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")

Conversion of Gairloch debt to equity

Encha Energy acknowledgement of debt to SacOil

Encha Energy services agreement with SacOil

Proposed appointments to the Board

1. Introduction

SacOil, the African independent upstream oil and gas company, is pleased to announce that it has concluded an agreement dated 5 April 2013 (the "Agreement") with Gairloch Limited ("Gairloch") for the conversion of US$17.6 million of debt and accrued interest provided by Gairloch to equity in SacOil by 31 May 2013 (the "Specific Issue"), thereby leaving SacOil debt free, reducing financing costs and significantly improving its balance sheet position.

Furthermore, the Company has entered into the following agreements dated 28 February 2013 with Encha Energy Proprietary Limited ("Encha Energy"), whose associates have a 20.67% shareholding in SacOil:

a) an acknowledgement of debt("Acknowledgment of Debt") in terms of which, subject to the fulfilment of a suspensive condition, Encha Energy acknowledgesits indebtedness to SacOil in the amount of R75 million; and

b) a services agreement (the "Services Agreement") in terms of which, subject to the fulfilment of certain suspensive conditions, Encha Energy undertakesto provide certain services to SacOil.

2. Details of the Specific Issue

SacOil will issue 488,804,476new ordinary shares of no par value ("Shares") to nominees of Gairloch at a price of R0.32037 (approximately US$0.036) per Share (the "Issue Price"), raising R156.6 million (approximately US$17.6million) which will be applied to the satisfaction of SacOil's entire indebtedness to Gairloch. The Issue Price represents a 0.6% premium to the volume weighted average traded price of the SacOil shares on the JSE Limited (the "JSE") over the 30 business days prior to the date of the Agreement.

On completion of the Specific Issue, Gairloch will hold a 33.89% indirect interest in SacOil. Gairloch is expected to be a long-term investor in the Company.

The Agreement is subject to the fulfilment of the following conditions precedent by no later than 31 May 2013, or such later date as the parties may agree in writing:

a) the approval of the Specific Issue by SacOil's shareholders;

b) the approval of the JSE and the AIM Market of the London Stock Exchange ("AIM") for the admission of the Shares to trading on those markets;

c) all other regulatory consents and approvals (including, without limitation, the approval of the Financial Surveillance Department of the South African Reserve Bank) required for the implementation of the Specific Issue. 

Based on SacOil's published interim results for the six months ended 31 August 2012, the unaudited pro forma financial effects of the Specific Issue on SacOil's reported loss per share ("LPS"), headline loss per share ("HLPS"), net asset value per share ("NAV") and tangible net asset value per share ("TNAV") is set out below.

The unaudited pro forma financial information is presented for illustrative purposes only, and, because of its nature, it may not give a fair presentation of SacOil's financial position, changes in equity, results of operations or cash flows. The financial information is the responsibility of the board of directors of SacOil.

Notes:

1. The "Before the Specific Issue" financial information has been extracted from SacOil's historical published interim results for the six months ended 31 August 2012. These figures have been adjusted for the specific issue of shares to Yorkville Advisers as outlined in the announcement dated 1 November 2012.

2. The LPS/EPS and HLPS/HEPS figures are based on the assumption that the Specific Issue was implemented on 1 March 2012 for statement of comprehensive income purposes. NAV and TNAV are based on the assumption that the Specific Issue was implemented on 31 August 2012 for statement of financial position purposes.

3. The "After the Specific Issue" assumes all adjustments detailed in note (2) above.

4. Measured as the "After the Specific Issue" column as a percentage of the "Before the Specific Issue" column.

3. Details of the Acknowledgment of Debt and Services Agreement

Included in "Trade and Other Receivables" in the Company's published interim results for the six months ended 31 August 2012 is an amount of R75 million relating to an Advance Against Asset Negotiation Rights. The Company has concluded the Acknowledgment of Debt with Encha Energy in terms of which, subject to the suspensive condition that the Services Agreement has been duly executed and has become unconditional, Encha Energy acknowledges its indebtedness to SacOil in the amount of R75 million with effect from 28 February 2013.

Encha Energy's acknowledgement of indebtedness is secured by a deed of suretyship (the "Suretyship") executed by Encha Group Limited ("Encha") in favour of SacOil on 28 February 2013 in terms of which Encha binds itself as surety for, and co-principal debtor with, Encha Energy for the payment obligations of Encha Energy to SacOil under the Acknowledgement of Debt. Encha Energy has undertaken to effect repayment of the debt to SacOil by no later than 28 February 2016.

4. The JSE Listings Requirements

The Specific Issue is classified as a specific issue of shares for cash in terms of the JSE Listings Requirements and, as such, requires the approval of SacOil's shareholders. In addition, the Services Agreement, is subject to approval by SacOil shareholders in accordance with King III code on corporate governance. A circular providing the details of the Specific Issue and the Acknowledgement of Debt and Services Agreement will be issued as soon as practicable, but no later than 60 days after the publication of this announcement, in order to expedite the process and minimize associated costs.

5. Proposed appointments to the Board

On completion of the Specific Issue, SacOil intends to appoint two new independent non-executive directors to its Board - Mr Danladi Verheijen and Ms Lola Akinleye.

Danladi Verheijen is the Managing Director of Verod Capital Management Limited ("Verod"), a West Africa focused investment firm, which he co-founded in 2008. Verod invests in high growth, medium sized companies across several sectors, including consumer products, manufacturing, technology/media and real estate. He previously was a Vice President at Citibank Nigeria where he led corporate finance and investment banking transactions. He also had responsibility over Citibank's equity investment portfolio and represented the bank on the investment and advisory committee of Nigeria's largest private equity firm. Prior to that, he held roles at Ocean and Oil Holdings and at McKinsey & Company. He has an MBA from Harvard Business School, an M.Sc in Engineering Economic Systems & Operations Research from Stanford University and a B.Sc in Electrical Engineering from Calvin College. He is a Director at a number of companies and he serves on the Boards of the Harvard Business School Association of Nigeria and Christian Care for Widows and the Aged.

Lola Akinleye has over 15 years finance and investment banking experience with significant experience in corporate finance advisory, equity and debt capital raising, structured and project finance and with public-private partnerships for the development of infrastructure. She began her career at General Electric in London and has held roles at JP Morgan, ARM Investment Managers and Zenith Capital. She has a BA in Economics from the University of Nottingham and also an MA in Information Technology from the same institution. 

Mr Verheijen is a shareholder of Verod whose subsidiary has an 80% beneficial interest in Newdel Holdings Limited which in turn is one of Gairloch's nominee shareholders with 134,224,317 SacOil shares to be issued to it. Further disclosures regarding Mr Verheijen and Ms Akinleye will be made upon finalisation of their appointments.

Commenting, Robin Vela, CEO of SacOil, said:

"Converting the Gairloch debt to equity will leave the Company debt free, which not only reduces costs but also greatly strengthens the balance sheet. Gairloch also brings to SacOil a strong and long-term shareholder, who understands the region we operate in well and will support the ongoing growth of the business towards first production and beyond. The addition to the board of Danladi and Lola will transform the SacOil board making it Pan-African comprising individuals with experience and leadership roles in the key Nigerian capital market".

10 April 2013

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