facts sac ln - ithubanet.co.za · analysis of financial data and updates to our recommendations...

The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. While the accuracy or completeness of the information contained in this document cannot be guaranteed by FirstEnergy Capital Corp., it was obtained from sources believed to be reliable. FirstEnergy Capital Corp. and/or its officers, directors and employees may from time to time acquire, hold or sell positions in the securities mentioned herein as principal or agent. FirstEnergy Capital (USA) Corp., a member of the Financial Industry Regulatory Authority, is a wholly owned subsidiary of FirstEnergy Capital Holdings Corp. and operates as a Broker-Dealer in the United States. FirstEnergy Capital LLP is authorised and regulated by the FCA.

September 23, 2014

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FACTS

FirstEnergy Capital Corp. | Suite 1100, 311-6th Avenue S.W. Calgary, Alberta, Canada T2P 3H2 | +1.403.262.0600 www.firstenergy.comFirstEnergy Capital LLP | 85 London Wall, London, EC2M 7AD | +44 (0)20 7448 0200

COMPANY UPDATEAnalysis of financial data and updates to our recommendations

OUTPERFORM ▲Price 09/22/2014 £0.0312m Target Price ▲ £0.07Implied Total Return 124%

2014e 2015e

EV/DACF N/A 32.5xEV per boe/d N/A $78,488P/Core NAV N/A N/AP/RENAV 0.5x 0.5xP/Unrisked NAV 0.4x 0.4x

Transaction Details SacOil has entered into a SPA to acquire the subsidiary Mena International Petroleum (MIP), a subsidiary of Mena International Holdings (MNH CN) to acquire a 100% interest in the Lagia oil field, onshore Sinai Peninsula, Egypt. The 2P reserves reflect the use of Cyclic Steam Stimula-tion that will serve to improve the recovery of oil from the Nukhul formation. The Lagia oil field holds a heavy oil discovery (16-19 API) located in Sinai Egypt and holding reserves in-place of approximately 55 mmbbl excluding upside. The field has 2P reserves of 6.17 mmbbl as at YE13. The reservoir depth is typically shallow at 1,200 ft with the potential of lighter oil at deeper intervals of circa 4,800 ft given that the South Lagia prospect encountered 36 API at this depth. We understand that no oil-water contact or gas-water contact has been observed in any of the wells however, we note that upside is not reflected in the current 2P reserves numbers. The closest analogue is the Issaran field operated by Scimitar Production.

The transaction was undertaken for a consideration of US$10 mm SacOil equity through the issue of 183.7 mm shares, together with assuming the liabilities of MENA’s Egyptian asset amounting to US$4.1 mm. The recent shareholders are locked up to a four month period. We have as-sumed that the oil from Lagia sells at a 25% discount to Brent based on the historical production recently sold into the market.

SAC LNOUTPERFORM

INterNAtIONAL OIL & GAS prOducerS

SacOil Holdings Limited (SAC LN)

ANALYStGerry F. Donnelly, PhD, B.Eng.+44 (0)20 7448 0214 - [email protected]

- Member of London Stock Exchange- Authorised and Regulated by the FCA

SacOil Holdings Limited (SAC LN / SCL SJ) - Corporate Re-Launch

The acquisition of the Lagia oil field, Egypt, is a transformational transaction for SacOil providing a solid 2P reserves base, upside that is not reflected and newsflow for an equivalent transaction consideration of US$2.28/bbl. With the potential for the asset to deliver production and cash flow in the very near term this could mark an inflexion point in SacOil’s investment profile signalling a momentous turnaround to that of a production story. In securing the assets, the Company gains access to 6.2 mmbbl 2P reserves base with an upside of c. 20 mmbbl, complementing the early stage exploration weighted element of the portfolio and in so doing changing the Company’s risk profile.

We have updated our target price in line with our RENAV from £0.06 per share to £0.07 per share where our Core NAV is broadly £0.05 per share that reflects the Lagia transaction along with the associated production profile and capex investment programme for the wider portfolio. We have also reflected dilution going into early 2015 as the balance sheet is strengthened and perfecture of SacOil’s title on OPL233 and de-risking of the asset, moving our risking from 40% to 75%. We have revised our Speculative Buy recommendation to Outperform that is underpinned by a Core NAV contribution of £0.04 per share from the Lagia field.

