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SacOil share analysis |
SacOil is focussed solely on oil & gas operations in Africa, where it believes it has a competitive advantage at the point of entry. It has operations in the DRC (where it has partnered with Total), Nigeria & South Africa. It looks for already discovered and as such relatively de-risked smaller plays.
With the shift of the Group`s focus to oil and gas, management have agreed to sell Greenhills chemical processing plant in Mpumalanga (to a company representing the management & employees of the Plant) for R7m. The plant reported a R1.7m profit in the year to 28 Feb 2012, but is currently (3 October 2012) loss making.
Sacoil has purchased all the equity in a Block 1 onshore prospecting licence in Malawi, and will be the operator. Block 1 comprises 12,265 square kilometres in the north west of Malawi, lying on trend with the East African rift system, on which there have been oil discoveries in Chad, Kenya, Sudan and Uganda. It is the 2nd largest prospecting licence in Malawi.
In the first 4 years Sacoil must pay USD2m & then there are 2 subsequent 3-year renewal periods. "During the initial four year period it is envisaged that desktop studies and the acquisition of gravity and magnetic data will take place in order to evaluate the petroleum potential of the block." said Robin Vela, CE of Sacoil.
The contingent bonus to be paid from Total to Sacoil is $54m, and was accounted for as a financial asset worth R263m at 29 Feb 2012 (as well as deferred tax of R52.5m). Ratioing these up by a R/$ on 29 Feb 2012 of R7.73 & R8.59 on 2 June 2012 gives a R292m financial asset & deferred tax of R58.3m.
Robin Vela is the Chief Executive, in this interview published on 22 May 2012, he hints that Sacoil are looking at purchasing a producer, and that it may be done by debt-financing.
In 2012 Sacoil brought on board Willem de Meyer as Vice President Commercial & Jordaan Fouche as Vice President Technical & New Business.
From 1 September 2012 Craig Campbell was appointed Vice President Finance.
Sacoil reported a tangible NAV of 64c/share on 31 Aug 2011.
OPL233 is a 126 square metre water block with a depth of less than 30 feet, located off the coast of the central delta region of nigeria (Bayelsa State), some 120km due south-southeast of the Forcados terminal, adjacent to the Apoi field, and flanked by several oil & gas fields & discoveries (OPL233 is contiguous to the Chevron Opoa field, which is a 100,000 barrels per day production well). The petrophysical interpretation of the Olobia-I well-logs indicates 103 feet of net oil & 54 feet of gas & condensate.
Reserve estimate
"The current reserve estimate is based on a 900-metre radial area very close to the Olobia-1 well, which represents a fraction of the block’s gross acreage. Olobia-1 hit around 100 feet of net pay oil and 90 feet of gas when it was originally drilled in 1986 by Shell. While the well was logged it was never flow tested."
Timeline
"The commencement of an extended well test, booking of reserves & generation of cash flow may occur before the end of 2013".
Seismic data
Access was gained to a 3D Ocean Bottom Cable seismic survey extending into OPL233 from the Chevron operated OML86 producing license. A preliminary study has identified the Olobia West prospect which appears to add additional prospectivity to OPL233.
The seismic data is in addition to the 3D seismic data which SacOil intends acquiring along with its partner Energy Equity Resources, as part of its farm in obligation for a 20% interest in OPL233: The joint venture has "completed the interpretation & evaluation of the existing seismic & well data on the block. In addition, the modelling & planning of a 3D Ocean Bottom Cable Survey was completed" in Q1 2012. "In preperation for the 3D seismic acquisition, the jv partners are in the process of finalising the seismic contractor assessments & engagements for this acquisition. Immediately after this contract award, which we (Sacoil) expect imminently, acquisition & processing will commence, leading to what is anticipated to be the citing of an optimal well location."
Farm-in agreement
"SacOil entered into a farm-in agreement with NIGDEL & Energy Equity Resources on 30 November 2010 under which SacOil & EER agreed to assist NIGDEL in the procurement of the Performance Bond."
On 17 April 2012 Sacoil announced that it had procured a US$25m performance bond from Ecobank Nigeria, which enables it to assist NIGDEL United company to fulfill its obligations under the Profit Sharing Contract on OPL233. The Bond is payable to the Nigeria National Petroleum Corporation. The bond was approved on the condition, inter alia, that cash collateral of US$10m be delivered in favour of Ecobank. SacOil has delivered the cash collateral through a combination of debt & equity funding, and the bond was posted on 13 April 2012. "SacOil has provided EER's 50% share of the obligations under the bond, secured against EER's interest in the concession. EER is obliged to repay SacOil 50% of the Bond plus interest & costs associated with the cash collateral & the procurement of the Bond prior to the commencement of an agreed work program with the Concession." The successful posting of the bond allows the partners to commence with the acquisition of up to 100km2 Ocean Bottom Cable 3D seismic survey, which will hopefully enable the optimum placement of an appraisal well following the Olobia-1 oil discovery, which if successful will be placed on an extended well test subject to NNPC & Department of Petroleum Resources approvals. "Production data obtained from the extended well test should enable a better estimate of recoverable resources & the optimal design of a full field development."
