Provisional Audited Results

SacOil Holdings Limited

(Incorporated in the Republic of South Africa)

(Registration number 1993/000460/06)

JSE share code: SCL AIM share code: SAC

ISIN: ZAE000127460

("SacOil" or "the Company" or together with its subsidiaries "the Group")

PROVISIONAL AUDITED RESULTS

for the year ended 29 February 2016

Overview

The Group continues to make steady progress in its goal to become a pan-African oil and gas company, despite significant headwinds in the industry and global economy. Key highlights for the year ended 29 February 2016 include:

· Completion of Phase 2 of the development plan at the Lagia Oil Field, Egypt

· Discovery of producible 24˚ API gravity oil in the Thebes formation for the Lagia Oil Field

· Reorganisation of the Group's interest in Block III, in the Democratic Republic of Congo

· Granting of a two-year extension to current exploration period of Block III

· Recovery of US$10 million previously associated with the OPL 233 performance bond

· Commencement of pre-feasibility studies on the Bioko Oil Terminal project

· Post-period, award of crude trading allocation in Nigeria

Dr Thabo Kgogo, Chief Executive Officer of SacOil, commented: "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 ('O&G') company with activities across the full industry value chain.

Our core priority for the year was the successful completion of Phase 2 of the development of the Lagia Oil Field in Egypt. We had set ourselves a target to achieve a peak production capability of 1 000 bbls/d by the end of the financial year. This was an ambitious target as we knew the development of this asset would be complex as a result of the heavy oil in place. Despite the challenges we encountered we were delighted to announce that we successfully proved the production capability of the asset in line with our stated time frame. Having demonstrated the field's capacity, we have since returned to production levels more suited to the current oil price environment.

We continue to make good progress with the implementation of our strategic plan. Late in 2015 we signed a Memorandum of Understanding with a consortium to conduct a detailed evaluation for the development of the Bioko Oil Terminal in Equatorial Guinea. The consortium tables a broad array of competencies, from engineering, procurement and construction through to international marketing and trading. Pre-feasibility studies of the project have commenced, the results of which aim to prove the commercial viability of the project and will determine the next steps with regards to SacOil's involvement. The studies are expected to be completed during the third quarter of the 2016 calendar year.

We recently made the difficult decision to withdraw our participation in the Mozambique pipeline development during the pre-feasibility stage of the project, due to certain changes introduced in the Joint Venture Agreement relating to the participants in the project, which impacted the equity stake attributable to SacOil. Accordingly, the Board made the decision not to proceed as a participant in the project. We wish the parties well in developing the project over the coming years.

We continue to expand the business into the midstream segment, with the securing of a 12-month contract for the purchase of crude oil grades from the Nigerian National Petroleum Corporation for onward sale. The first lifting of the crude oil is expected to take place in the middle of June 2016 and should contribute positive cash flows to the Group over the contract period. . 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.

With respect to the outstanding litigation matters previously reported on, the SacOil board and management team continue to defend the claims from Transcorp and Nigdel in relation to the Group's exit from OPL 281 and OPL 233, respectively. We remain committed to recovering all amounts owed by Transcorp and Nigdel and instituting the requisite counterclaims accordingly. Other litigation matters previously disclosed to shareholders are also still ongoing.

The SacOil board has now completed the evaluation of the findings of the previously documented forensic investigation and has implemented the recommendations provided in the report. The board has also completed the process of notifying regulatory authorities of the irregularities identified as it continues to resolve outstanding legacy issues inherited by the current management team.

The Group is owed R75.5 million by Encha Energy ("Encha") which became due and payable on 29 February 2016. This amount remains unpaid as at the date of this announcement. The Group has been engaging with Encha since the year end to recover the amount and is in the process of enforcing its claim to recover these funds.

We thank you, our shareholders, for your continued support of our vision. Although there remains much to be done to realise the full potential of our strategy, we expect to accelerate progress in the coming year by intensifying the SacOil team's efforts to secure cash generative assets to grow the business."

Operational review

The Lagia development programme was successfully completed under budget with no HSE incidents reported, resulting in the attainment of the targeted capability of 1 000bbl/d. We have since scaled back production to levels more suitable in the current oil price environment. Post-drilling analysis indicated that the discovery in the deeper Thebes formation is a lighter crude with higher API gravity of 24˚ API, when compared to the oil produced from the Nukhul formation in this field with an API gravity of 11 degrees API.