20

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£0.10

£0.15

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£0.25

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SacOil Holdings Limited (AIM: SAC)

0

10

20

£0.00

£0.05

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11

Jul-1

1

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12

Jul-1

2

Jan-

13

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Source: Bloomberg

SacOil Holdings Limited (SAC LN) EBITDA EBITDA EPS EPS NAV DPS (2014)

Current Target Diluted Market Total 2014e 2015e 2014e 2015e CorePrice Price Shares Cap Debt Production Production CFPS CFPS NAV RENAV

Ranking (LN) (mm) (£mm) (£mm) (boe/d) (boe/d) (diluted) (diluted) (£/sh) (£/sh)

New O £0.03 £0.07 3,268 £102 £0 20 2,835 (R0.04) R0.02 £0.04 £0.06Old SB £0.06 953 0 0 R0.01 R0.01 £0.01 £0.07

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FACTS SACOIL HOLDINGS LIMITEDSEPTEMBER 23, 2014

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Egyptian Lagia Field Acquisition

Source: Mena Hydrocarbons

Source: Mena Hydrocarbons

Existing Lagia Field Wells Drilled

The asset is relatively low risk having already delivered test production and a work plan is now in place to drill additional wells commencing with steam injection in an effort to bring on production. This Phase 1 will involve the hydraulic stimulation of four existing wells and a work over of another well following closing, which is expected at October end. Phase 1 will be funded out of existing cash resources. Presently, the assets include existing production facilities and oil storage for 3,000 bbl of oil.

UntestedHigh Block

Main Fault Blockcontaining assignedreserves in Hukhul

Sandstone

Deeper reservoirsuntested beneath

structure crest

South Lagia 1potential in deeper

reservoirs

Lagia 10 (drilled)

Lagia 9 (drilled)

Lagia 8 (drilled)Lagia Field

EGYPTABU

ZENIMA

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This is a transaction in a proven hydrocarbon basin in one of Africa’s most established oil producing regions holding an existing discovery and resource. Any concerns on the prospect of receivables is broadly mitigated given that outstanding receivables were minimal from early oil sales. A development programme is planned to bring the field into production with Phase 1 which will involve hydraulic stimulation of four existing wells and a work over of another well following closing which is expected at October end. Phase 1 will be funded out of existing cash resources. SacOil anticipates bringing the Lagia field back into production by 4Q15 although we believe that given demonstration of historical production most recently, that the Company may be able to advance this timeline much sooner. Notably SacOil also inherits an operating team with the as-set under the JV Company Petro Sinai.

We highlight that the production profile reflects only the 6.2 mmbbl 2P reserves on the field and does not include the upside. For illustrative purposes we also present the potential of mid-longer term production from the Company’s OPL233 near shore Nigerian asset.

On the basis of the recent perfecture of the Nigerian offshore asset OPL233 we believe the risk profile of SacOil is correspondingly changing and we have subsequently modified our risking from 40% to 75% for the development of OPL233 20 mmbbl contingent resource base. The work programme on OPL233 will see the results from the Ocean Bottom Cable (OBC) survey completed by October followed by interpretation.

We believe this transaction marks the beginning of SacOil’s transformation and risk profile and entry into Egypt marks an important step where we could see additional near term Egyptian centric opportunities brought into the portfolio.

Production Forecast (2014-2021)

Source SacOil, FirstEnergy Capital

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2014 2015 2016 2017 2018 2019 2020 2021

Anticipated

WI D

aily Produ

ction bb

l/d

WI Production Projections (bbl/d)

Lagia Field ‐ Egypt (Onshore) OPL233

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Rationalisation of Early Stage Assets?This transaction presents the ability for the Company to rebalance its exploration weighted portfolio with a low risk redevelopment asset that establishes a footprint in one of Africa’s most proven hydro-carbon fairways. Furthermore the deal provides newsflow that was largely absent previously the early stage nature of the exploration weighted portfolio.

For the wider asset base, we believe the Company could elect to sell or farm down its Malawi, DRC and/or Botswana licences thereby migrating the risk profile of the SacOil story to that of more of an execution and development story.

