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")

AUDITED RESULTS

for the year ended 28 February 2013

SacOil Holdings Limited is pleased to announce its results

for the year ended 28 February 2013.

KEY HIGHLIGHTS

- For the year under review

- Another geography and asset is added in Malawi

- Posting of performance bond on OPL 233 in Nigeria

- Extension of OPL 233 exploration phase by the Nigerian National Petroleum Corporation

- Approval of OPL 233 extension work programme and budget

- Renegotiation of farm-in and joint operating terms for OPL 233

- Total acquires a further 6.67% interest in Block III from SacOil's partner in Semliki

- Airborne gravity and magnetic survey acquired for Block III

Subsequent to the year under review

- Appointment of Tito Mboweni to the SacOil Board as the independent non-executive Chairman

- Appointments of Vusumzi Pikoli Mzuvukile Maqetuka and Stephanus Muller to the SacOil Board as independent non-executive directors

- Appointments of Ignatius Sehoole as non-executive director- Appointments of Roger Rees as Chief Executive Officer and Tariro Mudzimuirema as Finance Director

- Constitution of various Board committees

- Planned recapitalisation of the Company through a renounceable Rights Offer

- Planned equity settlement of Gairloch loans

- Request for tender for OPL 233 seismic survey

Commenting, Roger Rees, Chief Executive of SacOil said: "With the successful recapitalisation of the Company, it will be debt-free and in a significantly stronger position to be able to move its existing asset portfolio forward and as such create value for shareholders. The Company has a management team with a strong track record of developing resource assets and the portfolio itself holds significant potential. It is a strong balance of high-impact exploration licences, along with lower risk appraisal and near-term production prospects, all of which are in highly prospective areas, such as the DRC Lake Albert Area, part of the proven East African Rift System, and the Niger Delta, in Nigeria."

OVERVIEW

For the year ended 28 February 2013 the Group reported a reduction in the loss from continuing operations to R70,1 million (2012: R104,1 million). Contributing towards this positive trend were the disposal of the loss-making Greenhills Manganese plant, the farm-out profit on the Block III exploration and evaluation asset, an increase in investment income by 59%, a 76% reduction in taxation and a 46% reduction in finance costs.

Although the Group's audit report contains an emphasis of matter paragraph about the Group's ability to continue as a going concern, the directors are confident that, upon completion of the proposed recapitalisation of the Company by way of the planned Rights Offer and the equity settlement of the Gairloch loans, the Group will be able to continue its operations for the foreseeable future, that is for a period of at least 12 months.

FINANCIAL PERFORMANCE

Other income

During the period under review the Group generated other income of R123,2 million (2012: R248,6 million) comprising:

- A profit of R71,1 million (2012: loss of R83,4 million included under "other operating costs") realised by Semliki Energy SPRL ("Semliki") on disposal of a 6.67% (2012: 60%) interest in Block III to Total RDC ("Total") in March 2012 (2012: March 2011) for a cash consideration of R76,0 million (US$10 million) (2012: R143,5 million (US$15 million)) and a future contingent consideration of R26,8 million (2012: R219,1 million). The transaction was initiated by and benefited SacOil's partner in Semliki. SacOil's effective interest in Block III has remained unchanged at 12.5%;

- Foreign exchange gains totalling R32,1 million (2012: R6,2 million). The Group's foreign exchange gains arise on translation of US dollar denominated loans receivable from Energy Equity Resources (Norway) Limited ("EERNL"), as well as on the cash that is collateralised as security on the performance bond for OPL 233; and A transaction break fee of R7,9 million (2012: nil) received from a third party and various other income items totalling R12,1 million (2012: nil).

The decrease in other income primarily reflects a decrease in the Group's farm-out activity offset by increases in foreign exchange gains.

Other operating costs

Other operating costs totalled R175,6 million (2012: R162,0 million) for the year under review. These costs primarily include:

- The write-down of R129,9 million (2012: nil) of future expected cash flows from the contingent consideration for the Block III farm-outs in March 2011 and March 2012. The write-down was necessitated by the change in timelines impacting the receipt of the contingent consideration and is reflective of the time value of money;

- Remuneration costs of R15,9 million (2012: R13,4 million);

- Audit fees of R4 million (2012: R0,3 million);

- Consulting fees totalling R3,7 million (2012: R11 million);

- Legal fees of R4,1 million (2012: R9,3 million); and

- Corporate costs totalling R4,6 million (2012: R8,6 million).

Included in the 2012 other operating costs were the loss of R83,4 million on the farm-out of Block III in March 2011 and the one-off AIM listing costs of R21,9 million.