With the granting of a two-year extension to the current exploration period of Block III from 27 January 2016 to 26 January 2018, by the Minister of Hydrocarbons of the Democratic Republic of Congo ("DRC"), Total E&P RDC ("Total") as operator of Block III, has commenced with the acquisition of a 2D seismic survey. This extension sets the platform for the operator to acquire the seismic data, interpret the results and determine the associated prospectivity. This seismic acquisition programme is in fulfilment of the work programme obligations.

Activity on the Group's exploration assets was minimal during the year as the focus shifted to expending available cash resources on a cash generative asset.

FINANCE REVIEW

For the year ended 29 February 2016, the Group reported a profit of R39.6 million (2015: loss of R277.0 million), basic EPS of 1.64 cents (2015: basic loss per share of 8.54 cents) and headline EPS of 1.04 cents (2015: headline loss per share of 4.67 cents) as it continued to benefit from the weakening of the Rand which contributed R154.6 million (2015: R78.6 million) in foreign exchange gains on the Group's US Dollar denominated financial assets. Further contributing to this profit were the gain of R103.6 million achieved on the Reorganisation of the Group's holding in Block III and the non-recurrence of the one off write-downs of R420.2 million related to the restructuring of the Group's portfolio of assets in the prior year. The Group's foreign exchange gains and the gain on Reorganisation are included in other income.

The results of the Group also reflect the impact of a Lagia impairment charge of R76.5 million (2015: RNil) emanating from the decline in oil prices as at 29 February 2016, which affected the valuation of the Group's oil and gas properties by R56.8 million and other intangible assets by R19.7 million. The competent person report has confirmed that the 2P reserves at Lagia have risen from 6.2 million barrels to 6.9 million barrels. As such, the impairment charge is a reflection of the decline in oil prices, and is offset by additional foreign exchange gains totalling R61.5 million (2015: R8.7 million) on the translation of these assets included in other comprehensive income.

The delay in activities on Block III due to the civil unrest in the area and in obtaining an extension of the operating licence resulted in a further impairment of R26.1 million (2015: R23.8 million) of the contingent consideration receivable, as reported in the interim results, which reflects the deferral of its receipt by a year. These impairment charges are included under other operating costs.

Reorganisation of the holding in Block III ("Reorganisation")

Prior to the Reorganisation, Semliki SARL ("Semliki") had a direct 18.3% participating interest in Block III in the DRC alongside partners Total E&P RDC (66.7%) ("Total") and the DRC Government (15%). Semliki was 68% directly owned by RDK Mining Proprietary Limited ("RDK"), a wholly-owned subsidiary of SacOil, with the remaining 32% held by Divine Inspiration Group Proprietary Limited ("DIG").

During the year SacOil initiated a process to reorganise the holding of its indirect interest in Block III ("the Interest"). The transaction agreements implementing the Reorganisation were concluded on 29 February 2016. This resulted in the disposal of the Group's shareholding in Semliki for $1 (R16) and the incorporation of SacOil DRC SARL ("SacOil DRC"), in which RDK owns 100% of the issued shares. The effect of the Reorganisation is the transfer of the Group's share of assets and liabilities (including the Interest), previously owned in Semliki, to SacOil DRC, pursuant to various agreements with DIG. 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.

As part of the Reorganisation, DIG indemnified the Group of outstanding taxes relating to historical farm-outs of Block III by Semliki. This contributed to the gain of R103.6 million on the derecognition of current tax payable by the Group as further explained in note 9.

Revenue

The Group has continued to invest in the planned development activities at Lagia to achieve higher production levels. Production for the year was therefore affected by these development activities. Although the Group's revenue increased by 127% relative to the prior year, it remains minimal. Now that Phase 2 of the planned development activities has been completed we look forward to optimising the production from the field to establish a sustained level of production that will grow the revenue of the Group over the next financial year.

Other operating costs

The management of the Group's costs was a key priority during the year ended 29 February 2016. Excluding the impact of the impairment charges totalling R102.6 million (2015: R23.8 million) and the prior-year write-downs of R420.2 million highlighted above, the Group's cost base increased by 39% to R91.8 million (2015: R66.1 million). This increase is primarily attributable to the inclusion of a full year's operating costs relating to Lagia relative to only four months since acquisition in the prior year.

Investment income

During the financial year the Company announced the conclusion of a settlement agreement with EERNL. The revised terms of the historical loans advanced to EERNL no longer provide for interest on the outstanding loans. As such, investment income for the year decreased by 70%.

