JSE-listed upstream oil and gas company SacOil expected to complete a work programme for Malawi’s second-largest petroleum exploration region – Block 1 – by the second quarter of the 2014 financial year.
The company, which immediately started operations after winning the onshore petroleum prospecting licence for the 12 265 km2 area in December, was currently undertaking the initial planning for the environmental- and social-impact assessment, said CEO Robin Vela.
The company previously stated that the licence dovetailed with its strategy of building a balanced upstream oil and gas portfolio through the acquisition of early-stage opportunities in Africa, similar to its project in the Democratic Republic of Congo (DRC), where it was granted the 3 177 km2 Block 3 prospecting licence in 2010.
SacOil, which holds a 12.5% effective interest in Block 3, said planning for the acquisition of a two-dimensionsal (2D) seismic survey to map potential oil and gas prospects had started following the successful acquisition and positive results of the geological information of a previous survey.
The block’s operator Total E&P RDC successfully acquired an airborne gravity and magnetic survey over the northern part outside the Virunga National Park.
Total was working with three bidders to optimise the 2D seismic design according to the local topography; however, the current design envisaged that a minimum of 400 km of 2D seismic data would be acquired during the next dry season, which starts in December.
The processing and interpretation of the data from the survey had been completed, confirming the expected geological trend observed in the area, and the firm was currently finalising the data acquisition and completing the environmental- and social-impact report for submission to the DRC authorities.
Civil unrest in the area caused a delay of about six months to SacOil’s and Total’s work programme; however, the parties secured a one-year extension to its licence, which now only expires in January 2016.
Meanwhile, SacOil had significantly improved its balance sheet, was debt free and reduced its financing costs after agreeing to convert $17.6-million of debt and accrued interest owing to Gairloch to equity in SacOil by May 31.
“Converting the Gairloch debt to equity will leave the company debt free, which not only reduces costs but also greatly strengthens the balance sheet,” Vela commented.
SacOil will issue 488.8-million new ordinary shares of no par value to nominees of Gairloch at R0.32037 a share, raising R156.6-million.
Gairloch would then hold a 33.89% indirect interest in SacOil.
The group also entered into a deal with Encha Energy, in which Encha acknowledged a R75-million debt to SacOil and agreed to provide certain services to SacOil.
Encha Energy had undertaken to repay SacOil by February 2016.