Oil and gas company SacOil has returned to profitability in the 2016 financial year, on the back of reorganisation gains of R103.6-million, a weakening rand contributing some R154.6-million in foreign exchange and the nonrecurrence of R420.2-million in one-off write-downs owing to the restructuring of the group's portfolio of assets in the prior year.

The JSE- and Aim-listed firm on Tuesday posted a profit of R39.6-million for the year ended February 29, after plunging into the red with a loss of R277-million in 2015.

SacOil swung from a basic loss a share of 8.54c in 2015 to basic earnings a share of 1.64c in the year under review, while headline earnings a share of 1.04c were recorded in 2016, compared with the headline loss a share of 4.67c reported in the prior year.

“The 2016 financial year was characterised by operational and strategic progress against a challenging sector backdrop. It was a year in which we demonstrated our ability to deliver on core operational objectives and evolved further towards our strategic goal of becoming a Pan-African oil and gas company with activities across the full industry value chain,” said CEO Dr Thabo Kgogo.

While still at “minimal” levels, revenue for the period under review reached R4.7-million, a 127% surge on the R2-million generated in the prior year.

With the completion of Phase 2 of the planned development activities at the Lagia oilfield, in Egypt, the group was working to establish a sustained level of production to bolster revenue over the next financial year.

The R55.4-million Phase 2 development resulted in reserves increasing from 6.2-million barrels to 6.9-million barrels.

“Our core priority for the year was the successful completion of Phase 2 of the development of Lagia. We had set ourselves a target to achieve a peak production capability of 1 000 bbl/d by the end of the financial year.

“Having demonstrated the field's capacity, we have since returned to production levels more suited to the current oil price environment,” Kgogo noted.

SacOil also completed the reorganisation of its holding in Block III, in the Democratic Republic of Congo (DRC), which provided the group with a direct holding in the asset and saw subsidiary Semliki transferred to joint venture partner Divine Inspiration Group.

“This reorganisation now enables SacOil to directly represent its interest in Block III and to have a direct line of sight of the activities of the block. SacOil DRC has an effective 12.5% participating interest in Block III,” he said.

Further, Block III operator, Total E&P RDC, started the acquisition of a two-dimensional seismic survey following the granting of a two-year extension to the current exploration period from January 2016 to January 2018 by the DRC’s Minister of Hydrocarbons.

Meanwhile, prefeasibility studies on the Bioko Oil Terminal project, in Equatorial Guinea, to prove the commercial viability and determine the next steps with regards to SacOil's involvement, had started.

The studies were expected to be completed during the third quarter of this year.

The expansion into the midstream segment continued, with SacOil securing a 12-month contract for the purchase of crude oil grades from the Nigerian National Petroleum Corporation for onward sale.

“This diversification of our revenue generation and industry activities is in line with our previously stated growth strategy and marks a significant milestone for SacOil,” said Kgogo.