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 2014

HIGHLIGHTS

- Cementing of Board and executive team

- Transition from development to production initiated

- Acquisition of 20% interest in Nigeria's OPL 233 completed; seismic survey initiated

- Completion of satellite imagery survey for Botswana assets and ESIA initiation in Malawi

- Strategic entry into Egypt through 100% acquisition of Lagia Oil Field

- Active review of capital structure and funding options

Dr Thabo Kgogo, Chief Executive of SacOil, commented:

"We attained a number of milestones during this period with the support of a new Board and re-energised executive team.

In particular, the acquisition of Lagia Oil Field in Egypt marks our transition from a development to a production company supported by a reserve base able to deliver production and cash flow in the near term. This transformational transaction also provides us with greater access to the capital markets as we roll out our strategy to build a substantial pan-African exploration and production business.

Looking ahead, our funding situation remains a top priority and we will continue to work towards the successful resolution of the loan situation with EERNL but also actively review alternative options, including rebalancing of our portfolio. The completion of the forensic investigation and resolution of the matters raised will remain a priority of the Board."

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 9 October 2014, in which the Company communicated a detailed update on its asset-level operations.

FINANCIAL REVIEW

The Group reported a decrease of 23% in profit after tax to R20.7 million for the six months ended 31 August 2014 compared to R27.0 million for the corresponding prior comparative period. Although the Group's investment income increased by 64%, the resultant increase was off-set by foreign exchange losses on the Group's financial assets coupled with higher other operating costs.

The increase in investment income is attributable to the compounding effect of the interest accruals on the loan advanced to Energy Equity Resources (Norway) Limited ("EERNL"). Furthermore, the loan now attracts interest of 32% compared to 30% for the corresponding prior comparative period, following the renegotiation of the loan repayment terms (refer to note 13). The composition of investment income is disclosed in note 4.

Other operating costs, as disclosed in note 3, increased by 305% to R46.6 million (2013: R11.5 million) during the period under review. The Group impaired its financial assets by R19.7 million (2013: nil). The increase is also reflective of the Group's investment in business development activities.

The Group's foreign exchange losses for the six months total R7.2 million (2013: R43.7 million foreign exchange gains). The US dollar / Rand exchange rate was less volatile during the six months under review compared to the corresponding prior comparative period when it fluctuated between R8.8398/US$1 and R10.3016/US$1 at the beginning and end of the reporting period, respectively.

The Group extinguished all its debt in January 2014, resulting in the elimination of borrowing costs (2013: R10.5 million).

Exploration and evaluation assets increased by R29.2 million to R296.0 million (28 February 2014: R266.8 million) as a result of the Group capitalising the seismic survey costs relating to OPL 233.

Other financial assets, as disclosed in note 8, increased by R35.2 million to R691.1 million (28 February 2014: R655.9 million). The net movement comprises:

- An increase in interest of R73.4 million on the EERNL loan (R59.4 million), contingent consideration (R10.7 million) and other financial assets (R3.3 million);

- A part repayment of the EERNL loan of R10.6 million;

- An impairment charge of R19.7 million against the EERNL loan; and

- Foreign exchange losses totalling R7.9 million.

Cash and cash equivalents comprise the translated US$10 million cash collateral held as security for the performance bond on OPL 233 of R106.7 million (28 February 2014: R108.1 million) and cash deposits amounting to R214.0 million (28 February 2014: R273.5 million). The decrease in cash is reflective of the Group's investment in the OPL 233 seismic survey, business development activities and normal operating costs.

Other financial liabilities, as disclosed in note 10, decreased by R20.9 million, reflecting the settlement of the amounts owed to Nigdel United Oil Company, the operator of OPL 233.

GOING CONCERN

The Board continues to explore funding and other alternatives available to the Group to 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 as detailed in note 14.

REPORTABLE IRREGULARITY

The Board of SacOil recently engaged Ernst & Young Inc. to carry out a forensic investigation on specific historical transactions of the Company between 1 August 2011 and 30 November 2011 relating to the Company's unsuccessful attempt to acquire interests in Block I and II in the DRC, amongst other matters.

Based on matters raised in the preliminary forensic report, Ernst & Young Inc., the Company's external auditors, have reported to the Independent Regulatory Board for Auditors that they have reason to believe that Reportable Irregularities committed by previous members of management took place. These Reportable Irregularities relate to matters which do not affect the current condensed consolidated interim financial statements. The directors do not expect that future losses will arise from the matters raised.

The forensic investigation represents a key step taken by the Board to address historical governance issues.

