SAC.L Regulatory News (SAC)

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")

Acquisition of a 100% interest in the Lagia oil field, onshore Sinai Peninsula, Egypt

Further cautionary announcement

1. Introduction

SacOil, the African independent upstream oil and gas company, is pleased to announce that it has entered into a sale and purchase agreement dated 9 September 2014 (the "Agreement") to acquire a Cyprus-registered exploration and production company, Mena International Petroleum Company Ltd ("MIP"), from Mena International Petroleum Holdings Company Ltd (the "Seller"), a wholly-owned subsidiary of TSX Venture listed Mena Hydrocarbons Inc. (TSXV:MNH) ("Mena Hydrocarbons") (the "Acquisition").

2. Rationale for the Acquisition

SacOil's current strategy is to grow and balance its existing portfolio on the African continent through the addition of reserves and production to its asset base. The two-pronged approach of this strategy includes:

· the monetization of the existing assets; and

· expansion of the portfolio to deliver production and cash flows.

MIP has a 100% interest in the development lease for the Lagia oil field, covering an area of approximately 32 square kilometres on the Sinai Peninsula in Egypt. The Lagia oil field is at a development stage with heavy oil (16-18° API) in shallow reservoirs and light oil potential in deeper reservoirs. The assets include existing production facilities and oil storage for 3 000 barrels of oil. The field is currently in test production and SacOil intends to implement a phased development programme to bring the field into full production. Phase 1 will include the hydraulic stimulation of 4 existing wells and the work-over of 1 well, commencing as soon as practicable after closing the Acquisition, and will be funded from existing cash resources.

Following completion of the Acquisition, which is expected on or before 31 October 2014 (the "Completion Date"), SacOil will provide further updates on its planned future development activities and investments in the Lagia oil field.

Highlights of the Acquisition include:

· The Lagia oil field represents the acquisition by SacOil of a de-risked onshore development asset in Egypt with short timelines to production and cash flows;

· Proven plus probable reserves net to MIP of 6.174 million barrels (audited by Degolyer and MacNaughton as at the year ended 31 December 2013); and

· The Acquisition represents a strategic entry to Egypt, where SacOil sees the potential to build a substantial E&P business.

3. Terms of the Acquisition

SacOil will, subject to fulfilment of the conditions precedent set out below, acquire all the issued shares in MIP (the "Sale Shares") from the Seller, with effect from 9 September 2014 (the "Effective Date").

As consideration for the Acquisition (the "Acquisition Consideration"), the Seller will be entitled to receive US$ 10 million in SacOil shares via the issuance of 183 666 947 ordinary shares in the Company (the "Consideration Shares"), based on the 30 day volume weighted average price of the SacOil shares on the JSE for the period ended 8 September 2014. The Consideration Shares shall be issued to Mena Hydrocarbons and shall not be traded for a period of 4 months following the Completion Date. The Acquisition Consideration shall be reduced by issuing fewer Consideration Shares should the working capital deficiency on the Completion Date be greater than US$4.1 million.

In addition, SacOil will settle in cash all MIP's liabilities, to a maximum value of US$ 4.1 million (the "Cash Consideration"). The Cash Consideration includes an amount of US$1,857,319 due to the holders of various promissory notes (the "Promissory Notes"). SacOil may from the Effective Date elect to pay MIP's trade creditors directly, subject to a maximum of US$250,000 (the "Loan"). Should the Acquisition not be completed, the Loan will become immediately due and payable.

There was no profit attributable to MIP in the last financial year

4. Conditions precedent

The Acquisition is subject to representations and warranties normal for a transaction of this nature. The Acquisition is subject to fulfilment of the following conditions precedent on or before the Completion Date:

4.1 the completion of the financial due diligence investigations into the affairs of MIP;

4.2 receipt of relevant confirmation from the Egyptian General Petroleum Corporation ("EGPC") in relation to certain historical costs recoveries due to MIP and other such matters related to the petroleum operations of MIP;

4.3 receipt of confirmations from the Cyprus Registrar of Companies and the Cyprus Inland Revenue of various administrative and financial matters in relation to MIP;

4.4 receipt of MIP's unqualified audited financial statements for the period ended 31 December 2013;

4.5 MIP's working capital on the Completion Date showing a deficiency no greater than US$2,242,681 (excluding the Promissory Notes);

4.6 the delivery by the Seller of various administrative documents and copies of directors' and shareholders' resolutions;

4.7 approval of the Mena Hydrocarbons' and the Seller's shareholders, and no more than 5% of Mena Hydrocarbons' shareholders having exercised their dissent rights;

4.8 security for the Loan, in the event that the Acquisition does not proceed to completion;

4.9 the release of the Seller's obligations under a letter of guaranty referred to in the concession agreement in relation to the Lagia oil field;

4.10 SacOil having placed US$ 1,857,319 (one million eight hundred fifty seven thousand three hundred and nineteen) in escrow to settle the Promissory Notes;

4.11 the JSE and AIM having approved the listing of the Consideration Shares;

4.12 no law or governmental order shall have been enacted prohibiting the Acquisition;

4.13 notification to, and receipt of written confirmation from, EGPC and the Arab Republic of Egypt of the transfer of the Sale Shares to SacOil and the change in control of MIP;

4.14 confirmation from the holders of the Promissory Notes of the settlement amount as at the Completion Date and release of security over the Sale Shares;

4.15 receipt of relevant approvals from the TSX Venture Exchange, AIM, the JSE and any other relevant securities commissions; and

4.16 the execution by certain shareholders of MENA Hydrocarbons of an "Orderly Marketing Agreement", as defined in the Agreement, for a 6 month period following the end of the 4 month lock up period.

As a result of the Acquisition, MIP will become a subsidiary of SacOil and confirmation is hereby given in terms of paragraph 9.16 of the JSE Listings Requirements that SacOil will ensure that none of the provisions in the Memorandum of Incorporation ("MoI"), or such similar document, of MIP will frustrate SacOil in any way from compliance with, nor relieve it from, its obligations in terms of the JSE Listings Requirements.

5. Pro forma financial effects of the Acquisition 

The pro forma financial information applicable to the Acquisition is still in the process of being finalised and will be published in due course.

6. Categorisation of the Acquisition

The Acquisition is categorised as a Category 2 transaction for SacOil in terms of the JSE Listings Requirements.

7. Further cautionary announcement

Shareholders are referred to the cautionary announcement dated 11 August 2014, and until such time as the pro forma financial effects in relation to the Acquisition have been published, they are advised to continue to exercise caution when dealing in the Company's securities.

8. Commentary

Commenting on the Acquisition, Dr Thabo Kgogo, SacOil CEO, said, "The signing of a definitive agreement to acquire Mena International Petroleum Company Ltd is another significant milestone in the history of the Company, and endorses our short to medium term strategy of balancing our existing exploration and appraisal portfolio with lower risk production and development assets. We welcome our new shareholders and this opportunity to expand into a new geographical location, which continues our strategy of building a substantial Pan African company".

Commenting further, he noted, "This acquisition represents the first booked reserves for the Company and through our anticipated development programme, we will be targeting a daily production rate from the Lagia oil field of more than 1,000 barrels of oil per day by Q4 2015." 

FirstEnergy Capital LLP is acting as financial adviser to SacOil on the Acquisition.

Johannesburg

10 September 2014

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