Exploration and evaluation ("E&E") assets

Developments in the industry led the Group to defer expenditure on exploration activities in an effort to prioritise focus on the Lagia Oil Field which generates cash for the Group. Consequently, there was minimal expenditure on the Group's E&E assets. The elimination of DIG's interest in Block III from the Group results pursuant to the Reorganisation resulted in a decrease in E&E assets by 32%.

Oil and gas ("O&G") properties

The Group expended R55.4 million on Phase 2 (2015: R7.3 million on Phase 1) of the Lagia development programme which improved the Group's production profile and increased O&G properties. Foreign exchange gains totalling R46.8 million (2015: R5.8 million) on translation of the US Dollar-based O&G assets also contributed to an increase in these assets. The impairment charge of R56.8 million outlined above and depletion charges of R2.3 million (2015: R0.3 million) off-set these increases.

Other financial assets (non-current and current)

The Group's other financial assets ("OFA") are primarily denominated in US Dollars. The continued weakening of the Rand contributed R213.4 million (2015: R52.6 million) in foreign exchange gains on the contingent consideration, loans due from EERNL and the Transcorp refund. Interest on the unwinding of the time value discount applied on initial recognition further increased OFA by R38.0 million (2015: R121.5 million).

The effect of the Reorganisation is that the Group now retains and reports on only its effective share of assets and liabilities relating to Block III. As such, R202.7 million of the contingent consideration attributable to DIG was derecognised on completion of the Reorganisation. The part repayments of R63.1 million (R14.8 million) by EERNL and Greenhills and the impairment charge of R26.1 million (2015: R23.8 million) further decreased OFA.

The net effect of these transactions on the Group's OFA is a decrease of R40.5 million (6%) year on year. The Group's OFA are disclosed in note 6.

Cash and cash equivalents

The Group's balances decreased by R122.4 million as a result of the capital expenditure of R55.4 million (2015: R7.3 million) relating to Lagia, business development expenditure of R13.2 million (2015: R18.6 million) and operating costs of R53.8 million (2015: R24.3 million).

In June 2015, the Group benefited from the part repayment of R63.1 million ($5 million) of the EERNL loan which was offset by the settlement of the Group's indebtedness to EERNL. The Company's subsidiary, SacOil 233 Nigeria Limited held this amount in its bank account on behalf of EERNL with respect to the cash collateral of $10 million which previously secured the OPL 233 performance bond. Upon the release of the cash collateral EERNL utilised these funds to part settle the loans owed to the Group.

Current tax payable

The tax indemnity provided by DIG and Semliki as part of the Reorganisation effectively eliminated R199.5 million in taxes payable. These taxes had historically been incurred by Semliki pursuant to a farm-out of Block III which solely benefited DIG.

Commitments

The Group's capital commitments have decreased by 41% following the completion of Phase 2 of the Lagia development plan.

GOING CONCERN

The Board has performed an assessment of the Group's operations relative to available cash resources and is confident that the Group is able to continue operating for the next 12 months. The Group's summarised provisional consolidated audited financial statements presented have been prepared on a going concern basis.

CHANGES IN DIRECTORATE

Mr Gontse Moseneke did not offer himself for re-election as a Non-executive director at the Annual General Meeting of the Company held on 1 October 2015. He subsequently retired as a director of the Company with effect from 1 October 2015.

LITIGATION

Litigation proceedings previously disclosed to shareholders are still ongoing. The Group continues to defend the claims made by Transcorp, Nigdel, Mr Joe Modibane and Mr Robin Vela, as previously disclosed.

OUTLOOK

We continue to make good progress with the implementation of our strategic plan. The challenges that exist in the sector are likely to continue over the next 12 months and will require us to continue to operate effectively at a lower oil price. As a result of our stable financial position, which is underpinned by a diverse portfolio with near term revenue generation potential and no debt, as well as the Board's strategy to diversify the Company's operations, SacOil remains in a strong position to see out this period and emerge stronger. Through an improved focus on Corporate Governance under the current management team combined with the support of its institutional shareholder register, SacOil is able to mitigate the risks and challenges that currently exist and will continue to look for opportunities to grow into a sustainable, pan-African integrated energy company.

