Johannesburg - SacOil shareholders have paved the way for a debt-free balance sheet and a much needed boost in the company’s exploration prospects in southern Africa after voting in favour of a rights issue and the conversion of debt into equity on Friday.
The company plans to raise R570 million by issuing 2.11 billion shares at 27c each, after which it will convert its R238.5m debt into equity, resulting in an R800m recapitalisation by end of January 2014.
Roger Rees, the interim chief executive, said the funds from the rights issue would be invested in its assets. If its exploration programme is executed as planned, it is set to generate cash flows by the end of 2015.
“The recapitalisation opens the way for SacOil to fully pursue its exploration activities in Botswana, Malawi, the Democratic Republic of Congo [DRC] and Nigeria and is a vote of confidence in the company’s existing assets.”
SacOil’s second-biggest shareholder, the Government Employees Pension Fund, managed by the Public Investment Corporation (PIC), will allocate R329m towards supporting the rights offer.
“The conversion of debt to equity will eliminate debt, significantly improve SacOil’s balance sheet and reduce the group’s finance costs,” Rees said.
The independent oil and gas producer said its Nigerian assets were between 18 and 24 months away from producing revenue. It is confident its investment in Nigeria will contribute to its existing reserves and, ultimately, its hydrocarbon production.
SacOil revamped its executive in July with the appointment of Rees and Tito Mboweni, the former Reserve Bank head, as its chairman. Mboweni is chairman at AngloGold Ashanti, South Africa’s biggest gold producer. It also appointed Tariro Mudzimuirema as its interim financial director.
The company has come a long way since it restarted trade on London’s Alternative Investment Market in October. Its partnership with multinational oil company Total on the exploration of Block III in the eastern DRC had significant potential, it has previously said.
Total has committed about $30 million (R3 billion) to the exploration and drilling of the first test well next year. Oil analysts claim the area has a confirmed reserve in excess of 2.5 billion barrels. The completion of the survey takes Total a step closer to ascertaining the presence of oil or gas in the area.
SacOil shares remained unchanged at 25c on Friday. - Business Report