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Entry into unincorporated JV with EER and update in Farmout agreement in respect of the Chaal Gas Permit


(Formerly SA Mineral Resources Corporation Limited)

(Incorporated in the Republic of South Africa)

(Registration number 1993/000460/06)

Share code: SCL and ISIN: ZAE000127460


Entry into unincorporated JV with EER and update in Farmout agreement in respect of the Chaal Gas Permit


  • Strategic focus on production and near production oil and gas fields;
  • Joint venture agreement with credible Nigerian local partner, EER; and
  • Joint venture positioned to participate in the Nigerian divestment programme

For producing and near term production (undeveloped discoveries) oil and gas fields,

Strategic focus on production and near production oil and gas fields SacOil, the JSE listed Pan African independent upstream oil and gas company, has embarked on its strategy of seeking to acquire production and near production oil and gas fields on the African continent (“Production Assets”).

SacOil`s focus, in this regard, will be to target such Production Assets in established oil and gas production basins in Africa. Nigeria is the natural first stop given the long standing relations between Nigeria and South Africa.

More specifically, Nigeria has many discovered but undeveloped oil and gas fields and there is active divestment of certain Production Assets by international oil companies (“IOCs”) because of, inter alia, Nigeria`s Indigenisation Laws. To acquire Production Assets, SacOil needed a local Nigerian partner and SacOil is therefore pleased to announce its entry into an unincorporated joint venture agreement with EER.

Energy Equity Resources

EER is a Nigerian led and managed London based Pan African oil and Gas Company operating in Nigeria and Nigeria/Sao Tome joint development zone for over 7 years.

It has been involved in developing several assets in the region and worked with Shell, ExxonMobil, Chevron, Addax and Anadarko.

EER has also worked with several independent and local oil and gas companies such as

Afren Plc. and Oriental Energy Resources Ltd. EER has been involved in assisting the IOCs, host communities, the local and Federal government of Nigeria in finding a lasting solution to the issues in the Niger Delta.

EER is run by professional and experienced Nigerian and International oil and gas industry experts and is owned by its management and some major United Kingdom institutional investors.

EER’s Chief Executive Officer, Osamede Okhomina says “in SacOil we have a corporate partner that shares our business and social objectives. Most importantly SacOil`s access to the South African capital market and deep institutional investor base would ensure that the joint venture has necessary access to funding that meets its aggressive expansion objectives.”

Robin Vela, Chief Executive Officer of SacOil, says “the Company is delighted to form an association with EER because of its excellent track record and access to near term production and producing fields in Nigeria. The arrangement with EER fits neatly with SacOil`s objective of working with credible local partners in the jurisdictions the Company looks to enter. EER maintains strong relationships with the Nigerian authorities, host communities and IOCs operating in Nigeria. The joint venture`s envisaged initial transaction (in onshore Niger Delta) has a recoverable contingent resource (P50) (as verified by an independent competent person) of a 100 million barrels of oil equivalent (mboe) and a potential to produce up to 30 000 barrels of oil per day.

SacOil has a world class exploration interest in the Democratic Republic of Congo and produces manganese sulphate and oxide for the feed, fertiliser and chemical industries at its Greenhill’s plant in Mpumalanga, South Africa. Farmout Agreement in respect of the Chaal Gas Permit, Tunisia Candax Energy Inc. (“Candax”) has announced that according to the Journal Official de la Republique Tunisienne, the Chaal Permit (which covered an area of 1,200 km2, situated onshore central Tunisia approximately 50 km west of the city of Sfax) and in which Candax had a 60% working interest has been annulled. Having requested a one year extension with the intention of testing the commerciality of the Chaal-1 gas discovery, Candax and its partners are in the process of considering their options in relation to this decision. Under the terms of the Farmout Agreement, details of which were included in the circular that was posted to SacOil shareholders on 4 September 2010, signed between Candax and the Company, Candax has until 31 January 2011 to deliver a one year extension to their exploration permit and Tunisian Government consents to the Farmout Agreement.


5 October 2010


BDO Corporate Finance


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