ABOUT SACOIL

SacOil is a South African based independent African oil and gas company, dual-listed on the JSE and AIM. The Company has a diverse portfolio of assets spanning production in Egypt; exploration and appraisal in the Democratic Republic of Congo, Malawi and Botswana; and midstream and downstream operations. The company continues to evaluate industry opportunities throughout Africa as it seeks to establish itself as a leading, full-cycle pan-African oil and gas company.

SUMMARISED PROVISIONAL CONSOLIDATED AUDITED STATEMENT OF COMPREHENSIVE INCOME

SUMMARISED PROVISIONAL CONSOLIDATED AUDITED STATEMENT OF FINANCIAL POSITION

SUMMARISED PROVISIONAL CONSOLIDATED AUDITED STATEMENT OF CHANGES IN EQUITY

SUMMARISED PROVISIONAL CONSOLIDATED AUDITED STATEMENT OF CASH FLOWS

NOTES

1 BASIS OF PREPARATION

The summarised provisional consolidated audited financial statements of the Group for the year ended 29 February 2016 have been prepared in accordance with the Group's accounting policies, which comply with the recognition and measurement criteria of International Financial Reporting Standards, and the presentation and disclosure requirements of IAS 34 - Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the Listings Requirements of the JSE Limited for provisional reports and the Companies Act of South Africa (No. 71 of 2008, as amended). The accounting policies applied in the preparation of the results for the year ended 29 February 2016 are consistent with those adopted in the financial statements for the year ended 28 February 2015 except as noted below.

The Group has adopted the amendments to IFRS 2 - Share-based Payments which clarifies the definition of a "vesting condition". The vesting condition under the Group Share Option Scheme is for employees to remain in service.

The Group further adopted the amendment to IFRS 8 - Operating Segments. Disclosures required by this amendment are provided in note 3.

These summarised provisional consolidated audited financial statements have been prepared on a going concern basis.

All monetary information is presented in the functional currency of the Company, being South African Rand.

2 AUDITORS' AUDIT REPORT

The directors take full responsibility for the preparation of these summarised provisional consolidated audited financial statements. These summarised provisional consolidated audited financial statements for the year ended 29 February 2016 have been prepared under the supervision of the Chief Financial Officer, Mr Damain Matroos CA(SA). These summarised provisional consolidated audited financial statements, which have been derived from the audited consolidated annual financial statements for the year ended 29 February 2016 and with which they are consistent in all material respects, have been audited by Ernst & Young Inc. Their unmodified audit opinions on the consolidated financial statements and on the summarised provisional consolidated audited financial statements are available for inspection at the registered office of the Company. The auditor's report does not necessarily report on all the information contained in this report. Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditor's engagement, they should obtain a copy of the auditor's report together with the accompanying consolidated audited financial statements from the Company's registered office.

3 SEGMENTAL REPORTING

The Group operates in six geographical locations which form the basis of the information evaluated by its chief operating decision-maker. For management purposes the Group is organised and analysed by these locations. These locations are: South Africa, Egypt, Nigeria, DRC, Botswana and Malawi. Operations in South Africa relate to head office activities of the Group that include the general management, financing and administration of the Group.

Business segments

The operations of the Group comprise one class of business, being oil and gas exploration and production. The activities currently undertaken in Mozambique and Equatorial Guinea related to the Mozambican pipeline and the development of the Bioko Oil Terminal, respectively, are not significant at this stage and have not been separately disclosed. These activities therefore do not meet the recognition criteria for operating segments.

Revenue

The Group's reported revenue is generated from one customer, the Egyptian General Petroleum Corporation ("EGPC") with respect to oil sales. This revenue is attributed to the Egypt segment.

Taxation - Egypt

No income or deferred tax has been accrued by Mena as the Concession Agreement between the EGPC, the Ministry of Petroleum and Mena provides that the EGPC is responsible for the settlement of income tax on behalf of Mena, out of EGPC's share of petroleum produced. The Group has elected the net presentation approach in accounting for this deemed income tax. Under this approach Mena's revenue is not grossed up for income tax payable by EGPC on behalf of Mena. Consequently, no income or deferred tax is accrued.

The depletion charge for 2016 represents a full year of depletion of the oil and gas asset. The depletion charge for 2015 represents the portion since the acquisition of the oil and gas properties in October 2014.

Details pertaining to the impairment charge are provided in note 10

1 The last instalment of R2.0 million of the deferred consideration, due in October 2016, has been reclassified as short term. The present value of this future receivable is R1.9 million.

