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 interim results for the six months ended 31 August 2012

SacOil, the African independent upstream oil and Gas Company, is pleased to announce its reviewed financial results for the six months ended 31 August 2012.

Highlights

• Block III, DRC: Successful acquisition of an airborne gravity and magnetic survey, post period-end;
• OPL 233, Nigeria: Seismic acquisition on part of the block and successful posting of performance bond;
• OPL 281, Nigeria: Restructuring of farm in agreement, reducing capex requirement from SacOil;
• Greenhills Plant: Disposal of non-core manganese plant to management and employees for R7 million, post period-end;
• Successful resolution of Identiguard litigation matter with SacOil awarded judgement in its favour and costs; and
• Comprehensive loss attributable to owners of the parent of R12.6 million (2011: R100.1 million restated)

Commenting, Robin Vela, Chief Executive of SacOil said:
“We have continued to make good progress over the last six months albeit in challenging times in debt and capital markets for junior exploration companies. On our nearer term producing assets, we successfully posted the US$25 million performance bond on OPL 233 in Nigeria, enabling us to move forward with the acquisition of 3D seismic data, which will form the basis for drilling our first well. We have also acquired further 3D seismic data covering a portion of the block, which suggests additional prospectivity. On the high impact Block III in the DRC, Total the operator successfully completed an airborne gravity and magnetic survey, which will form the basis for a 2D seismic programme. Concurrently, we have disposed of the loss-making non-core Greenhills Manganese Processing Plant, allowing management and capital resources to be focused on the core oil and gas business. With solid work programmes in place on our blocks, we look forward to reporting further progress in the next period.”

Introduction
SacOil’s vision is to build a balanced hydrocarbon exploration and production portfolio using the Company’s African heritage as a competitive advantage at the point of entry. The Company’s strategic objectives are the development, exploration and production of discovered oil and gas assets with existing or near-term production, cash and revenue potential balanced with some exposure to high impact exploration. To that end, the Company has interests in three oil concessions – Block III, Albertine Graben in the Democratic Republic of Congo (“DRC”) and OPL 233 and OPL 281 in Nigeria.

Oil and gas assets

Block III, Albertine Graben, DRC
At the beginning of 2012, the Government of the DRC granted a Presidential Ordinance to Total E&P RDC (“Total”), the operator of Block III, for their 60% interest. Pursuant to the Presidential Ordinance, the work programme for 2012 was consequently approved by the Block III Operations Committee, including a budget of $30 million. The main item in the 2012 work programme was the acquisition of a gravity and magnetic survey over the northern part of Block III outside the Virunga National Park, which was completed in September this year, post period-end. Preliminary processing of the data broadly confirms the existence of the rift graben on trend with the adjacent concessions in Uganda. On completion the survey will form the basis for planning a prolific 2D seismic survey.

Following the farm-out of Block III to Total in March 2011, SacOil is carried for the entire work programme and will not be required to contribute any further capital into this project until a development plan is put in place.

On 12 March 2012, Total acquired a further 6.66% effective interest in Block III from Semliki Energy SPRL (“Semliki”), a special purpose vehicle jointly owned by SacOil and DIG Oil (Proprietary) Limited (“DIG”), for a cash consideration of US$10 million and future contingent bonuses amounting to US$11.3 million. Pursuant to the acquisition, Total’s holding in Block III increased to 66.66%, whereas SacOil’s effective interest in Block III remains unchanged at 12.5%. DIG’s holding reduced to 5.84% and the DRC Government retains a 15.0% interest in the asset. As a result of this transaction, Semliki, a company incorporated in the DRC and through which SacOil and DIG own their interests in Block III, is now owned 68% by SacOil and 32% by DIG.

OPL 233, Nigeria
On 17 April 2012, SacOil procured from Ecobank a US$25 million Performance Bond (“the Bond”) as part of its farm in obligation for a 20% interest in OPL 233. The Bond was provided to Nigdel United Oil Company Limited (“NIGDEL”) to fulfil its obligations under the Production Sharing Contract (“PSC”). The Bond was payable to the Nigerian National Petroleum Corporation (“NNPC”). The successful posting of the Bond allows the partners to proceed with the acquisition of up to 100 km2 3D Ocean Bottom Cable (“OBC”) seismic survey. Results of this survey are expected to enable the optimum placement of a well to appraise the Olobia-1 oil discovery.