Cash Flow Forecast (2014 to 2019)

Source: FirstEnergy Capital

Sensitivity on RENAV and NPV (15) US$/bbl


Valuation and Recommendation We revise our target price in line with our RENAV from £0.06 per share to £0.07 per share reflecting the Lagia transaction and the associated capex and forecasted production profile as well as the dilution going into 2015. The transaction is underpinned by a low cost development and acquisition price translating to a dollar per barrel metric that equates to US$5.8/bbl compared with an equivalent transaction consideration of U$2.2/bbl. At this juncture we have also updated our valuation assumptions to ensure the Company remains sufficiently capitalised by consider-ing a capital raise into early 2015 (1Q15) of circa US$27 mm (R275 mm).

Given the historical production proved at Lagia we have upgraded our Speculative Buy recommendation to Outperform given current trading levels represent an upside of 100% to our Core NAV which reflects the development case for the Lagia field.

SacOil Cash Flow Forecast (R mm) 2011 2012 2013 2014 2015 2016 2017 2018 2019Brent Price (US$/bbl) 110.9 111.7 108.8 107.7 103.7 101.7 100.5 100.5 102.0Net Production (bbl/d) 0.0 0.0 0.0 20 2835 9455 12235 12445 11968Opening Cash Position 18 11 94 382 114 65 1,122 2,418 3,770Net Operating Cash Flow (180) (17) (40) (124) 71 1,929 1,722 1,669 1,639Capex 0 (8) (63) (122) (505) (872) (426) (316) (267)Financing Cash Flow 51.7 101.5 355.9 0.0 385.0 0.0 0.0 0.0 0.0Acquisition/Disposal 102.0 75.8 -0.2 -21.0 0.0 0.0 0.0 0.0 0.0Closing Cash Position 11 94 382 114 65 1,122 2,418 3,770 5,142

Variation in Discount Rate Against NPV/bbl Lagia Oil fieldDiscount Rate (%)

5.78 65 85 100 110 12010% 4.57 6.41 7.79 8.70 9.6212.5% 3.90 5.49 6.67 7.46 8.2415% 3.37 4.75 5.78 6.46 7.1518% 2.86 4.05 4.93 5.51 6.10

Oil Price (US$/bbl)

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SacOil NAV Table

Source: FirstEnergy Capital, Company ReportsSacOil Fin & Ops

Source: FirstEnergy Capital, and Company Reports

Asset ValuationEMV

(US$ mm)Risked £/Share

Unrisked £/Share % Total

Net Cash 11 0.00 0.00 5.8%G&A ‐6 0.00 0.00 ‐3.2%Lagia Field ‐ Egypt 116 0.04 0.04 62.2%Total Core NAV 121 0.04 0.04 64.8%

OPL281 ‐ Nigeria (Onshore) 28.7 0.01 0.02 15.4%OPL233 ‐ Nigeria (Offshore) 22.8 0.01 0.01 12.2%Block III ‐ DRC 14.3 0.00 0.00 7.6%Total Risked Exploration 66 0.02 0.03 35.2%Total NAV 187 0.06 0.07 100.0%Unrisked NAV 0.07 0.07

P/Core NAV N/AP/NAV 50.1%P/Unrisked NAV 42.8%

YEAR END DEC 31, 2013a 2014e 2015e 2016e YEAR END DEC 31, 2013a 2014e 2015e

PRODUCTION VALUATIONOil & Liquids bbl/d 0 20 2,835 9,455 Share Price Y/E £/Share 0.03 0.03 0.03Natural Gas mmcf/d 0.0 0.0 0.0 0.0 Net Asset Value £/Share 0.04 0.04 0.04Total Production boe/d 0 20 2,835 9,455 Risked NAV £/Share 0.06 0.06 0.06Oil & Liquids Weight % 100% 100% 100% 100% Price / Core NAV % 77.3% 77.3% 77.3%

Production per Share boe/Share (000) 0.0 0.0 0.3 0.9 Price / Risked NAV % 77.3% 77.3% 77.3%% N/A N/A N/A 233.5% P/CF x N/A N/A 30.4x

Production per D.A. Share boe/Share (000) 0.0 0.0 0.2 1.2 P/E x 81.2x N/A N/A% N/A N/A N/A 372.7% DACFM x N/A N/A 32.5x

