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" or "the Group")

Reviewed interim results

for the six months ended 31 August 2013

SacOil Holdings Limited is pleased to announce its results for the six months ended 31 August 2013

OVERVIEW

SacOil is an independent African oil and gas company, dual-listed on the JSE and AIM, and has business operations that are focused across the African continent. Currently, the Group operates in the following jurisdictions: the Democratic Republic of Congo ("DRC"); the Republic of Malawi; the Republic of Botswana; and the Federal Republic of Nigeria. Further, the Company continues to evaluate opportunities to secure high-impact acreage in other established and prolific hydrocarbon basins in Africa.

OPERATIONS

Shareholders are referred to the announcement issued on SENS and RNS on 8 November 2013, in which the Company communicated a detailed update on its asset-level operations. The operational highlights for the period under review include:

- DRC, Block III: 2D seismic data acquisition currently being planned and expected to commence within the next dry season in Q1 2014;

- Nigeria, OPL 233: Execution of 2013 work programme and 3D seismic data acquisition currently underway;

- Nigeria, OPL 281: Re-interpretation of seismic and well data;

- Malawi, Block 1: Planning of environmental and social impact assessment; and

- Botswana: Granting of licences 123, 124 and 125.

FINANCIAL REVIEW

For the six months ended 31 August 2013, the Group reported a profit of R27,0 million (2012: loss of R11,8 million) primarily arising from an increase in investment income earned and decreases in finance and operating costs, relative to the corresponding prior period.

Other income for the period under review comprised foreign exchange gains amounting to R43,7 million (2012: R38,9 million) arising on the remeasurement of the following US Dollar denominated balances:

- the loans receivable from Energy Equity Resources (Norway) Limited ("EERNL");

- the Block III contingent consideration; and

- the cash collateral deposited with Ecobank.

The 21% overall decrease in other income is primarily attributable to the once-off profit on disposal of the 6,67% interest in Block III and the once-off break fee received from a third party in the corresponding prior period.

Other operating costs decreased by 50% to R11,5 million (2012: R23,2 million) during the period under review. The reduction is primarily attributable to decreases in corporate, remuneration, consulting, legal and travel and accommodation costs.

Investment income for the period under review comprised:

- interest income from loans of R34,2 million (2012: R18,9 million);

- interest earned on cash and cash equivalents of R0,2 million (2012: R0,4 million); and

- imputed interest income of R12,5 million (2012: R7,9 million) arising from the unwinding of the time value discount applied to the contingent consideration for Block III.

Investment income increased by R19,7 million relative to the corresponding prior period, reflective of an increase in the amounts advanced to EERNL, the compounding effect of the interest accruals and the impact of the weak Rand.

The Group's finance costs of R10,5 million (2012: R21,5 million) relate to interest on the two US$1 million loans acquired from Gairloch Limited ("Gairloch") during September 2012 and October 2012, to fund working capital requirements of the Group and work programme commitments for OPL 233. During the period under review the Group incurred further interest charges amounting to R32,6 million on the Gairloch novated loan. This interest has been capitalised to the OPL 233 exploration and evaluation asset, as it relates to a qualifying asset.

Taxation decreased by 13% to R41,7 million (2012: R48,1 million). Taxation was comparatively higher in the corresponding prior period as a result of the once-off capital gains tax incurred on the disposal of the 6,67% interest in Block III.

Exploration and evaluation assets increased by R43,8 million to R206,7 million (28 February 2013: R162,9 million) during the period under review as a result of the Group capitalising exploration expenditures amounting to R11,2 million and borrowing costs totalling R32,6 million in relation to OPL 233.

Other financial assets, under non-current assets, comprise:

- the US Dollar denominated contingent consideration for Block III of R221,9 million (28 February 2013: R181,5 million);

- the US Dollar denominated long-term loan due from EERNL of R123,5 million (28 February 2013: R93,5 million);

- the proceeds receivable on the sale of the Greenhills plant of R4,9 million (28 February 2013: R4,7 million);

- the advance payment against future services of R59,5 million (28 February 2013: R56,7 million); and

- the loan due from DIG Oil (Proprietary) Limited.

The overall increase of 20% in other financial assets, under non-current assets, is primarily a result of foreign exchange gains and interest amounting to R70,4 million on the contingent consideration and on the loan due from EERNL.

Other financial assets, under current assets, comprise:

- the US Dollar denominated short-term loan due from EERNL of R150,7 million (28 February 2013: R83,9 million); and

- the proceeds receivable on the sale of the Greenhills plant of R1,0 million (28 February 2013: R0,9 million).

The R66,9 million overall increase in other financial assets, under current assets, is primarily the result of foreign exchange gains and interest on the short-term loan due from EERNL.

Cash and cash equivalents comprise the revalued US$10 million cash collateral held as security for the performance bond on OPL 233 of R103,2 million (28 February 2013: R89,1 million) and cash deposits amounting to R0,3 million (28 February 2013: R4,9 million). The 10% increase in cash and cash equivalents is primarily attributable to foreign exchange gains resulting from the weaker Rand.

Other financial liabilities comprise the three loans owed to Gairloch totalling R235,1 million (28 February 2013: R129,0 million), operating costs owed to Nidgel United Oil Company amounting to R9,8 million (28 February 2013: R2,4 million), EERNL's 50% share of the cash collateral of R51,5 million (28 February 2013: R44,2 million) and makewhole costs owed to Yorkville under the Standby Equity Distribution Agreement totalling R0,4 million (28 February 2013: nil). The 69% increase in other financial liabilities is primarily attributable to foreign exchange losses and interest on the Gairloch loans amounting to R106,1 million, foreign exchange losses amounting to R7,3 million on EERNL's share of the cash collateral, and foreign exchange losses and additional costs relating to the amounts owed to Nigdel totaling R7,4 million.

GOING CONCERN

The Board is satisfied that the planned recapitalisation of the Company, as referred to in the General Meeting Circular to SacOil shareholders dated 7 November 2013, will ensure that the Group has adequate resources to continue operating for the next 12 months. The Group interim financial statements presented have been prepared on a going concern basis.

* Due to a change in accounting policy, certain amounts shown here do not correspond to the 2012 interim results and reflect adjustments made as detailed in note 3.

* Due to a change in accounting policy, certain amounts shown here do not correspond to the 2012 interim results and reflect adjustments made as detailed in note 3.

1. Basis of preparation

The consolidated condensed interim financial statements of the Group, comprised SacOil Holdings Limited and its subsidiaries (together "the Group"), for the six months ended 31 August 2013, have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), the preparation and disclosure requirements of IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of the JSE Limited and in the manner required by the South African Companies Act, No. 71, 2008. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with IFRS, as issued by the IASB, have been omitted or condensed as is normal practice.

Principal accounting policies

The same accounting policies, presentation and methods of computation have been followed in these consolidated condensed interim financial statements of the Group as those applied in the preparation of the Group's annual financial statements for the year ended 28 February 2013, except for the change in accounting policy detailed in note 3. The adoption of the following standards, which became effective during the period under review, had no material impact on the results, except for the disclosures required by these standards:

- IFRS 10: Consolidated Financial Statements;

- IFRS 11: Joint Arrangements;

- IFRS 12: Disclosure if Interests in Other Entities; and

- IFRS 13: Fair Value Measurement.

All of the Group's financial instruments are held at amortised cost. The fair values thereof would be influenced by numerous factors the most significant of which include credit risk, other forms of non-performance risk (for financial liabilities), and interest rate risk. Management is of the opinion that, taking into account the value of collateral, as well as payment options, the fair value of the financial instruments is expected to approximate the carrying value thereof.

The consolidated condensed interim financial statements of the Group should be read in conjunction with the Group's consolidated annual financial statements for the year ended 28 February 2013.

Notes to oil and gas disclosure

In accordance with AIM Guidelines, Bradley Cerff is the qualified person that has reviewed the technical information contained in this news release. Bradley has over 16 years' experience in the oil and gas industry with a Masters Degree in Science and Business Administration focused on Foreign Direct Investment in the African oil and gas industry. He is also a member of the Society of Petroleum Engineers.

2. Auditors' review report

The consolidated condensed interim financial statements of the Group for the six months ended 31 August 2013 have been reviewed by Ernst & Young Inc. A copy of the auditors' unqualified review opinion, which includes an emphasis of matter paragraph for the going concern matters noted in note 16, is available for inspection at the registered office of the Company.

These consolidated condensed interim financial statements have been prepared under the supervision of the interim Finance Director, Tariro Mudzimuirema (Chartered Accountant).

3. Change in accounting policy

During the period ended 31 August 2012, the Group capitalised costs paid by Total on behalf of Semliki Energy SPRL, a subsidiary within the Group, in terms of a cost carry arrangement under the farm-in agreement for Block III. These costs increased the Block III exploration and evaluation asset resulting in a corresponding increase in liabilities representing the amounts owed to Total. To align its accounting practices with comparable companies in the industry, the Group decided not to capitalise these costs but rather to use the requirements of IAS 37: Provisions, Contingent Liabilities and Contingent Assets, and only recognise the liability and corresponding asset on the occurrence of the contingent event (refer to note 13). As a result of the change in accounting policy, the following adjustments were made to the Group consolidated condensed interim financial statements:

6. Segmental reporting

The Group operates in five geographical locations which form the basis of the information evaluated by the Group's chief decision-maker. For management purposes the Group is organised and analysed by these locations. These locations are: South Africa, Nigeria, DRC, Botswana and Malawi. Operations in South Africa relate to the general management, financing and administration of the Group.

* Due to a change in accounting policy, certain amounts shown here do not correspond to the 2012 interim results and reflect adjustments made as detailed in note 3.

7. Discontinued operation

The Board committed to a plan to sell the Greenhills manganese processing plant ("the Plant") early in 2012 following a strategic decision to focus the Group's efforts and resources on the core oil and gas business. The Plant was therefore classified as held for sale at 31 August 2012. The Plant was subsequently sold on 1 October 2012 and met the criteria of a discontinued operation in terms of IFRS 5.32 at 28 February 2013.

At 31 August 2013 the present value of these future cash receipts is R5 925 154 (28 February 2013: R5 647 200) and is included under other financial assets.

9. Exploration and evaluation assets

For the six months ended 31 August 2013

* Due to a change in accounting policy, certain amounts shown here do not correspond to the 2012 interim results and reflect adjustments made as detailed in note 3.

OPL 233

During the period under review the Group capitalised borrowing costs totalling R32,6 million (2012: nil) and incurred further exploration expenditures totalling R10,8 million (2012: nil).

Botswana

During the period under review the Group acquired three exploration licences in Botswana for R0,4 million.

Block III

During the corresponding prior period, Semliki SPRL, a subsidiary of SacOil, sold to Total RDC a 6,67% interest in Block III resulting in the derecognition of R27,0 million of exploration and evaluation assets.

Adjustments

Adjustments to the OPL 281 and OPL 233 assets in the corresponding prior period relate to promoter fees. These fees will now be recovered from EERNL and are included in amounts due from EERNL under current other financial assets (note 10).

Restricted cash comprises the cash collateral of US$10 million (28 February 2013: US$10 million) paid to Ecobank to secure the performance bond on OPL 233. The cash is held in the bank account of SacOil's wholly owned subsidiary, SacOil 233 Nigeria Limited. The remainder of the performance bond is secured by a first ranking legal charge over SacOil's investment in SacOil 233 Nigeria Limited.

Performance bond

In April 2012, the Group posted a $25 million performance bond to support the work programme on OPL 233. This performance bond is secured by a R103,2 million ($10 million) (28 February 2013: R89,1 million (US$10 million)) cash collateral as disclosed in note 11. The remainder of the performance bond, disclosed as a contingent liability, is secured by a first ranking legal charge over SacOil's investment in SacOil 233 Nigeria Limited.

Cost carry arrangement

The farm-in agreement between Semliki and Total provides for a carry of costs by Total on behalf of Semliki. Total will be entitled to recover these costs, being Semliki's share of the costs on Block III, plus interest, from future oil revenues. The contingency becomes probable when production of oil commences and will be raised in full at that point. At 31 August 2013, Total had incurred R32,9 million (28 February 2013: R20,4 million) of costs on behalf of Semliki. Should this liability be recognised, a corresponding increase in assets will be recognised, which, together with existing exploration and evaluation assets, will be recognised as development infrastructure assets (refer to note 3).

Farm-in and transaction fees

OPL 233

A farm-in fee of R109,2 million (28 February 2013: R93,7 million) (US$10,6 million) is due to Nigdel United Oil Company Limited upon the formal approval by the Nigerian government of the assignment of title to SacOil 233 Nigeria Limited in relation to OPL 233. A transaction fee of R25,8 million (28 February 2013: R22,1 million) (US$2,5 million) is due to Energy Equity Resources (Norway) Limited upon the receipt of title to OPL 233, pursuant to the provisions of the Master Joint Venture Agreement.

OPL 281

A farm-in fee of R123,6 million (28 February 2013: R106,1 million) (US$12 million) is due to Transnational Corporation of Nigeria Limited upon the formal approval by the Nigerian government of the assignment of title to SacOil 281 Nigeria Limited in relation to OPL 281. A transaction fee of R25,8 million (28 February 2013: R22,1 million) (US$2,5 million) is due to Energy Equity Resources (Norway) Limited upon the receipt of title to OPL 281, pursuant to the provisions of the Master Joint Venture Agreement.

14. Dividends

The Board has resolved not to declare any dividends to shareholders for the period under review.

15. Subsequent events

Equity settlement of the Gairloch Loans

Gairloch Limited ("Gairloch") exercised its rights under the three loans agreements, to require SacOil to equity settle loans owed to Gairloch. On 12 September 2013 SacOil concluded an agreement with Gairloch for the conversion of debt to equity in SacOil. Under the terms of this agreement debt totalling circa R238,5 million (US$24,1 million) will be converted into 883 449 144 new SacOil ordinary shares at R0,27 (US$0,0272876) per share. The share issue price represents a 4,6% discount to the volume weighted average traded price of the SacOil shares on the JSE over the 30 business days prior to the date of the suspension. For details relating to the equity settlement of the Gairloch Loans, shareholders are referred to the circular distributed to shareholders dated 7 November 2013. This circular is also available on the SacOil website:

www.sacoilholdings.com.

Rights Offer

As previously announced on 12 September 2013, the Company intends to raise additional capital of up to R570 million by way of a renounceable rights offer of 2 111 111 111 SacOil shares ("Right Offer Shares") at an issue price of R0,27 per share (the "Rights Offer"). The Rights Offer will be supported by one of the Company's largest shareholders, the Government Employees Pension Fund ("GEPF"), managed by the Public Investment Corporation (SOC) Limited ("PIC"), to the extent of circa R329 million. The ratio of rights offered for existing SacOil shares will be in proportion to each shareholder's respective shareholding in the Company. For details relating to Rights Offer, shareholders are referred to the circular distributed to shareholders dated 7 November 2013. This circular is also available on the SacOil website:

www.sacoilholdings.com.

Bridge Loan Facility

On 27 September 2013, SacOil obtained a temporary overdraft facility of R15 million from Nedbank subject to the fulfilment of certain conditions precedent, some of which have already been met. The outstanding conditions precedent will be fulfilled on 6 December 2013, subject to SacOil shareholders approving the resolutions to give effect to the Whitewash Resolution, the Specific Issue and Rights Offer, as defined in the circular posted to shareholders on 7 November 2013.

Loan advanced to EERNL

The short-term loan due from EERNL, as disclosed in note 10, became due and payable on 31 May 2013. As at the date of the release of the interim results EERNL has not fulfilled its repayment obligations in respect of this loan. Discussions are in progress to agree a repayment schedule for this overdue amount. The Company is also considering its position in respect of the default provisions of the loan agreement underlying this receivable. The loan has not been impaired as the value of the security provided exceeds the carrying value of the loan. The loan is secured by EERNL's shares in its subsidiary EER233 Nigeria which holds a 20% interest in OPL 233, subject to government approval.

16. Going concern

As indicated in the General Meeting Circular to SacOil shareholders dated 7 November 2013 ("Circular"), the Board plans to recapitalise the Company by way of a renounceable rights offer of R570 million, to be completed by 31 January 2014 ("the Rights Offer"). The Board also plans to equity settle the Gairloch Loans by 31 January 2014 under the terms of the Subscription and Settlement Agreement concluded with Gairloch on 12 September 2013 ("the Specific Issue"). The completion of both transactions is dependent upon future material uncertain events which are discussed below.

Furthermore, the Company's projected cash flows to 30 November 2014 include the following assumptions some of which are subject to material uncertainties as discussed in further detail below:

- Cash inflow from the loan receivable from EERNL of R161,2 million (US$16,1 million);

- Cash inflow arising from rights issue proceeds amounting to R570,0 million;

- Cash outflows from farm-in fees payable to Nigdel and Transcorp totalling R226,0 million (US$22,6 million) the timing of which is uncertain; and

- Settlement of the full debt payable to Gairloch by means of a conversion to capital rather than a settlement in cash.

The features of these cash flows are further described below:

Rights Offer and equity settlement of Gairloch Loans

The resolutions required to give effect to the Rights Offer and Specific Issue are detailed in the Circular in the Notice of General Meeting. It is imperative that SacOil obtains shareholder approval for both the Rights Offer and Specific Issue. SacOil has prepared its working capital forecast on the basis that the Specific Issue and Rights Offer are approved by shareholders, and that the Rights Offer is fully subscribed for.

Management has engaged with some of the Company's shareholders to determine the levels of support and appetite for the Rights Offer. To date, the Company has obtained support for 58% of the Rights Offer value, representing an irrevocable undertaking by the PIC to support the Rights Offer to the extent of circa R329 million. Although the outcome of the shareholders' approval and the extent of the subscription to the Rights Offer cannot be determined with certainty at this stage, the Board is reasonably confident that the approval of the Rights Offer will be successful. As detailed in the Circular in Annexure 6, the Company has received irrevocable undertakings in favour of the resolutions required to give effect to the Rights Offer and Specific Issue, from shareholders with a 23,9% total equity interest in SacOil. Subsequent to the issue of the Circular, SacOil received a further irrevocable undertaking from the PIC, representing the GEPF a 16,6% shareholder in SacOil, to vote in favour of the resolutions detailed in the Circular, excluding the Whitewash Resolution, as referred to therein. The less certain element to this is the extent to which shareholders will follow their rights giving rise to the raising of the full R570 million of capital. Furthermore, ongoing communications with various shareholders have demonstrated a general understanding of the immediate need to convert the Gairloch Loans which continue to accrue onerous finance charges. Again, the Board is reasonably confident that shareholders' approval for the equity settlement of the Gairloch Loans will be obtained.

Loan receivable from EERNL

EERNL has not met its repayment obligations on the short-term loan repayment, which became due and payable on 31 May 2013. To date, EERNL has paid US$1 million of the US$12,5 million owed to SacOil at 31 May 2013 (31 August 2013: US$14,6 million). The Company is in discussions with EERNL to renegotiate payment terms and is also considering its rights in terms of the default provisions underlying the loan agreement. It is uncertain at this stage whether EERNL will meet its repayment obligations on or before the proposed repayment date. Should non-payment of the short- term loan continue, SacOil will consider enforcing the security provided by EERNL, being EERNL's shares in its subsidiary EER 233 Nigeria Limited which owns a 20% interest in OPL 233, through the disposal of this interest, to recover amounts owed.

Farm-in and transaction fees

The payment of farm-in and transaction fees is dependent upon the receipt of title to OPL 233 and OPL 281. These fees are payable within 30 days of the receipt of title. As at the date of the release of the interim results, the Company has been unable to determine the likely timing of the receipt of title to both OPL 233 and OPL 281 as these are subject to regulatory approvals not within the control of the Company. The Board's current plan is to fund these fees from the proceeds of the Rights Offer. Should title be received prior to the completion of the Rights Offer, the Company would be unable to fund these fees in the ordinary course of business. It is management's intention to renegotiate the timing of settlement of the fees should title be received before funds are available.

These conditions give rise to material uncertainties which may cast significant doubt about the Company's ability to continue as a going concern, and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Board is however confident that the Specific Issue and the Rights Offer will be approved by the shareholders, and that through this action SacOil will have appropriately addressed the material uncertainties with respect to going concern. It is on this basis that management has decided to prepare the financial statements on a going concern basis. In the interim SacOil has secured an interim funding facility, as detailed under note 15, which will enable it

to pay for its daily operational costs and work programme commitments on OPL 233.

The financial statements are prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

By order of the Board

Roger Rees

Chief Executive

Johannesburg

22 November 2013

CORPORATE INFORMATION

Registered office and physical address:

2nd Floor, The Gabba, Dimension Data Campus, 57 Sloane Street, 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

Directors:

Roger Rees (Chief Executive Officer), Tariro Mudzimuirema (Finance Director), Tito Mboweni**

Mzuvukile Maqetuka**, Stephanus Muller**, Vusi Pikoli**, Ignatius Sehoole*, Gontse Moseneke*

(*) Non-executive Director; (**) Independent Non-executive Directors