Investment income

During the reporting period the Group generated investment income of R46,9 million (2012: R29,5 million) primarily comprising:

- Interest income of R37,6 million (2012: R15,6 million) earned on the loans receivable from EERNL. These loans increased to R177,4 million (2012: R66,2 million) in the current year due to EERNL's share of the performance bond cash collateral and related costs, interest and foreign exchange gains;

- Interest income of R8,5 million (2012: R13,4 million) accruing to the Group as a result of the unwinding of the time value discount applied to the contingent consideration for Block III pursuant to the farm-outs in March 2011 and March 2012.

Finance costs

In order to fund the cash collateral of R79,4 million (US$10 million) required to post the performance bond on OPL 233, the Group secured borrowings from Renaissance BJM Securities (Proprietary) Limited ("Rencap") and Yorkville Advisors LLP ("Yorkville"). This additional funding requirement increased finance costs to R58,9 million (2012: R44,4 million). Of these costs, finance costs amounting to R35,1 million (2012: nil) have been capitalised to the OPL 233 asset, under exploration and evaluation assets, as they are directly attributable to the acquisition of a qualifying asset (2012: nil).

Taxation

The Group achieved a 76% reduction in taxation. Taxation was significantly higher in 2012 as a result of deferred tax of R105,3 million on the initial recognition of the contingent consideration and capital gains tax of R41,0 million, on the farm-out of Block III in March 2011. The farm-out in the current year resulted in capital gains tax of R28,5 million (2012: R41,0 million). The current year net deferred tax credit was R32,7 million (2012: charge of R105,3 million) which comprised the following:

- Recognition of a deferred tax charge of R10,7 million (2012: R105,3 million) associated with the current contingent consideration;

- Recognition of a deferred tax credit of R67,3 million corresponding to the write-down of the prior contingent consideration; and

- Recognition of a deferred tax charge of R23,9 million associated with the unwinding of the discount and foreign exchange gains

on the contingent consideration.

Other tax charges included withholding tax on foreign dividends of R8,1 million (2012: R10,2 million) and foreign taxes amounting to R36,9 million (2012: R10,2 million).

FINANCIAL POSITION

Non-current assets

Non-current assets increased by 9% as a result of increases in other financial assets and exploration and evaluation assets, offset by a decrease in property, plant and equipment. The US dollar-based long-term loan due from EER, included in other financial assets, increased to R93,5 million (2012: R66,2 million) in the current year due to the weakening of the Rand and accumulated interest. The Group also re-classified as long term, under other financial assets, a receivable of R56,7 million, following the re-negotiation of the terms of settlement of this financial asset during February 2013. This receivable, which is due for settlement by February 2016, has been discounted to reflect the present value of the future receivable of R75,5 million. Other loans due from operating partners also increased to R35,3 million (2012: R1,9 million) due to increases in activity in our operations.

The contingent consideration, under other financial assets, decreased to R181,5 million (2012: R263,3 million) as a result of the write-down outlined above offset by the contingent consideration from the farm-out of Block III in March 2012 of R26,8 million (2012: R219,1 million) and interest income and foreign exchange gains amounting to R21,3 million.

The farm-out of Block III in March 2012 resulted in the derecognition of a portion of exploration and evaluation assets amounting to R27,0 million (2012: R242,1 million). This decrease was offset by the capitalisation of borrowing costs amounting to R35,1 million to exploration and evaluation assets, in respect of the OPL 233 asset.

The disposal of the Greenhills plant resulted in the recognition of an impairment loss of R1,0 million (2012: nil) on the remeasurement of property, plant and equipment to fair value less costs to sell, and the derecognition of R4,3 million of buildings, plant and equipment.

Current assets

Current assets increased by 85% as a result of increases in other financial assets and cash and cash equivalents, offset by decreases in inventory and trade and other receivables. Cash and cash equivalents as at 28 February 2013 included the revalued cash collateral of R89,1 million (US$10 million) (2012: nil) held as security for the performance bond on OPL 233. Other financial assets included the short-term loan due from EERNL of R83,8 million (2012: nil) which relates to EERNL's 50% share of costs relating to the cash collateral. The reclassification of a receivable of R75,5 million follows the re-negotiation of the settlement of this financial asset as outlined above. The disposal of the Greenhills Manganese plant in September 2012 eliminated inventories (2012: R2,5 million) and trade receivables

(2012: R3,6 million).

Non-current liabilities

Non-current liabilities decreased by 32% reflective of the decrease in deferred tax on the contingent consideration which decreased to R181,5 million (2012: R263,3 million).