Target DACFM x N/A N/A 70.2xCAPITALIZATION EV per Boe/d US$/boed N/A N/A 78,488Exit Net Debt Rmm (341) 1 153 (531) Target EV per Boe/d US$/boed N/A N/A 169,328Net Debt/CF Years 8.6 0.0 2.1 ‐0.3 EBITDA R$mm ‐53 ‐126 ‐32Basic Shares (*) mm 3,085 3,268 3,968 3,968 EV/EBITDA US$/boe ‐15.9 ‐14.3 ‐72.5Options mm 0.0 0.0 0.0 0.0Warrants mm 0.0 0.0 0.0 0.0 FINANCIAL PERFORMANCEConvertible Debentures mm 0.0 0.0 0.0 0.0 Cash FlowDiluted Shares mm 3,085 3,268 3,968 3,968 Cash Flow Rmm ‐40 ‐124 71Fully Diluted Shares mm 3,086 3,270 3,970 3,970 Cash Flow Netback US$/boe N/A N/A 69Market Cap. £mm 96 102 124 124 Cash Flow Per Share US$ per share ‐0.02 ‐0.04 0.02Enterprise Value £mm 69 102 133 94 % Change Year‐Over‐Year % 5.6% 100% ‐146%

EarningsYIELD AND CAPITAL EXPENDITURES Earnings Rmm 10 ‐127 ‐136Dividends US$mm 0.0 0.0 0.0 0.0 Earnings Per Share US$/share 0.00 ‐0.04 ‐0.03Dividends Per Share US$/share 0.00 0.00 0.00 0.00 % Change Year‐Over‐Year Basic ‐106.3% ‐947.9% ‐14.5%Yield % 0.0% 0.0% 0.0% 0.0% Capital Expenditures

Capital Expenditure Rmm 63 122 505PRICE FORECAST Capex / Cash Flow % ‐159% ‐98% 708%Brent US$/bbl 108.75 107.65 103.75 101.75 Debt ServicingOil $US wellhd 84.66 93.17 77.81 94.73 Debt Servicing US$mm 0.0 0.0 0.0Natural Gas $US wellhd N/A N/A N/A N/A Free Cash FlowExchange Rate US$ / Rand $ 8.60 8.60 10.00 10.80 Free Cash Flow US$mm ‐103 ‐246 ‐434

DebtTotal Debt Rmm 0.0 0.0 0.0Exit Net Debt Rmm ‐341 1 153

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Valuation Contribution


0.004 0.002

0.04 0.040

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0.007 0.0050.062

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Current Share Price p/share


Core NAV Risked Upside

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Disclosure Requirements Ranking System

FirstEnergy’s rating system reflects our outlook for expected performance of an issuer’s equity securities relative to its peer group over the next 12 months.

A Top Pick (Buy) rating represents a security expected to provide a return materially higher than the peer group average.

An Outperform (Buy) rating represents a security expected to provide a return greater than the peer group average.

A Market Perform (Hold) rating represents a security expected to provide a return in line with the peer group average.

An Underperform (Sell) rating represents a security expected to provide a return less than the peer group average.

A Speculative Buy (Buy) rating represents a security where the return potential is high, but the risk of a significant loss is material.

A Tender (X) represents a security where investors are guided to tender to the terms of the takeover offer.

The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about the subject security and issuer.

The author of this reports further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report.

FirstEnergy Capital may receive or intends to seek compensation for investment banking services from all issuers under research coverage within the next three months.

This communication is issued in accordance with Article 19 of the Financial Services Markets Act 2000 (Financial Promotions) Order 2005. This report has not been approved by FirstEnergy Capital LLP for the purposes of section 21 of the Financial Services and Markets Act 2000. It is directed solely at investment professionals who are persons having professional experience in matters relating to investments. Any investment or activity to which it relates is available only to such persons or will be engaged in only with such persons.

Persons who do not have professional experience in matters relating to investments should not rely on this communication.

of 7Regulatory Disclosures and our policy on the dissemination of research can be found at http://www.firstenergy.com/research/regulatory-disclosures

Ranking Distribution

% Investment Banking Clients

Top Picks 9% 8%Outperforms 44% 23%Market Performs 32% 7%Underperforms 2% 1%Speculative Buys 7% 2%Under Review 1% 0%Restricted Companies 5% 5%Tenders 0% 0%Not Rated 0% 0%

Total 100%

Ranking & Financing Stats-current.xlsm

Disclosure Requirements Ranking System1. Is this an issuer related or industry related publication? Issuer

2.

