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Solo Oil announces investment update ahead of General Meeting
19 May 2017
AIM-listed Solo Oil, the natural resources investment company focused on acquiring and developing a diverse global non-operated portfolio of strategic oil and gas assets has announced an investment update ahead of a General Meeting called for 8 June 2017.
The meeting has been called to seek Shareholder approval for (i) an update of the Company's Investing Policy in line with the clarity prescribed by the current market guidelines, and (ii) authority for the allotment of shares necessary to make the second stage investment into Helium One Limited and to raise further capital as appropriate to pursue investments potentially available in the current market.
On 22 March 2017 Solo announced an agreement to acquire a 10% interest in Helium One, the pure play helium explorer in Tanzania, with an additional call option to acquire a further 10% interest within 90 days. The first investment of 10% has been completed and in the light of market conditions the parties have reassessed the terms of the Second Investment. The Second Investment is intended to close on or before 30 June 2017 with a long stop date of 31 July 2017 to provide for any delays in certain regulatory approvals in Tanzania.
The Second Investment exercise price has been reduced from £4.0 million (£2.0 million in cash and £2.0 million by the issue to Helium One of ordinary shares in Solo) to £3.0 million in cash. Upon exercising the Second Investment Helium One will grant to the Company the further right to subscribe for ¼ of a share in Helium One for every one share subscribed for under the Call Option exercisable for a period expiring 31 December 2017 with an exercise price of US$0.40 per share.
As announced on 9 May 2017, Helium One has completed the acquisition of an airborne gravity and magnetics survey and has approved the continuation of the soil and groundwater sampling surveys, following the successful results of the first phase sampling. Work is progressing on track for the 2018 drilling of the Rukwa project area, where there are independently certified most likely prospective gross in place helium volume of approximately 99 billion cubic feet ("bcf"). Current global Helium demand is approximately 6 bcf, therefore the scale of this resource makes the Rukwa project of strategic global importance to the future supply for Helium over the coming decades. With limited new Helium supply coming on stream and the shut down of the US Federal helium reserve in 2021, Helium One is well placed to potentially become a significant player in the global Helium market.
Ruvuma PSC, Tanzania
Following the drilling and successful testing of the Ntorya-2 appraisal well in the onshore Ruvuma Petroleum Sharing Contract ('PSC') area in Tanzania the gas associated with the Ntorya appraisal area has been substantially increased to a most likely discovered gross gas in place of 466 bcf. Based on this, a 25-year development license is being sought from the Tanzanian authorities and Solo plans to seek a partner for its future involvement in the development so as to fund the Solo share of the development costs.
Solo owns a 25% non-operating interest in the Ruvuma PSC, and the Ntorya-1 and Ntorya-2 wells, which are operated by Aminex.
Horse Hill Discovery, UK
As previously announced on 4 April 2017, an application for long term production testing and further appraisal drilling was submitted to Surrey County Council in October 2016, and is now scheduled to be decided at the Council's planning committee meeting in July 2017. Solo continues to anticipate that these operations will therefore commence in the second half of 2017 upon grant of the necessary remaining regulatory permissions.
The Horse Hill-1 well ('HH-1') Kimmeridge Limestone and Portland Sandstone conventional oil discovery is located within onshore exploration Licence PEDL137, on the northern side of the Weald Basin, approx. 3 kms north of Gatwick Airport. As previously reported in February and March 2016, two naturally-fractured limestone members within the Kimmeridge section, known as KL3 and KL4, flowed dry, 40 degree API oil, at an aggregate stabilised natural flow rate of 1,365 barrels per day ("bopd") with no indication of depletion. The overlying Portland flowed dry, 35-37 degree API gravity crude at a stable pumped rate of 323 bopd. The Portland was produced at the rod-pump's maximum achievable rate and thus flow was constrained by the pump's mechanical capacity.
Licence PEDL137 is operated by Horse Hill Developments Limited ('HHDL') which holds a 65% interest and is the licence's operator. Solo has a 10% ownership of HHDL which represents a 6.5% working interest in HH-1 and PEDL137.
Neil Ritson, Solo's Chairman commented:
'Solo's original Tanzanian gas portfolio is maturing and we are reviewing our various options with regards to monetising a portion of the Ruvuma PSC during the development of the Ntorya gas condensate discovery in order to fund future participation in the licence and in doing so, extract maximum value on behalf of our shareholders.
Ruvuma is the model case study for Solo's investment strategy in terms of building a material position in an exciting early stage project and then leveraging our technical capabilities to progress the asset to a monetisation point. We are hoping to replicate this model with the exciting opportunity with Helium One and wish to accumulate a material interest now at an attractive pricing point. We see very significant upside potential from the Helium One investment and are pleased to have renegotiated the call option on more favourable terms and hope shareholders share our excitement for this unique investment opportunity.
The balance of this year is likely to also present several further investment opportunities as traditional hydrocarbon markets stabilise and additional international assets become available at favourable valuations.'
Source: Solo Oil