In addition, during this period the OPL 233 joint venture gained access to a portion of an OBC Seismic acquired by Chevron, which extends into OPL 233 from the adjacent oil producing Chevron operated OML 86 concession. SacOil is in the process of reviewing this data in more detail but an initial study conducted by Atlantic Subsurface, a National Petroleum Investment Management Services (“NAPIMS”) approved consulting firm, suggests additional prospectivity in the block, with the identification of the Olobia West prospect. SacOil and its partner Energy Equity Resources (“EER”) also intend to acquire at least 100 km2 3D OBC Seismic as part of the farm in obligation for their respective 20% interests in OPL 233.

During the next period SacOil will undertake a resource update following the analysis of data collected from the Chevron OBC survey and the new OBC survey to be acquired.

SacOil has a 20% share in OPL 233 subject to government consent, following which SacOil and EER will have to fulfil their joint farm-in obligation to pay NIGDEL a remaining farm-in fee of US$9.1 million. SacOil is carrying EER’s obligation of US$4.0 million until first oil date at an interest rate of 25% nominal annual compounded monthly (“nacm”).

A gross work programme budget of US$25 million is estimated for the one year extension period of phase 1 of the exploration period (granted by NNPC on 14 November 2012) and involves the acquisition of 3D OBC and the drilling of at least one well. SacOil’s share of this is US$12.5 million.

In relation to OPL 233, the remaining summary financial obligations on SacOil are as follows:

• US$9.1 million to fulfil farm-in obligations of both SacOil and EER post-governmental consent/receipt of definitive title; and
• US$12.5 million to fund its share of the work programme over the next year.

By posting the performance bond, SacOil has enabled the joint venture to retain the licence, together with a one year extension to phase 1 of the exploration programme expiring on 15 November 2013.

OPL 281, Nigeria
On 8 February 2012, SacOil agreed revised terms for its partnership with Transnational Corporation of Nigeria PLC (“Transcorp”) and EER.

Highlights of the revised terms of the farm-in to licence OPL 281 are as follows:

• a reduction in farm-in costs for SacOil and EER from US$32.50 million to US$24.50 million. SacOil has already paid US$12.50 million of this amount;
• Transcorp will remain the operator of OPL 281 and will pay its 60% share of the capex costs to first production as opposed to SacOil and EER carrying 100% of these costs as previously agreed; and
• Transcorp to post the performance bond to the Nigerian Government.

SacOil has a 20% share in OPL 281 subject to government consent, following which SacOil will have to fulfil its farm-in obligation to pay Transcorp a remaining farm-in fee of US$12.0 million on behalf of SacOil and EER. SacOil is carrying EER’s obligation of US$12.25 million until first oil date at an interest rate of 25% nacm.

A gross work programme budget of US$15.0 million is estimated for phase 1 of the exploration period and involves the reprocessing of the existing 3D seismic data and the drilling of at least one well. SacOil’s share of this is US$3.0 million.

In relation to OPL 281, the remaining summary financial obligations on SacOil are as follows:

• US$12.0 million to fulfil farm-in obligations of both SacOil and EER post governmental consent/receipt of definitive title; and
• US$3.0 million to fund its share of the work programme over the next year.

Other assets – Greenhills Manganese Processing Plant (“Greenhills Plant” or the “Plant”)
The Greenhills Plant is a non-core asset and SacOil has in the past announced its intention to divest this asset. Revenue generated by the Plant continued to deteriorate due to employment and maintenance issues, the extensive need for capital investment and the subsequent loss of a major customer as a result of product related concerns. On 15 October

2012 the Company finalised a sale agreement with management and employees of the Plant, under which the Plant was sold on an “as is” and vendor financed basis, with the liabilities for rehabilitation and environmental aspects passed on to the purchaser. The sale of the Plant will eliminate the Company’s monthly opex contribution to the Plant of R0.2 million per month, ensure the continued employment of employees and enable SacOil management to focus on the core oil and gas business. The purchaser has the obligation to provide a minimum of R2.0 million working capital upfront; invest R5.0 million in capex for the recapitalisation and sustaining of the Plant; and make a staged payment of R7.0 million to SacOil. The effective date for the transaction was 17 September 2012 and the sale was finalised on 15 October 2012. Details relating to the disposal of the Plant are included in notes 12 and 18.3 to the condensed Group interim financial statements.

Financial review

Continuing operations
A loss from continuing an operation of R13.7 million was reported compared to R100.4 million in the prior comparable period. This principally reflected the recognition of profit on disposal of the 6.66% interest in Block III, increases in interest income and foreign exchange gains offset by debt facility/capital raising fees, corporate and general costs and an impairment provision on the Greenhills Plant.

Other income totalled R55.2 million (2011: R139.0 million). On 12 March 2012, Total acquired from Semliki, a special purpose vehicle jointly owned by SacOil and DIG, a further 6.66% effective interest in Block III for a cash consideration of US$10 million and future contingent bonuses receivable amounting to US$11.3 million. This followed the prior year disposal to Total of a 60% interest in Block III. Of the R40.9 million profit (2011: R83.4 million loss) on the sale of exploration and evaluation assets recorded in the current period, R45.0 million related to the disposal of the 6.66% interest in Block III and was offset by a R4.1 million reversal of contingent bonuses receivable related to the prior period disposal. Contingent consideration attached to the same transactions netted out at a R31.6 million charge (2011: R219.1 million gain) with a R26.8 million gain on the current period disposal more than offset by a R58.4 million reversal related to prior year provisions. SacOil’s underlying 12.5% interest in Block III was retained through increasing its interest in Semliki to 68%. The impact of the transaction was then adjusted for through “Non-controlling interest”.

Foreign exchange gains of R38.9 million (2011: R3.3 million) principally related to the US$ denominated loans to EER and the cash collateral held by Ecobank as security for the performance bond on OPL 233. The posting of the performance bond required a cash collateral of US$10 million which was funded by lending facilities from Renaissance BJM Securities (Proprietary) Limited (“Rencap”) and Yorkville Advisors LLP (“Yorkville Advisors”). It was agreed between EER and SacOil that SacOil would fund all costs relating to the performance bond with subsequent recovery of half of these costs, being EER’s portion, from EER based on a contractual agreement stipulating applicable interest and repayment dates.

Other operating costs totalled R23.2 million (2011: R37.7 million) and principally comprised on going employment costs, professional, legal and audit fees and the costs of maintaining the Company’s listings on the Johannesburg and London Stock Exchanges. The level of such expenses has decreased due to the non-recurrence of once-off AIM initial listing costs incurred in the prior period amounting to R21.9 million. Operating costs in the current period were tightly controlled to limit constraints on working capital requirements.

An impairment loss of R1.5 million was recognised, immediately before the classification of the Greenhills Plant as an “Asset held for sale”, to reduce the carrying amount of the assets in the disposal group to the fair value less costs to sell.

No share-based payment expenses were incurred in the current period (2011: R50.9 million).

Investment income of R27.2 million (2011: R6.7 million) principally comprised interest of R18.9 million (2011: R5.8 million) on loans made to EER which increased following the posting of the performance bond. In addition, R7.9 million of imputed interest (2011: R0.6 million) reflected the unwinding of the discount applied to the deferred consideration related to the Block III disposals totalling R15.2 million partially offset by a R7.3 million impact of reversing some prior year provisions.

The increase in finance costs by R19.6 million to R21.6 million related to interest costs and debt facility/capital raising fees on the Rencap and Yorkville Advisors borrowing facilities.

Current tax represents R26.8 million (2011: R41.0 million) of capital gains tax on the profit on disposal of the additional 6.66% interest in Block III, R4.9 million (2011: R10.2 million) of foreign dividend tax and R18.4 million (2011: nil) estimated penalties on the late payment of prior period tax charges. Deferred tax includes R10.7 million of provisions (2011: R6.1 million) related to the current period disposal of the interest in Block III net of R12.8 million of releases (2011: R88.0 million charges) related to the reversal of prior period provisions. A further R3.3 million (2011: nil) has been provided against the expected recovery of costs carried by Total out of future production.

Discontinued operations
The loss of R1.4 million (2011: profit of R2.0 million) from discontinued operations related to the Greenhills Plant. Declining revenues of R9.1 million (2011: R19.3 million) reflected the loss of a major customer and other factors described above whilst cost of sales of R7.3 million (2011: R13.6 million), salaries of R2.4 million (2011: R3.0 million) and other operating costs of R0.8 million (2011: R0.7 million) did not decline in proportion.

Financial position
Non-current assets showed an overall decrease to R472.9 million from R519.6 million at 29 February 2012.

The reduction in property, plant and equipment from R6.1 million at 29 February 2012 to R0.4 million at 31 August 2012 principally reflected the transfer of the Greenhills Plant to assets held for sale after depreciation. The reduction in exploration and evaluation assets from R182.0 million to R135.7 million reflected the disposal of a 6.66% interest in Block III and the revision of capitalised costs following the availability of additional cost information, partially offset by the provision for costs incurred on Block III exploration by Total on the Company’s behalf.