2 The amount due represents Encha Energy's indebtedness to SacOil Holdings Limited under the Acknowledgement of Debt Agreement concluded between the two parties on 28 February 2013. The financial asset recognised at 29 February 2016 is R75.5 million (2015: R68.6 million) representing the present value of this receivable. Interest amounting to R6.9 million (2015: R6.3 million) arising from the unwinding of the discount applied to the future receivable on initial recognition, has been included in investment income. The receivable was due on 29 February 2016 and has been classified as short term. Refer to note 15 for further details on this loan.

3 At 29 February 2016 the long-term loan receivable of R57.5 million (2015: R37.7 million) represents the present value of future amounts (R80.2 million (2015: R57.9 million) ($5 million)) due from EERNL, to be recovered from its share of OML 113's cash flows expected in 2019 and 2020. Interest amounting to R4.4 million (2015: RNil million) arising from the unwinding of the discount applied to the future receivable on initial recognition has been included in investment income in profit or loss. Foreign exchange gains totalling R15.3 million (2015: R13.0 million) have been recognised in other income on profit or loss in relation to this long-term loan.

During the year EERNL repaid $5.0 million of the short-term loan from its share of the cash collateral. The remainder of the loan is expected to be recovered within a year from recoveries from Nigdel pursuant to the termination of EERNL's and SacOil's participation in OPL 233. The recovery from Nigdel of R173.6 million (2015: R125.4 million) has been provided for pending the finalisation of arbitration proceedings. The increase in the loan and the impairment provision of R48.2 million is attributable to foreign exchange losses as the amount provided for is denominated in US Dollars.

SacOil agreed to an interest freeze on the outstanding loans from 30 November 2014. The loans are denominated in US Dollars.

4 The Farm-In Agreement between Semliki and Total provides for a cash payment by Total to Semliki upon the occurrence of certain future events ("contingent consideration"). As there is a contractual right to receive cash from Total, Semliki has historically recognised a financial asset in its statement of financial position. The asset was initially recognised at its fair value. Subsequently, the financial asset meets the definition of a loan and receivable, and is accounted for at amortised cost taking into account interest revenue and currency movements. At each reporting date SacOil revises its estimate of receipts from the financial asset in line with the requirements of IAS 39. Included in the statement of comprehensive income at 29 February 2016 is an impairment loss of R26.1 million (2015: R23.8 million) representing the write-down of future expected cash flows from the contingent consideration for the Block III farm-outs in March 2011 and March 2012. The write-down, which is reflective of the time value of money, arose as a result of the delays in activities on Block III due to civil unrest in the area and in obtaining an extension to the operating licence. The extension has, however, now been granted. Consequently, this defers the receipt of the contingent consideration by a year. A deferred tax charge amounting to R36.6 million (2015: R6.5 million) was recognised in the statement of comprehensive income. At 29 February 2016 SacOil's rights to the contingent consideration, previously held through Semliki, were transferred to SacOil DRC SARL in line with the reorganisation described in note 9. The assumptions used to measure the contingent consideration are detailed below:

Should the probability factors applied to the valuation model be increased or decreased by 10%, all other variables held constant, post-tax profit would have been R45.5 million (2015: R55.2 million) higher and R45.5 million (2015: R55.2) million lower, respectively.

5 The loan comprised the taxes recoverable from DIG with respect to the capital gains tax payable by Semliki on the farm-out of the 6.67% interest in Block III in March 2012, which transaction was initiated by and solely benefited DIG. The loan was interest free, unsecured, has no fixed repayment terms and was denominated in US Dollars. On 29 February 2016 the Group completed the restructuring of its holding in Block III as detailed in note 9, which resulted in the elimination of its obligations relating to these foreign taxes. Consequently, the asset previously recognised to reflect the recovery of taxes payable by the Group from DIG has been derecognised.

6 The Transcorp Refund represents amounts recoverable from Transcorp under the provisions of the Farm-in Agreement (""FIA""), following the termination of SacOil 281's participation in OPL 281. SacOil paid R44.1 million ($6.25 million) on behalf of its subsidiary SacOil 281 and R43.6 million ($6.25 million) on behalf of EER 233 Nigeria Limited for a signature bonus and other costs relating to OPL 281, which contractually will be refunded by Transcorp with interest, on the signature bonus component, at 20% per annum. The FIA provides for the accrual of interest between the date of payment of these amounts and the date of exit from the asset, being 3 December 2014. As such there is no interest accrued in the current year. Under the terms of the settlement agreement concluded with EERNL in 2015 EERNL ceded its share of the refund as settlement of the OPL 281 loan owed to SacOil.

