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SacOil Unveils Plans to Become an Oil Producer

SacOil Unveils Plans to Become an Oil Producer

South African oil and gas company Sacoil has taken the first step in transforming from an exploration entity to an oilproducer by inking in a joint-venture (JV) agreement with Nigerian oil firm Energy Equity Resources.

Sacoil CEO Robin Vela made it clear at a media briefing in Johannesburg, that the JSE-listed company was eager to become a serious oil producer in the short to medium term. “We have now taken the first move and changed our game plan in the oil space.

“This venture will create real value for Sacoil, and even though the returns on near-term assets are not always as elaborate as that of exploration projects, this venture will form the basis of Sacoil’s transformation into that of an oilproducer.”

Vela believed that the markets had been undervaluing Sacoil’s share price, which had been lingering at around 80c a share since August this year, peaking at 99c in late September.

He believed that once Sacoil became an oil producer, the company would see a significant spike in its share price.

Currently, the new venture is already considering its first transaction on a 100-million contingent resource in Nigeria, with the near-term potential to produce around 30 000 bbl/d. The transaction could see the first oil being produced in 36 months, if everything goes according to plan.

Nigeria, known as Africa’s oil giant, is producing around 2,7-million barrels of oil every day, which generates some $200-million a day in revenue.

Energy Equity Resource CEO Osamed Okhomina indicated that the JV would require about $70-million to finance the production of the first batch of oil, at a capacity of 10 000 bbl/d.

However, he pointed out that sourcing financing for such near-term assets was not a difficult task.

Meanwhile, Vela added that Sacoil would seriously consider aggressively looking for offshore investment to fund some of the company’s future capital needs.

He noted that the South African markets generally preferred to invest into the more traditional mining and resources markets, rather than the lesser-known oil and gas markets. “We may even consider listing on another board if need be, but that is not the cards yet,” he said.

Nevertheless, Sacoil had been attracting stronger interest from investors such as Metropolitan Asset Management and Stanlib over recent months, especially after it received a Presidential decree from the Democratic Republic of Congo (DRC) government, after waiting for about two years.

Sacoil boasts a prospecting area in the DRC that is well known for its oil resources, even though most development had been taking place on the Uganda side of this well-known oil address.

Vela said that Sacoil had now started its planned five-year work programme on its prospecting area, Block 3, in the DRC. An initial capital investment of about $12,5-million would be required for the first two years of the programme.

The company has also acquired a 55% stake in a gas resource area in Tunisia, but was still waiting for the Tunisian government to come on board.

Meanwhile, Vela indicated that Sacoil would consider disposing its noncore manganese asset in South Africa’s Mpumalanga province. Currently, the cash flow from the Greenhills mine is being used for corporate funding and the running of operations.

Vela said that going forward, Sacoil would aggressively expand its footprint in oil and gas on the African continent, mainly through acquisitions and partnerships.

Source: Engineering News

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