SacOil CEO Looks at Mozambique, Egypt in Portfolio Balancing

Source: Bloomberg 11/20/2014, Location: Africa

SacOil Holding Ltd. (SCL) wants to diversify its assets by building a natural-gas pipeline in Mozambique and developing Egyptian oil wells, according to CEO Thabo Kgogo.

“We are in discussions with a couple of international engineering companies that would like to participate” in a project to build a gas processing plant in Mozambique and a line that would bring the fuel 600 kilometers (373 miles) to South Africa, Kgogo, head of the Johannesburg-based oil and gas company, said in a telephone interview yesterday. SacOil hopes to start feasibility studies in the first quarter of next year.

The Johannesburg-based company this year started a program to broaden assets outside of exploration blocks it holds in Malawi, Botswana and Democratic Republic of Congo. SacOil acquired the Lagia oil field on Egypt’s Sinai peninsula. Along with South Africa’s Public Investment Corp. Ltd. and Mozambique’s Instituto De Gestao Das Participaçoes Do Estado, it also entered into a memorandum of understanding over the gas pipeline and plant.

The waters off Mozambique are the site of the world’s largest natural-gas discovery in a decade. SacOil may first finish the processing plant to service the domestic market as the pipeline is under construction, according to Kgogo.

“We used to have a lot of exploration opportunities or blocks, so we are re-balancing that portfolio by acquiring development-to-production assets,” Kgogo said. “Then you can generate cash to fund your exploration assets.”

Drilling Wells
SacOil bought the Egypt assets on Sept. 9 from Mena International Petroleum Co. Ltd. in a deal including $10 million in shares and settling as much as $4.1 million of liabilities.

The company can start hydraulic fracturing on current wells this year and drilling additional wells in early 2015 “with the intention of ramping up production to about 1,000 barrels a day” of oil, said Kgogo, who expects the oil price to stabilize at $90 a barrel.

The price of Brent crude has dropped more than 30 percent this year and traded at $78.50 a barrel at 1:52 p.m. London time. Sacoil shares rose 2 South African cents, or 4.6 percent, to 46 cents as of 4:10 p.m. in Johannesburg.


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