Current liabilities

In order to fund the cash collateral of R79,4 million (US$10 million) required to post the performance bond on OPL 233, the Group secured borrowings from Rencap and Yorkville during April 2012. The Yorkville loan was settled in November 2012 through the issue of equity in SacOil Holdings Limited and a cash payment of US$1,0 million.

As announced on 31 December 2012, the Rencap loan was novated to Gairloch in December 2012. The loans due to Gairloch at 28 February 2013 were R129,0 million (2012: nil). On 12 September 2013, the Company concluded an agreement with Gairloch for the settlement of the loan through an issue of equity in SacOil, subject to shareholders approval. The loans continue to incur interest at 8% and 10% per month, respectively, until 30 September 2013, being the calculation date agreed with Gairloch under the Subscription and Settlement Agreement. A circular providing details of the loan conversion incorporating a Notice of General Meeting, will be issued as soon as practicable.

The Group is also indebted to Nigdel for operating costs of R2,4 million on OPL 233 (2012: nil).

Taxes payable increased to R94,0 million (2012: R20,5 million) as a result of the capital gains tax on the 6.67% farm-out of Block III of R28,5 million, withholding tax on foreign dividends of R8,1 million and foreign taxes amounting to R36,9 million (2012: R20,5 million).

FINANCING OF THE GROUP'S ACTIVITIES

Total cash generated during the year was R83,3 million (2012: utilisation of R7,1 million) resulting in a year-end balance of R94,0 million (2012: R10,8 million). This cash is currently held as collateral for the performance bond on OPL 233 and will be utilised to fund future exploration activities of the Group.

Net cash from financing activities of R101,5 million (2012: R51,7 million) is reflective of the loans acquired by the Group to fund the R79,4 million (US$10 million) cash collateral required to post the performance bond on OPL 233. Further loans were also acquired to fund the working capital requirements of the Group. These loans were acquired as follows:

- R63,5 million (US$8 million) was acquired from Renaissance BJM Securities (Proprietary) Limited ("Rencap") in April 2012 to part fund the cash collateral.

- The Rencap loan was novated to Gairloch Limited ("Gairloch") on 28 December 2012. The novated loan was R96 million (US$11,25 million).

- R30 million (US$3,4 million) was acquired from Yorkville Advisors LLP in April 2012 to part fund the cash collateral. This loan was repaid in November 2012.

- R8,2 million (US$1 million) was acquired from Gairloch in September 2012 to fund working capital requirements.

- R8,8 million (US$1 million) was acquired from Gairloch in October 2012 to part fund work programme commitments and working

capital requirements.

RECAPITALISATION OF THE COMPANY AND EQUITY SETTLEMENT OF GAIRLOCH LOANS

SacOil concluded an agreement dated 12 September 2013 with Gairloch for the conversion of R238,5 million (US$24,1 million) of debt and accrued interest provided by Gairloch to equity in SacOil by no later than 31 January 2014 ("the Specific Issue"), thereby leaving SacOil debt free, reducing finance costs and significantly improving its balance sheet position.

Furthermore, the Company intends to raise additional capital of 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"), which will be supported by one of the Company's largest shareholders, the Public Investment Corporation (SOC) Limited ("the 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.

The Specific Issue and the Rights Offer ("the Transactions") are interconditional and will result in a recapitalisation of the Company enabling it to actively pursue and develop its oil and gas prospects. It is expected that the Transactions will be concluded by 31 January 2014.

OUTLOOK

The successful completion of the Transactions will see the Company recapitalised and able to fund its existing assets to June 2015.

The Group's underlying assets remain attractive. The proceeds of the Rights Offer will be applied to moving these assets up the value curve. Our stronger balance sheet will further allow us to pursue value enhancing opportunities on the African continent.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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

1. Basis of preparation

The consolidated annual financial statements of the Group for the year ended 28 February 2013 have been prepared in accordance with the Group's accounting policies, which comply with International Financial Reporting Standards, IAS 34: Interim Financial Reporting, as well as the Financial Reporting Guides as issued by SAICA, the Listings Requirements of the JSE Limited and the Companies Act of South Africa, and are consistent with those of the previous period, except for the change in accounting policy as detailed in note 3.

These consolidated annual financial statements have been prepared on a going concern basis. All monetary information is presented in the functional currency of the Group, being South African Rand.

2. Auditor's audit report

The Group annual financial statements are the responsibility of the directors of the Company. They have been prepared under the supervision of Roger Rees CA (SA). These financial statements have been audited by Ernst & Young Inc., the Group's auditors. The unqualified audit report includes an emphasis of matter paragraph which refers to the directors' disclosure in note 12 which indicates conditions which give rise to a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern. The audit report is available for inspection at the Company's registered office and is available in the integrated annual report, the availability of which is detailed in note 10.

