SACOIL

Financial Mail - Investors Monthly - - Opening Bell -

Share price: 33c JSE code: SCL

HOLD PRE­DIC­TIONS ON THE MEDIUM- term fu­ture of the oil price range greatly, from as low as US$20/bar­rel to as much as $60/bar­rel.

Even pes­simists fore­cast­ing $20/bar­rel do not be­lieve that is sus­tain­able for long as there will be no in­vest­ment in fu­ture pro­duc­tion.

This is a point in the cy­cle when big­ger, blue-chip com­pa­nies of­fer com­pelling value. How­ever, there’s still a case for small com­pa­nies that are able to gen­er­ate cash to with­stand the down­turn.

SacOil has one on­shore oil field in pro­duc­tion, at La­gia in Egypt, which is funded for pro­duc­tion of 1,000 bar­rels/day, and it has sev­eral other prospects in Africa. The most ex­cit­ing could be its par­tic­i­pa­tion in a joint ven­ture with the Pub­lic In­vest­ment Corp and Igepe, look­ing at bring­ing gas to SA from the Rovuma basin. It is also look­ing around for other prospects in Africa.

SacOil’s board in­cludes ex­ec­u­tives from the lo­cal busi­ness scene — such as for­mer Re­serve Bank gov­er­nor Tito Mboweni as chair­man, and pro­fes­sional ser­vices ex­ec­u­tive Ig­natius Se­hoole as a nonex­ec­u­tive di­rec­tor. CEO Thabo Kgogo and op­er­a­tions ex­ec­u­tive Bradley Cerff are from PetroSA, and they en­gage ac­tively with me­dia and in­vestors.

SacOil faces other risks be­sides the tim­ing of an oil price re­cov­ery. There’s lit­i­ga­tion to re­cover funds in Nige­ria. It re­mains to be seen whether SacOil can de­liver La­gia and make a profit from it. If it can, it should do well when oil prices re­cover.

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