Share issue
32 135 560 new SacOil shares will be issued to YA Global Masters SPV at a
price of R0.49 per SEDA Share, pursuant to the terms of
the Standby Equity Distribution Agreement dated 12 October 2011 and approved by
Shareholders in a general meeting on 17 November 2011, raising GBP1.3million. The listing of the SEDA Shares on the JSE and the admission of the SEDA Shares to trading on AIM are expected to take place on Thursday, 3 May 2012. The proceeds of
the Issue completes the funding of the performance bond on SacOil's oil
concession block OPL 233 in Nigeria. SacOil's total issued share capital after the Issue will be 893 689 516 ordinary shares.
Ownership |
This doesn't tie up with other numbers so I must have made a mistake, but my calcs suggest Block III oil rights are effectively owned:
Sacoil has entitlement to contingent cash bonuses of US$54m. Total bears all the costs associated with the acquisition of the airborne gravity & magnetic survey, the seismic survey & subsequent exploration & appraisal wells, up to final investment decision. |
Operator |
Total |
Total has "committed to use all reasonable endeavours to meet the Block III Work Programme obligations & to reach final investment decision" by 31 March 2014".
By the end of 2011 Total had "completed the acquisition & interpretation of a satellite imagery survey over the entire concession", which "reaffirmed the exploration potential of the entire Block III & therefore it was decided to commit to an airborne geographical survey over the whole concession. In preperation for the exploration programme, environmental & societal studies were also successfully completed."
A budget to the end of 2012 of $30m has been approved by the Opscom (which Sacoil is part of). It was partly used to conduct an airborne gravity & magnetic survey on the northern part of the Block III area - processing confirms the trend observed in the adjacent concessions in Uganda, and identifies features similar to those found to be oil-bearing in Uganda
The next step is to acquire a 2D seismic survey, to estimate the properties of the rock & map potential oil & gas prospects (Total has initiated a tendering process). Subject to positively identifying structures that may contain oil & gas, Total intends to drill an exploration well, which will determine the oil & gas potential & commercial viability of Block III (Robin Vela described an aim of drilling the well by the end of 2012 as being "overly ambitious"). Sacoil is not required to contribute any further capital into this project until final investment decision, which is when a development plan is put in place.
Robin Vele, the Chief Executive of Sacoil, believes that the 12.5% of Block III is worth "anywhere between $100m & $200m".
Equity ownership of OPL281 is 60% Transcorp, 20% Energy Equity Resources (EER) & 20% SacOil. This is a much bigger play than OPL233, but will take a bit more time, and will be worked once Sacoil have the cashflow ffrom OPL233.
OPL281 is an onshore block covering about 138 square kilometres, located in the western delta part of Nigeria, some 25km east of the Forcados Crude Export Terminal. OPL281 is a former Shell permit, with a contingent reserve of 99.2mboe (by TRACS International), there are 2 discovery wells:
In 1970 a discovery well encountered hydrocarbons at 4 levels between 8720 & 12350 feet.
In 1967 a discovery well found 8 hydrocarbon sands between 8260 & 10761 feet.
"The concession is located near to existing off-take infrastructure and as such, early monetisation post the successful drilling of a well would be possible."
Sacoil has a partnership with Transnational Corporation of Nigeria (Transcorp) & Energy Equity Resources (EER). Transcorp is the operator of OPL281, and will pay 60% of the Capex costs to first production. Farm-in fees for the technical joint venture partnership between Sacoil & EER is $24.5m. EER's 50% portion of the fees is carried by SacOil as an interest bearing loan to EER that is repaid from EER's entitlement to production in OPL281. SacOil paid $12.5m towards the signature bonus on 28 Feb 2011 & the outstanding $12m becomes due once the remaining conditions precedent to the farm-in agreement have been met (these include perfection of title & all the necessary Nigerian government & Nigerian National Petroleum Company consents in relation to the licence).
A work programme budget of $15m is estimated for phase 1 of the exploration of OPL281, which involves the reprocessing of the existing 3D seismic data & the drilling of at least one appraisal well.
A Competent Person's Report issued by reserves auditing firm, AGR-TRACS International has attributed a gross unrisked contingent resource of approximately 100MMboe, with additional potential in 2 further prospects & deeper zones.
In order to ensure that there is sufficient cash to pay for costs in relation to proposals under consideration, SacOil have issued 10 926 906 SEDA Shares to YA at 44c a share pursuant to the terms of the Standby Equity Distribution Agreement dated 12 October 2011. Application has been made to the Johannesburg Stock Exchange to grant a listing of the SEDA Shares (& the LSE). The SEDA shares are expected to start trading on AIM on 9 Feb 2012.
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