The increase in other financial assets from R331.4 million to R336.8 million included a R10.7 million net increase in long-term loans. Future contingent bonuses receivable amounting to R26.8 million were recognised in the current period following the disposal by Semliki of the 6.66% interest in Block III, together with imputed interest and foreign exchange gains amounting to R50.3 million attributable to all contingent bonuses receivable from Total. However, future contingent bonuses receivable attributable to the first farm-out which occurred in March 2011 were re-estimated in the current period from US$108 million to US$90.5 million. This resulted in the reversal of contingent bonuses receivable of R82.4 million.

Current assets showed a significant increase to R290.9 million from R98.5 million at 29 February 2012 largely due to increases within trade receivables of loans to EER of R93.7 million, to DIG of R22.5 million and of the cash collateral related to the performance bond of R84.6 million within cash and cash equivalents. The advance against asset negotiation rights of R75.5 million remains in place although the Board recognises that there is a chance that negotiations may be unsuccessful (see note 10).

Cash balances of R95.1 million showed an increase of R84.3 million during the period. This primarily reflects the US$10 million cash collateral deposited with Ecobank as security for the Performance Bond on OPL 233.

Shareholders’ equity attributable to equity holders of the parent increased from R333.1 million during the previous period to R381.9 million. Increases in issued share capital from R486.2 million to R523.0 million arose from the conversion of loans due to Yorkville Advisors into shares under the Standby Equity Distribution Agreement whilst a reduction in accumulated losses largely reflected the profit within Semliki arising from the disposal of 6.66% of Block III.

Following the disposal of the Greenhills Plant in October 2012, management now plans to concentrate its activities in the oil and gas exploration and production sector. Consequently it is intended to review the Group’s accounting policies and the presentation of its results to ensure that they fully reflect relevant recognised practice in this industry whilst still remaining in compliance with IFRS. Any changes arising from this review will be reflected in the results for the full year to 28 February 2013.

Financing the Group’s activities
Total cash generated during the interim period was R84.3 million (2011: R6.1 million cash utilisation) resulting in a balance of R95.1 million as at 31 August 2012. Net cash used in operating activities of R115.5 million (2011: R65.6 million) was largely funded through the net impact of the sale of the 6.66% interest in Block III after adjustment for SacOil’s increased holding in Semliki, with increased borrowings further contributing to cash resources.

Cash utilised in operations of R115.8 million (2011: R31.4 million) is reflective of costs associated with the procurement of the Performance Bond and advances to our partners. The decline in revenues and the increase in operating losses from the Greenhills Plant also contributed to the decrease in operating cash flows.

The repayment of short-term loans by our partners is expected to improve cash flows from operations.

Prior period error
During the period ended 31 August 2011, whilst the Group correctly recognised the impact of the cash proceeds, together with a receivable associated with the contingent bonuses receivable from Total on the farm-out of the 60% interest of Block III, the value of the receivable, as well as the tax and interest impact of these amounts were not correctly recognised. The previously reported comprehensive loss attributable to SacOil of R31.1 million has been correctly adjusted and restated to a comprehensive loss of R100.1 million to correct these misstatements as at 31 August 2011.

Details of these adjustments are included in note 16 to the condensed Group interim financial statements.

Principal risks to 2012 – 2013 performance
The Directors do not consider that the principal risks as published in the Annual Report for the year ended 29 February 2012, on pages 14 and 15, have changed as at the date of this interim report. A detailed analysis of these risks can be obtained in the Annual Report for the year ended 29 February 2012.

Going concern
The Group continues to rely on its ability to successfully raise further financing to fund future working capital and development needs. The Board is satisfied that the Group has access to adequate resources to continue operating for the next 12 months. The condensed Group interim financial statements have therefore been prepared on a going concern basis.

By order of the Board
Robin Vela (Chief Executive)

21 November 2012
Johannesburg

Directors:
Richard John Linnell** (Chairman), Robin Vela (Chief Executive Officer), John Bentley**,
Colin Bird*, James William Guest**, Gontse Moseneke*
(*) Non-executive director (**)Independent Non-executive directors

CORPORATE INFORMATION
Registered office and physical address:
2nd Floor, The Gabba
Dimension Data Campus
57 Sloane Street
Bryanston
2021

Postal address:
PostNet Suite 211
Private Bag X75
Bryanston,
2021

Contact details:
Tel: +27 (0) 11 575 7232
Fax: +27 (0) 11 576 2258
Email: info@sacoilholdings.com
Website: www.sacoilholdings.com

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 South Africa
Auditors Ernst & Young Inc.
JSE sponsor Nedbank Capital
AIM Nominated Adviser finnCap Limited

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