At 29 February 2016 the Company receivable of R152.9 million (2015: R110. 4 million) with respect to the above transactions represents SacOil's entitlement to EERNL's share of the Transcorp refund. The Group's receivable of R305.8 million (2015: R220.8 million) further includes SacOil 281's share of the refund. Pursuant to the exit SacOil will not have future commitments and obligations associated with the appraisal of OPL 281.

The fair value of other financial assets is given in note 11.

The Group's other intangible assets arose from the acquisition of Mena in the prior year. Mena owns the Lagia Oil Field. The Petroleum Concession Agreement gives Mena the right to drill for petroleum reserves.

Details pertaining to the impairment charge are provided in note 10.

9 REORGANISATION OF INTEREST IN BLOCK III

2016

Background

Prior to the Reorganisation, Semliki had a direct 18.3% participating interest in Block III in the DRC alongside partners Total E&P RDC (66.7%) ("Total") and the DRC Government (15%). Semliki was 68% directly owned by RDK Mining Proprietary Limited (""RDK"") with the remaining 32% held by Divine Inspiration Group Proprietary Limited (""DIG""). RDK is a wholly-owned subsidiary of SacOil.

Reorganisation

During the year SacOil initiated a process to reorganise the holding of its indirect interest in Block III (""the Interest""). The transaction agreements implementing the Reorganisation were concluded on 29 February 2016. This resulted in the disposal of the Group's shareholding in Semliki SARL (""Semliki"") for $1 (R16) and the incorporation of SacOil DRC SARL (""SacOil DRC""), in which RDK owns 100% of the issued shares. The effect of the Reorganisation is the transfer of the Group's share of assets and liabilities (including the Interest), previously owned in Semliki, to SacOil DRC, pursuant to various agreements with DIG. This Reorganisation now enables SacOil to represent its interest in Block III directly and to have a direct line of sight of the activities of the block.

The following table summarises the impact of the Reorganisation on the results of the Group measured at the carrying amount of the assets and liabilities disposed or transferred.

1 DIG has indemnified the Group of tax obligations pertaining to the farm-out of a portion of Block III to Total in March 2011 and March 2012 which has resulted in the derecognition of current tax payable. Consequently, the asset previously recognised to reflect the recovery of taxes payable by the Group from DIG, under this indemnity, has simultaneously been derecognised.

2 Amount less than R1 000.

The gain on Reorganisation of R103.6 million has been recognised in "other income" in profit or loss.

The Group's oil and gas properties and other intangible assets form part of a single cash-generating unit ("CGU"). This CGU falls within the Egypt reportable segment (note 3). The trigger for impairment testing for the current year was the decline in oil prices, which significantly affected the revenue of the Group. This decline occurred subsequent to the acquisition of Mena in October 2014.

In assessing whether an impairment is required the carrying value of the CGU is compared with its recoverable amount. The recoverable amount is the higher of the CGU's fair value less costs to sell and value in use. Given the nature of the Group's activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, unless indicated otherwise, the recoverable amount used in assessing the impairment charges described above is value in use. The Group generally estimates value in use using a discounted cash flow model.

Key assumptions relating to this valuation include the discount rate and cash flows used to determine the value in use. Future cash flows are estimated based on financial budgets approved by management covering a three-year period and are extrapolated over the useful life of the assets to reflect the long-term plans for the Group using the estimated growth rate for the specific business. The future cash flows were discounted to their present values using a pre-tax discount rate of 10%. This discount rate is derived from the Group's post-tax weighted average cost of capital ("WACC"), with appropriate adjustments made to reflect the risks specific to the CGU and to determine the pre-tax rate. The WACC takes into account targeted debt and equity, weighted 50% each. The cost of equity is derived from the expected return on investment by the Group's investors. The cost of debt is based on the interest rate at which the Group would be able to borrow for future expenditure. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data.

Other key assumptions used:

Crude oil prices: Forecast commodity prices are based on management's estimates and available market data.

Production rates: Based on management's best estimate of production profiles.

Growth rate estimates: Rates are based on published industry research.

Gross margins: Gross margins are based on average values achieved in since the acquisition of the assets.

Management has considered the sensitivity of the value-in-use calculation to various key assumptions such as crude oil prices and production rates. These sensitivities have been taken into consideration in determining the required impairments. A 10% change in any of these variables could change the recoverable amount by R22.1 million to R113.8 million.

