Gairloch has agreed to the conversion of US$18.6mln of debt plus interest into 489mln SacOil shares. Gairloch is expected to be a long-term investor in the company.
The conversion price was set at 0.32037 rand, roughly equivalent to 3.6 US cents. The conversion price represents a 0.6% premium to the volume weighted average traded price of SacOil shares on the Johannesburg Stock Exchange over the 30 business days prior to the date of the agreement.
"Converting the Gairloch debt to equity will leave the company debt free, which not only reduces costs but also greatly strengthens the balance sheet. Gairloch also brings to SacOil a strong and long-term shareholder, who understands the region we operate in well and will support the ongoing growth of the business towards first production and beyond,” said Robin Vela, chief executive officer of SacOil.
The company has also concluded an “acknowledgement of debt” deal with Encha Energy, a company that, through associates, has a 20.67% shareholding in SacOil.
Encha has acknowledged it owes SacOil 75mln rand and has undertaken to repay the debt by 28 February, 2016, at the latest.
On the operational side, SacOil is cracking on with the initial planning associated with the environmental and social impact assessment for its Block 1 asset in Malawi.
SacOil was awarded the onshore licence in December 2012, and is targeting completion of the work programme by the second quarter of 2014.
There was also good news from the Democratic Republic of the Congo, where the group has completed the processing and interpretation of data from the recently acquired airborne gravity and magnetic survey over the northern part of Block III outside the Virunga National Park.
The analysis confirms the expected geological trend observed in the area and points to the existence of a north-west to south-east trending basin, according to SacOil’s interpretation.
The horst and graben structure, as well as the quality and thickness of the sedimentary infill, will need to be confirmed with seismic data, SacOil said.
Planning for the acquisition of a 2D seismic survey to map potential oil and gas prospects on Block III has now begun. The current design envisages that, at a minimum, 400 kilometres of 2D seismic data will be acquired during the next dry season, which starts December 2013.
In Nigeria, a site survey of the OPL 233 asset has been successfully completed by a seismic contractor, and the company is awaiting the results.
SacOil is also in the process of reviewing the existing seismic data in more detail and on completion will update its internal evaluation of the OPL 233 resources. It has also sourced additional 2D data on the south-western portion of the concession, which will assist in the identification of a number of additional leads and prospects for subsequent further evaluation of the block.
Over on the OPL 281 production sharing contract, SacOil is waiting on the outcome of final talks between the Nigerian National Petroleum Corporation (NNPC) and Transcorp.
The 2013 programme for OPL 281 remains subject to final NNPC approvals, but is expected to be focused on reprocessing of existing and raw 3D seismic data over the block and the drilling of one well.
Shares in SacOil surged 10.1% in the first hour of trading after news of the debt-to-equity conversion deal broke.