A SAC full of promise?

26th Nov '11 by davjo

3 comments 5024 reads

Picking up on Repo’s interest reported on Stockopedia and elsewhere :-

Website : http://www.sacoilholdings.com/

Sep 2011 Presentation : http://www.sacoilholdings.com/im/files/p/SacOil%20Presentation-LONDON-Outside_6sep11.pdf

As Repo notes, SAC came to AIM last April at 20p/sh, now 4.25p

Shares out 680m + 112m recently issued to Timtex = M/cap £33m

Debt : Nil

Cash : £11m

USD25m Standby Equity Distribution Agreement over 3 years

Assets :-
DRC : 12.5% Block 3 - having farmed out 60% to Total for free carry for at least $35m up to final investment decision. $54m contingent bonus presumably dependent on commerciality. One explo well expected around Dec 2012.

Nigeria : 20% in OPL 233 and 20% in OPL 281. Currently quoted as “under acquisition”. Quick flick through detail suggests SAC to carry the seller through to production.

South Africa : Greenhills non core Manganese manufacturing plant.

Management
Seem experienced and obviously well connected in snatching Block 3 from Tullow/Heritage. Certainly well journeyed judging by the long list of directorships.

Litigation
Identiguard have won a case against SacOil regarding payment of supplementary sig bonus of $2m for Block 3. SacOil have been granted right to appeal.

Other agreements
It seems SacOil’s co-venturer in DRC Block 3, Divine Inspiration Group(DIG), has agreed to assign their 35% interest in the Block 1 PSA to Sacoil. Note this PSA has seemingly been awarded to a couple of obscure African outfits. There are also various other agreements and letters of intent between individuals and companies of which I’ve not researched lest I lose the will to live.

Cautionary Announcement 24 Nov 2011
Shareholders are advised that the Company continues to consider various proposals and potential transactions, which if successfully concluded, may have a material effect on the price of SacOil`s securities. Accordingly, Shareholders are advised to continue to exercise caution when dealing in the Company`s securities until a further announcement in this regard is made.

I wouldn’t put much store by this. I definitely don’t see a company approach, more likely ratification of the Nigerian licences, disposal of the Manganese plant or something like signing into Tunisia acreage. I see they have been in discussions with Candax. DRC Block 1 would be a very different matter, not dissimilar to pulling a very desirable rabbit out of the hat, but I think that is exceedingly unlikely.

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AnonymousUser858

28th Nov '11

D

great contribution - thanks muchly

T

repobear

From Shore Capital today

''This valuation work gives a Risked NAV of 12p/share (fully diluted), with substantial unrisked potential. We would normally expect an E&P company with an active work programme to trade broadly in line with Risked NAV, but SacOil trades at a circa 65% discount to our estimate. We believe that this unusually large discount reflects volatile market conditions and the recent lack of exploration activity on the ground in Nigeria and the DRC.

We look forward to commencement We have accounted for the SEDA facility in our Risked NAV calculation, and see adequate headroom through our forecast period. SacOil is carried in the DRC, where an aeromagnetic
survey is due to commence in the first quarter of 2012. In the short term, we believe that posting of the OPL 233 performance bond will provide confidence in SacOil?s ability to fund and expedite its work programme, and allow the share price to reach a level that is more consistent with underlying asset value.''

and summed up

''SACOIL+ (SAC, 4.1p, No recommendation) – Initiation of coverage. We have this morning published our initiation note (attached) on African E&P company SacOil, entitled “Establishing a footprint in African E&P”. SacOil aims to become a leading player in the region, and has assembled a portfolio of assets in Nigeria and the Democratic Republic of Congo (DRC). With its deal-making credentials established, the next step is to move projects up the value chain with active programmes of exploration and appraisal. A farm-out deal with Total in the DRC is expected to kick-start activity on the high-impact Block III, which is adjacent to significant discoveries in Uganda, and SacOil is fully carried through to commercial development. Total’s backing provides us with lots of encouragement, and we now look forward to the commencement of appraisal work on OPL 233 in Nigeria. Following a US$10m follow-on investment by Encha Group, SacOil has secured up to US$25m of additional funding via a three-year Standby Equity Distribution Agreement (SEDA); as a result, we see adequate headroom, and calculate diluted Risked NAV of 12p/share.''

Definitely not for widows and orphans, as davjo says, and just like the ever so popular AEX in that respect , imv. However there should be a decent trade in there at the very least, from the highly oversold situation, I believe, and a decent chance of significant long term value.

DYOR, and thinking

repo

Antone

10th Dec '11

I think sacoil does indeed offer a SAC full of promise, they have made amazing progress in the short time they
have been listed on AIM although as yet not reflected in the shareprice. It should be re-rated fairly soon in my
opinion and im sure many investors are waking up to this potential gem.

Another AFREN in the making ?

A SAC full of promise?

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Davjo

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