3. Change in accounting policy

In the prior financial period the Group capitalised costs paid by Total RDC ("Total") on behalf of Semliki Energy SPRL ("Semliki"), 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 has 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 note 8). Comparative figures have been restated to reflect the change in accounting policy. As a result of the change in accounting policy, the following adjustments were made to the Group financial statements:

There were no adjustments required for the 2011 financial year-end as the cost carry arrangement only commenced during the 2012 financial year. The reversal of the cost carry in the 2012 financial year results in the elimination of all costs capitalised by the Group in terms of the old accounting policy. No adjustments are therefore necessary in the current financial year.

4. Segmental reporting

The Group operates in four 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 and Malawi. Operations in South Africa relate to the general management, financing and administration of the Group.

Business segments

The operations of the Group comprise one class of business, being oil and gas exploration and development.

5. Discontinued operation

The Greenhills manganese processing plant ("the Plant") was sold on 1 October 2012 and met the criteria for a discontinued operation in terms of IFRS 5.32. The Plant was not a discontinued operation or classified as held for sale at 29 February 2012 as management had not committed to a plan to dispose of the Plant. The comparative statements of comprehensive income have been re-presented to show the discontinued operation separately from continuing operations. The Board committed to a plan to sell 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 present value of these future cash receipts is R5 647 200 and is included under other financial assets.

7. Stated capital

8. Commitments and contingent liabilities

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 R89,1 million ($10 million) cash collateral, revalued at year-end. The cash is held in the bank account of SacOil's wholly-owned subsidiary, SacOil 233 Nigeria Limited. 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. Only at 28 February 2013 Total has incurred R20,4 million (2012: R28,9 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 R93,7 million (2012: R79,9 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 R22,1 million (2012: R18,8 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 R106,1 million (2012: R90,4 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 R22,1 million (2012: R18,8 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.

9. Dividends

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

10. Posting of integrated annual report and details of annual general meeting Shareholders are advised that the integrated annual report is available on the Company's website (www.sacoilholdings.com) and will be posted to shareholders on 23 September 2013. The annual general meeting of SacOil will be held on Friday, 29 November 2013 at 10:00 at 2nd Floor, The Gabba, Dimension Data Campus, 57 Sloane Street, Bryanston.

The record date on which members must be recorded as such in the register maintained by the transfer secretaries of the Company for the purpose of being entitled to attend and vote at the annual general meeting is Friday, 22 November 2013.

11. Events after the reporting period

The following event took place from the period 1 March 2013 to the date of this report: Equity settlement of Gairloch loans Subsequent to the year-end, 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 terms of this agreement debt totalling 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.

Shareholders are referred to the announcement dated 12 September 2013 issued on SENS and RNS for further details on the loan conversion.

Rights Offer

Shareholders are advised that 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 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 Public Investment Corporation (SOC) Limited, 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. Shareholders are referred to the announcement dated 12 September 2013 issued on SENS and RNS for further details on the Rights Offer.

Loan advanced to EERNL

The short-term loan due from EERNL became due and payable on 31 May 2013. As at the date of the release of the 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 exceeds the carrying value of the loan.

Acquisition of exploration licences

The Company announced on 9 May 2013 that its Botswana subsidiary, Transfer Holdings (Proprietary) Limited, had been advised by the Botswana Department of Mines that these exploration licences were duly approved and ready for collection. The petroleum exploration licences numbers 123/2013, 124/2013 and 125/2013 were awarded to Transfer Holdings (Proprietary) Limited on 29 April 2013. A further announcement in relaton to these licences will be released in due course.

Suspension of trade in the Company's shares on the JSE and AIM

An application was made to the JSE and AIM for the trading of the Company's shares to be suspended on both exchanges following the resignations from the Board of two non-executive directors and the Chief Executive Officer as announced on SENS and RNS on 31 May 2013, at which point the Company did not have a fully constituted Board. Shareholders are further referred to the announcement issued on SENS and RNS on 12 September 2013, regarding the progress made in obtaining a lifting of the suspension on both the JSE and AIM.

12. Going concern

By order of the Board

Roger Rees

Chief Executive

Johannesburg

16 September 2013

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

Email: info@sacoilholdings.com

Website: www.sacoilholdings.com

Directors:

Roger Rees (Chief Executive Officer), Tariro Mudzimuirema (Finance Director), Tito Mboweni (Chairman)*, Mzuvukile Maqetuka*, Gontse Moseneke**, Stephanus Muller*, Vusi Pikoli*, Ignatius Sehoole*

* Independent non-executive directors ** Non-executive Director

Advisers: