying
value of the CGU is compared with its recoverable amount. The
recoverable amount is the higher of the CGU's fair value less costs
to sell and value in use. Given the nature of the Group's
activities, information on the fair value of an asset is usually
difficult to obtain unless negotiations with potential purchasers
or similar transactions are taking place. Consequently, unless
indicated otherwise, the recoverable amount used in assessing the
impairment charges described above is value in use. The Group
generally estimates value in use using a discounted cash flow
model.
Key assumptions relating to this valuation include the discount
rate and cash flows used to determine the value in use. Future cash
flows are estimated based on financial budgets approved by
management covering a three-year period and are extrapolated over
the useful life of the assets to reflect the long-term plans for
the Group using the estimated growth rate for the specific
business. The future cash flows were discounted to their present
values using a pre-tax discount rate of 10%. This discount rate is
derived from the Group's post-tax weighted average cost of capital
("WACC"), with appropriate adjustments made to reflect the risks
specific to the CGU and to determine the pre-tax rate. The WACC
takes into account targeted debt and equity, weighted 50% each. The
cost of equity is derived from the expected return on investment by
the Group's investors. The cost of debt is based on the interest
rate at which the Group would be able to borrow for future
expenditure. Segment-specific risk is incorporated by applying
individual beta factors. The beta factors are evaluated annually
based on publicly available market data.
Other key assumptions used:
Crude oil prices: Forecast commodity prices are based on
management's estimates and available market data.
Production rates: Based on management's best estimate of
production profiles.
Growth rate estimates: Rates are based on published industry
research.
Gross margins: Gross margins are based on average values
achieved in since the acquisition of the assets.
Management has considered the sensitivity of the value-in-use
calculation to various key assumptions such as crude oil prices and
production rates. These sensitivities have been taken into
consideration in determining the required impairments. A 10% change
in any of these variables could change the recoverable amount by
R22.1 million to R113.8 million.
11 FAIR VALUE MEASUREMENT
--- ----------------------------- ------- ------- ------- -------
Carrying value Fair value
--- ----------------------------- ---------------- ----------------
2016 2015 2016 2015
R'000 R'000 R'000 R'000
Group
--- ----------------------------- ------- ------- ------- -------
Loans and receivables
--- ----------------------------- ------- ------- ------- -------
Other financial assets (note
6)(1) 636 944 677 394 540 851 590 453
--------------------------------- ------- ------- ------- -------
(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 financial
instruments and are not considered to be objective evidence of
impairment for items carried at amortised cost per IAS 39 as this
does not impact the timing or amount of expected future cash
flows.
Assets Fair value
at 29 February
2016
R'000
---------------- ---------------- ----------- ------------
Valuation Significant
technique inputs
---------------- ---------------- ----------- ------------
Other financial 540 851 Discounted Weighted
assets cash flow average
model cost of
capital
---------------- ---------------- ----------- ------------
The Group's own non-performance risk as at 29 February 2016 was
assessed to be insignificant.
Fair value hierarchy:
The following table presents the Group's assets not measured at
fair value in the statement of financial position, but for which
the fair value is disclosed above. The different levels have been
defined as follows:
Level 1 - Quoted (unadjusted) prices in active markets for
identical assets or liabilities
Level 2 - Other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly
Level 3 - Techniques which use inputs that have a significant
effect on the recorded fair value that are not based on observable
market data
Level Level Level Total
1 2 3
------------------------ ------- ------- ------ ------
R'000 R'000 R'000 R'000
------------------------ ------- ------- ------ ------
At 29 February 2016
------------------------ ------- ------- ------ ------
540 540
Other financial assets - - 851 851
------------------------ ------- ------- ------ ------
At 28 February 2015
------------------------ ------- ------- ------ ------
590 590
Other financial assets - - 453 453
------------------------ ------- ------- ------ ------
21 21
Asset held for sale - - 840 840
------------------------ ------- ------- ------ ------
There were no transfers between any levels during the year.
12 COMMITMENTS AND CONTINGENT LIABILITIES
--- --------------------------------------------- ------- -------
2016 2015
R'000 R'000
--- --------------------------------------------- ------- -------
Commitments
--- --------------------------------------------- ------- -------
Exploration and evaluation assets - work
programme commitments - due within 12
months 830 68 661
------------------------------------------------- ------- -------
Exploration and evaluation assets - work
programme commitments - due within 13
to 48 months 51 282 19 500
------------------------------------------------- ------- -------
52 112 88 161
------------------------------------------------- ------- -------
Exploration and evaluation commitments
will be funded through a combination
of debt and equity funding.
--- --------------------------------------------- ------- -------
Contingent liabilities
--- --------------------------------------------- ------- -------
Performance bond on OPL 233 issued by
Ecobank in respect of OPL 233's exploration 173
activities(1) - 666
------------------------------------------------- ------- -------
Cost carry arrangement with Total(2) 95 773 96 613
------------------------------------------------- ------- -------
270
Total 95 773 279
------------------------------------------------- ------- -------
(1) Performance bond
The performance bond issued by Ecobank in respect of the OPL 233
exploration activities expired on 2 May 2015.
(2) Cost carry arrangement
The Farm-In Agreement between Semliki and Total provides for a
carry of costs by Total on behalf of Semliki on Block III.
Semliki's rights under this contract were subsequently assigned to
SacOil DRC as part of the Reorganisation concluded on 29 February
2016 (see note 9). 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 29 February 2016 Total has incurred R95.8
million (28 February 2015: R96.6 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.
13 RELATED PARTIES
--- ---------------------------- ------ ------
2016 2015
R'000 R'000
--- ---------------------------- ------ ------
Key management compensation
--- ---------------------------- ------ ------
Non-executive directors:
--- ---------------------------- ------ ------
Fees 3 242 2 796
-------------------------------- ------ ------
Executive directors:
--- ---------------------------- ------ ------
Salaries 10 610 13 665
-------------------------------- ------ ------
Other key management:
--- ---------------------------- ------ ------
Salaries 7 436 4 642
-------------------------------- ------ ------
14 DIVIDENDS
The Board has resolved not to declare any dividends to
shareholders for the period under review.
15 EVENTS AFTER THE REPORTING PERIOD
The following events occurred after the reporting period:
During April 2016, SacOil and Energy Equity Resources ("EER")
signed a Memorandum of Understanding to explore oil and gas
opportunities in the Republic of Nigeria. Pursuant to this
initiative, SacOil and EER were awarded a 12-month contract for the
purchase of crude oil grades by the Nigerian National Petroleum
Corporation for onward sale. The first lifting of the crude oil is
expected to take place in the middle of June 2016.
The receivable from Encha Energy ("Encha"), disclosed in note 6,
became due and payable on 29 February 2016. This amount remains
unpaid as at the date of this report. Under the terms of the
Acknowledgement of Debt Agreement concluded with Encha, interest
calculated at the prime rate plus 3% shall accrue on the
outstanding balance. Notwithstanding the date on which the
outstanding balance became due and payable, such interest will be
calculated from 28 February 2013 to the date of actual payment. The
Group is in discussions to recover these funds.
On behalf of the Board
Tito Mboweni Dr Thabo Kgogo Damain Matroos
Chairman Chief Executive Officer Chief Financial Officer
Johannesburg
31 May 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), Marius
Damain Matroos (Chief Financial Officer), Bradley Cerff (Executive
Director), Tito Mboweni (Chairman)*, Mzuvukile Maqetuka*, Stephanus
Muller*, Vusi Pikoli*, Ignatius Sehoole**, Danladi Verheijen**,
Titilola Akinleye**
* Independent non-executive directors ** Non-executive directors
Advisers:
Company Secretary: Fusion Corporate Secretarial Services
(Proprietary) Limited
Transfer Secretaries South Africa: Link Market Services South
Africa (Proprietary) Limited
Transfer Secretaries United Kingdom: Computershare Investor
Services (Jersey) Limited
Corporate Legal Advisers: Norton Rose Fullbright South
Africa
Auditors: Ernst & Young Inc
JSE Sponsor: PSG Capital Proprietary Limited
Investor Relations United Kingdom: Buchanan Communications
Limited
Investor Relations South Africa: Hill+Knowlton Strategies South
Africa Proprietary Limited
AIM Nominated Adviser: finnCap Limited
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BXGDUDDXBGLB
(END) Dow Jones Newswires
May 31, 2016 10:15 ET (14:15 GMT)
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