1 In terms of SacOil's accounting policies and IAS 39 - Financial Instruments: Recognition and Measurement ("IAS 39") these financial instruments are carried at amortised cost and not at fair value, given that SacOil intends to collect the cash flows from these instruments when they fall due over the life of the instrument. Changes in market discount rates which affect fair value would therefore not impact the valuation of these financial instruments and are not considered to be objective evidence of impairment for items carried at amortised cost per IAS 39 as this does not impact the timing or amount of expected future cash flows.

The Group's own non-performance risk as at 29 February 2016 was assessed to be insignificant.

Fair value hierarchy:

The following table presents the Group's assets not measured at fair value in the statement of financial position, but for which the fair value is disclosed above. The different levels have been defined as follows:

Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2 - Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3 - Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data

There were no transfers between any levels during the year.

1 Performance bond

The performance bond issued by Ecobank in respect of the OPL 233 exploration activities expired on 2 May 2015.

2 Cost carry arrangement

The Farm-In Agreement between Semliki and Total provides for a carry of costs by Total on behalf of Semliki on Block III. Semliki's rights under this contract were subsequently assigned to SacOil DRC as part of the Reorganisation concluded on 29 February 2016 (see note 9). Total will be entitled to recover these costs, being SacOil DRC's share of the production costs on Block III, plus interest, from future oil revenues. The contingency becomes probable when production of oil commences and will be raised in full at that point. At 29 February 2016 Total has incurred R95.8 million (28 February 2015: R96.6 million) of costs on behalf of SacOil DRC. Should this liability be recognised a corresponding increase in assets will be recognised, which, together with existing exploration and evaluation assets, will be recognised as development infrastructure assets.

14 DIVIDENDS

The Board has resolved not to declare any dividends to shareholders for the period under review.

15 EVENTS AFTER THE REPORTING PERIOD

The following events occurred after the reporting period:

During April 2016, SacOil and Energy Equity Resources ("EER") signed a Memorandum of Understanding to explore oil and gas opportunities in the Republic of Nigeria. Pursuant to this initiative, SacOil and EER were awarded a 12-month contract for the purchase of crude oil grades by the Nigerian National Petroleum Corporation for onward sale. The first lifting of the crude oil is expected to take place in the middle of June 2016.

The receivable from Encha Energy ("Encha"), disclosed in note 6, became due and payable on 29 February 2016. This amount remains unpaid as at the date of this report. Under the terms of the Acknowledgement of Debt Agreement concluded with Encha, interest calculated at the prime rate plus 3% shall accrue on the outstanding balance. Notwithstanding the date on which the outstanding balance became due and payable, such interest will be calculated from 28 February 2013 to the date of actual payment. The Group is in discussions to recover these funds.

On behalf of the Board

Tito Mboweni Dr Thabo Kgogo Damain Matroos

Chairman Chief Executive Officer Chief Financial Officer

Johannesburg

31 May 2016

CORPORATE INFORMATION

Registered office and physical address: 1st Floor, 12 Culross Road, Bryanston, 2021

Postal address: PostNet Suite 211, Private Bag X75, Bryanston, 2021

Contact details: Tel: +27 (0) 10 591 2260; Fax: +27 (0) 10 591 2268

E mail: [email protected]

Website: www.sacoilholdings.com

Directors: Dr Thabo Kgogo (Chief Executive Officer), Marius Damain Matroos (Chief Financial Officer), Bradley Cerff (Executive Director), Tito Mboweni (Chairman)*, Mzuvukile Maqetuka*, Stephanus Muller*, Vusi Pikoli*, Ignatius Sehoole**, Danladi Verheijen**, Titilola Akinleye**

* Independent non-executive directors ** Non-executive directors

Advisers:

Company Secretary: Fusion Corporate Secretarial Services (Proprietary) Limited

Transfer Secretaries South Africa: Link Market Services South Africa (Proprietary) Limited

Transfer Secretaries United Kingdom: Computershare Investor Services (Jersey) Limited

Corporate Legal Advisers: Norton Rose Fullbright South Africa

Auditors: Ernst & Young Inc

JSE Sponsor: PSG Capital Proprietary Limited

Investor Relations United Kingdom: Buchanan Communications Limited

Investor Relations South Africa: Hill+Knowlton Strategies South Africa Proprietary Limited

AIM Nominated Adviser: finnCap Limited