SacOil Holdings Limited, the African independent upstream oil and gas company, announced the termination of its joint venture with Nigdel United Oil Company (Nigdel) of Nigeria, and consequently its participation in Oil Prospecting Licence (OPL) 233 on Thursday, 20 May. The 126 square kilometre, offshore oil block is located in the core shallow marine area of the Niger Delta region.
Dr Thabo Kgogo, CEO of SacOil comments: “The termination of the joint venture in respect of OPL 233 is in line with the strategy communicated to shareholders previously. We are now in a process of rebalancing our portfolio with a greater focus on production assets. With the expected return of capital from OPL 233, combined with SacOil’s existing cash resources, the Company will be in a far stronger position to pursue its strategy of increasing production and focusing on cash generative assets across Africa”.
Nigeria is a prolific hydrocarbon basin and the largest exporter of oil on the African continent, and will continue to be an area of focus for SacOil, according to Kgogo.
The Company announced earlier this year that operations at their oil field in Lagia, Egypt is gaining strong momentum with production at approximately 350 barrels per day and that a target of 1000 barrels per day is set for year-end. In addition, the Company is also in partnership with the Public Investment Corporation SOC Limited (“PIC”) and The Instituto de Gestão das Participações do Estado (“IGEPE”) on an ambitious project to evaluate the technical and commercial feasibility of a transnational terrestrial gas pipeline and distribution facilities that will transport natural gas from Mozambique’s Rovuma fields into South Africa. Other Company assets include development and operational projects in Botswana, Malawi and the DRC.
Dr Kgogo explains that SacOil’s exit from OPL 233 is just one element of the Company’s new strategy which includes a proactive acquisition and investment strategy concentrated on income-producing assets.
When asked if the OPL 233 withdrawal is influenced by the need for funding on other projects, SacOil’s CEO is clear that the Company is financially sound and that this tactical move will simply enhance the Group’s ability to generate revenue and advance their new strategy. The exit from the specific assets also releases cash which the new management seems to be confident it can use to execute and accelerate on SacOil’s strategy of acquiring producing assets.
It is evident that SacOil’s focus has moved towards becoming cash generative and that delays to the Nigerian projects has been an influencing factor on their decision to exit OPL 233. In contrast, the Company managed to accelerate their operations in Egypt and have made considerable progress on their Lagia-based asset.
“There is no doubt about Nigeria's proven potential as a lucrative oil-producing region. We will continue to evaluate other low cost producing and development opportunities across the continent, including Nigeria. Our investment strategy has always been underpinned by strong relationships in the countries we operate, and we will continue to sustain our good relations with our Nigerian partners”, says Dr Kgogo.