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Mar 18, 2011

SacOil to start trading on Aim next month

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Africa-based SacOil will start trading on London’s Aim market next month, CEO Robin Vela confirmed earlier this month.

The South African Reserve Bank approved the admission, which is expected on April 8. The company, which has a primary listing on the JSE, is expected to list with a market capitalisation of £156-million (about R1,7-billion).

Vela says that the secondary listing will allow SacOil to be evaluated against a number of its peers, which would allow a real comparable pricing for its stock. Companies are regarded as peers in terms of their stage of development, their focus on African acreage and the fact that they are pure-play upstream, some with an indigenisation feel.

He adds that the board intends to attract new UK institutional investors and raise its public profile to ensure that it remains sufficiently capitalised to further develop current exploration projects and execute near-production and producing-asset oil and gas transactions in the pipeline.

Last week, SacOil announced that French oil and gas major Total would buy a big stake in its Democratic Republic of Congo (DRC) oil block.

Vela notes that the announcement led to shares in SacOil climbing 24% to 257c a share at the close of business on March 7.

Before the transaction, SacOil subsidiary Semliki Energy held an 85% share of the block and the DRC government the balance. After the transaction, Total will own a 60% interest in the explo- ration permit for Block III, Semliki 25% and the DRC government 15%.

All conditions precedent have been satisfied, apart from the transaction being approved by shareholders. The intention is to complete the Total deal by the end of March.

SacOil will receive $7,5-million in cash upfront, followed by $54-million, which will be paid in two stages.

SacOil states that it is financially derisked in Block III as Total carries its entire exploration expenditure obligations until a final investment decision. It is also technically and oper- ationally derisked with Total as operator.

SacOil executive director Colin Bird says that Total has removed the two key risks that a junior and its shareholders have in the DRC, namely poor execution and financing.

“In SacOil’s early stages of development, it is important that, whatever acreage it gets, it is able to work up to production in as short a time as possible,” says Vela.

To do so, the company needs a partner that can provide transfer of skills, operate the block and derisk the asset as far as possible – Total met these requirements, he adds.

Edited by: Martin Zhuwakinyu
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