N

3.

N

4.

N

5.

N

6.

N

7.

N

8.

N

9.

N

10.

N

11.

N

12.

Top Picks 8% 6% N

Outperforms 48% 27% 13.

Market Performs 32% 7%

Underperforms 2% 1% Y

Speculative Buys 7% 3%

Tenders 1% 0%

Not Rated 2% 2%

Under Review 0% 0%

Restricted Companies 0% 0%

Total 100%

FirstEnergy Capital Corp., Suite 1100, 311-6th Avenue S.W., Calgary, Alberta, Canada, T2P 3H2, +1.403.262.0600

FirstEnergy Capital LLP, 85 London Wall, London, EC2M 7AD, +44 (0) 207 448 0200

The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. While the accuracy or completeness of the information contained in this document cannot be guaranteed by FirstEnergy Capital Corp., it was obtained from

sources believed to be reliable. FirstEnergy Capital Corp. and/or its officers, directors and employees may from time to time acquire, hold or sell positions in the securities mentioned herein as principal or agent. FirstEnergy Capital (USA) Corp., a member of the Financial Industry Regulatory Authority, is a

wholly owned subsidiary of FirstEnergy Capital Holdings Corp. and operates as a Broker-Dealer in the United States. FirstEnergy Capital LLP is authorised and regulated by the FCA.

12 MONTH TARGET PRICE: £0.06

Has any director, officer or employee who prepared this

research report received any compensation from the subject

company in the past 12 months?

Persons who do not have professional experience in

matters relating to investments should not rely on this

communication. Has FirstEnergy provided the issuer or its predecessor with

non-investment banking securities-related services in the past

12 months?

Ranking

Distribution

Has FirstEnergy managed or co-managed an offering of

securities by the issuer or its predecessor in the past 12

months?

Has FirstEnergy received compensation for investment

banking and related services from the issuer or its

predecessor in the past 12 months? Opinion: SPECULATIVE BUY

% Investment

Banking Clients

This communication is issued in accordance with

Article 19 of the Financial Services Markets Act 2000

(Financial Promotions) Order 2005. This report has not

been approved by FirstEnergy Capital LLP for the

purposes of section 21 of the Financial Services and

Markets Act 2000. It is directed solely at investment

professionals who are persons having professional

experience in matters relating to investments. Any

investment or activity to which it relates is available

only to such persons or will be engaged in only with

such persons.

Does any director, officer, employee of FirstEnergy or member

of their household serve as a director or officer or advisory

capacity of the issuer? (if so, list name)

A Speculative Buy (Buy) rating represents a security where the

return potential is high, but the risk of a signifi cant loss is material.

A Tender (X) represents a security where investors are guided to

tender to the terms of the takeover offer.Did the analyst and/or associate who prepared this research

report receive compensation based solely upon investment

banking revenues?

Did the analyst receive any payment or reimbursement of

travel expenses by the issuer?

Since July 9, 2002, has the analyst received any compensation

based on a specific investment banking transaction relative to

this issuer?

The author of this report hereby certifies that the

views expressed in this report accurately reflect

his/her personal views about the subject security

and issuer.group over the next 12 months.

Does the analyst, a member of the analysts household,

associate or employee who prepared this research report have

a financial interest in securities of the subject issuer? If yes,

nature of the interest and name:The author of this reports further certifies that no part

of his/her compensation was, is, or will be directly or

indirectly related to the specific recommendations or

views contained in this research report.

A Top Pick (Buy) rating represents a security expected to provide a

return materially higher than the peer group average.

date of this report? An Outperform (Buy) rating represents a security expected to

provide a return greater than the peer group average.Does FirstEnergy beneficially own more than 1% of any class

of common equity of the issuer?FirstEnergy Capital may receive or intends to seek

compensation for investment banking services from all

issuers under research coverage within the next three

months.

A Market Perform (Hold) rating represents a security expected to

provide a return in line with the peer group average.Does FirstEnergy or the analyst have any actual material

conflicts of interest with the issuer?

Explanation:An Underperform (Sell) rating represents a security expected to

provide a return less than the peer group average.

SACOIL HOLDINGS LTD (SAC LN) SEPTEMBER 2014

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