Shareholders will be kept informed of progress made regarding this matter.

CHANGE IN DIRECTORATE

On 1 June 2014 the new CEO, Dr Thabo Kgogo, joined SacOil and was appointed to the Board. On 11 August 2014 Bradley Cerff was appointed to the Board as an Executive Director.

OUTLOOK

Good progress has been made across the existing portfolio of exploration and appraisal assets during the period.

The acquisition of the Lagia Oil Field in Egypt completed in October 2014 marks an inflexion point in SacOil's investment profile with the Company transitioning from a pure exploration play to an exploration and production business with cash-generating assets.

SacOil is now focusing on its funding situation and will assess various alternatives to ensure that an adequate capital structure is in place to deliver on its stated strategy. This may include a combination of portfolio rebalancing, rationalisation of assets and alternative funding options which are being continually assessed. The resolution of the US$18 million loan due to SacOil by EERNL is a top priority which is anticipated to be resolved before the end of the financial year.

Longer term, SacOil will continue to execute on ongoing projects in the Democratic Republic of Congo, Malawi, Botswana and Nigeria which are all expected to yield significant future milestones and value for the Group. The partnership announced in March 2014 between SacOil, the Public Investment Corporation of South Africa and the Instituto De Gestao Das Participacoes Do Estado in Mozambique regarding the investigation of gas opportunities and future distribution of gas in southern Africa also offers exciting prospects.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 August 2014

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES

1. BASIS OF PREPARATION

The consolidated condensed interim financial statements of the Group, comprising SacOil Holdings Limited and its subsidiaries (together "the Group"), for the six months ended 31 August 2014, 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 of 2008 (as amended).

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 2014.

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 2014.

The following new IFRS and/or IFRICs were effective for the first time for this interim period from 1 January 2014:

- Amendments to IFRS 10, IFRS 12 and IAS 27, Investment Entities

- Amendments to IAS 32, Off-setting Financial Assets and Financial Liabilities

- Amendments to IAS 36, Recoverable Amount Disclosures for Non-financial Assets

- Amendments to IAS 39, Novation of Derivatives and Continuation of Hedge Accounting

The above standards did not have an impact on the Group's results.

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 18 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. AUDITOR'S REVIEW REPORT

The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standard, IAS 34, Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. The accounting policies applied in the preparation of these interim financial statements are in terms of International Financial Reporting Standards and are consistent with those applied in the previous annual financial statements. These interim condensed consolidated financial statements for the period ended 31 August 2014 have been reviewed by Ernst & Young Inc. who expressed an unmodified review conclusion. They have been prepared under the supervision of the Group's Financial Director: Tariro Mudzimuirema CA (SA).

The unqualified review report includes an Emphasis of Matter Paragraph on material uncertainties relating to the going concern of the entity.

The report also includes an "Other Legal and Regulatory Requirements" paragraph with respect to reportable irregularities which were reported in terms of section 45 of the Auditing Profession Act to the Independent Regulatory Board for Auditors (IRBA). The reportable irregularities are based on the further analysis by the external auditors of the preliminary findings of a forensic investigation into the historical conduct of the affairs of the Company, which investigation was instituted by the Company on the instruction of the board. The board is considering the section 45 report to the IRBA in relation to the reportable irregularities, with a view to take such action as is appropriate.

A copy of the auditor's review report is available for inspection at the Company's registered office together with the financial statements identified in the auditor's report.

3. OPERATING (LOSS) / PROFIT

4. INVESTMENT INCOME

5. SEGMENTAL REPORTING

The Group operates in five geographical locations which form the basis of the information evaluated by the Group's chief operating 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.

6. EARNINGS PER SHARE

7. EXPLORATION AND EVALUATION ASSETS

OPL 233

No borrowing costs have been capitalised during the period under review (August 2013: R32.6 million), as the Group settled the debt previously incurred to finance OPL 233, in January 2014. Exploration expenditures totalling R29.3 million (August 2013: R10.8 million) have been capitalised, primarily relating to the seismic survey.

8. OTHER FINANCIAL ASSETS

9. CASH AND CASH EQUIVALENTS

Restricted cash comprises the cash collateral of US$10 million (February 2014: US$10 million) paid to Ecobank to secure the US$25 million 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.

10. OTHER FINANCIAL LIABILITIES

11. CONTINGENT ASSETS AND LIABILITIES

Exploration and evaluation activities will be funded from current cash resources and funds from future capital-raising initiatives.

Performance bond

In April 2012, the Group posted a US$25 million performance bond to support the work programme on OPL 233. This performance bond is secured by a R106.7 million (US$10 million) (28 February 2014: R108.1 million (US$10 million)) cash collateral as disclosed in note 9. 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 2014, Total has incurred R36.6 million (28 February 2014: R36.5 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.

Farm-in and transaction fees

OPL 233

A farm-in fee of R112.9 million (28 February 2014: R114.3 million (US$10.6 million)) is due to Nigdel United Oil Company Limited ("Nigdel") following the formal approval by the Nigerian Government of the assignment of title to SacOil 233 Nigeria Limited in relation to OPL 233. The existence of the possible obligation to Nigdel will be confirmed by the occurrence of an uncertain future event, being the verification of the award of title, which process is not wholly within the control of SacOil. A transaction fee of R26.6 million (28 February 2014: R27.0 million (US$2.5 million)) is also due to Energy Equity Resources (Norway) Limited ("EERNL") following the assignment of title to OPL 233, pursuant to the provisions of the Master Joint Venture Agreement. The fee payable to EER will be off-set against the loan receivable from EERNL, when the award of title has been verified, if this occurs prior to the settlement of the loan.

OPL 281

A farm-in fee of R127.8 million (28 February 2014: R129.4 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 R26.6 million (28 February 2014: R27.0 million (US$2.5 million)) is due to EERNL upon the assignment of title to OPL 281, pursuant to the provisions of the Master Joint Venture Agreement.

12. Dividends

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

13. Subsequent events

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

Shareholders are referred to the announcement issued on SENS and RNS on 10 September 2014 wherein the Company announced that it had 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 as Mena Hydrocarbons Inc. (TSXV:MNH) ("Mena Hydrocarbons") (the "Acquisition"). 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 degrees 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 completion of the Acquisition is expected to occur on or about 31 October 2014. The full announcements are available on the SacOil website: www.sacoilholdings.com.

Loan advanced to EERNL

On 20 October 2014, the repayment of the loan due from EERNL was extended to 30 November 2014. As part of the extension terms, EERNL agreed to pay interest of 32% on the outstanding loan and to accept the interest on the non-cash component of the loan previously disputed.

The loan is secured by EERNL's shares in its subsidiary, EER233 Nigeria, which holds a 20% interest in OPL 233. The loan has not been impaired in full as the value of the security exceeds the carrying value of the loan.

14. Going concern

The Company continues to remain dependent on its ability to obtain sufficient funding to sustain operations and complete its exploration projects. While the Company has been successful in raising financing in the past, there can be no absolute assurance that it will be able to do so in future. As noted in note 13, the repayment of the loan advanced to EERNL has been extended to 30 November 2014, whilst EERNL undergoes its own recapitalisation, which will enable it to settle in full the loan owed to SacOil. Whilst this would be the best outcome for the Company, given the implications of default by EERNL, it is difficult to determine with certainty the outcome of the planned recapitalisation and, consequently, the settlement of the loan owed to SacOil. Should EERNL default on 30 November 2014, the Company will acquire an additional 20% interest in OPL 233, being the security provided for the debt, which will double SacOil's funding commitments for the OPL 233 asset. The disposal of this additional interest would not be expected to occur immediately upon default given the seismic survey that is still under way. The cash flow projections to February 2016 include cash inflows from EERNL totalling R201.0 million (US$18.0 million).

The above 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 remains reasonably confident that it will manage the material uncertainties that exist, as such the financial statements have been 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

Dr Thabo Kgogo

Chief Executive

Johannesburg

4 November 2014

CORPORATE INFORMATION

Registered office and physical address:

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

E-mail: info@sacoilholdings.com | Website: www.sacoilholdings.com

Directors:

Dr Thabo Kgogo (Chief Executive Officer), Tariro Mudzimuirema (Finance Director),

Bradley Cerff (Executive Director), Tito Mboweni**, Mzuvukile Maqetuka**, Stephanus Muller**,

Vusi Pikoli**, Ignatius Sehoole*, Gontse Moseneke*, Danladi Verheijen*, Titilola Akinleye*

* Non-executive Director

** Independent Non-executive Directors

Advisers:

Company Secretary:

Fusion Corporate Secretarial Services (Proprietary) Limited

Transfer Secretaries South Africa:

Link Market Services South Africa (Proprietary) Limited

Transfer Secretaries United Kingdom:

Computershare Investor Services (Jersey) Limited

Corporate Legal Advisers:

Norton Rose Fullbright South Africa

Auditors:

Ernst & Young Inc.

JSE Sponsor:

Nedbank Capital, a division of Nedbank Limited