Big picture - Why invest in Solo Oil PLC
Solo Oil PLC Snapshot
The Company's Investing Policy is to acquire a diverse portfolio of direct and indirect interests in exploration, development and production oil and gas assets which are based in the Americas, Europe or Africa. Both on-shore and off-shore interests will be considered. The intention is to acquire a widely distributed mix of oil and gas development and production assets.
The Company may invest by way of outright acquisition or by the acquisition of assets, including the intellectual property, of a relevant business, partnerships or joint venture arrangements. Such investments may result in the Company acquiring the whole or part of a company or project (which in the case of an investment in a company may be private or listed on a stock exchange, and which may be pre-revenue), and such investments may constitute a minority stake in the company or project in question. The Company’s investments may take the form of equity, joint venture debt, convertible instruments, licence rights, or other financial instruments as the Directors deem appropriate.
The Company will be both an active and a passive investor. The Company intends to be a long-term investor and the Directors will place no minimum or maximum limit on the length of time that any investment may be held.
There is no limit on the number of projects into which the Company may invest, nor the proportion of the Company’s gross assets that any investment may represent at any time and the Company will consider possible opportunities anywhere in the world.
All of the Company’s assets will be held in its own name, or through wholly owned subsidiaries.
Solo has acquired a 6.5% interest in the Kiliwani North Development Licence (KNDL) which contains the Kiliwani North 1 (KN-1) well which is expected to produce at an approximate rate of 20 million cubic feet per day (equivalent to more than 3,000 barrels of oil per day) in first half 2015.
Independently verified gross in-place unrisked mean gas resources of the well, computed by Isis Petroleum Consultants Pty Ltd, are estimated as 45 billion cubic feet. Construction of the 2 kilometre long pipeline from KN-1 to the new Songo Songo gas processing plant has been completed in February 2015.
The Songo Songo gas processing plant is connected with the newly constructed 36-inch gas pipeline from Mtwara in the south of Tanzania to Dar es Salaam, the national capital, in the north, and this provides an immediate route to monetise the Kiliwani North gas production.
Ndovu (Aminex’s nominated joint operator of KNDL together with the Tanzanian Petroleum Development Corporation) is in advanced negotiations for a gas sales agreement (GSA) with the Tanzanian authorities and these negotiations are expected to be satisfactorily concluded in 2015 with first commercial gas production from the field starting later in the year.
Solo also holds the option to acquire a further 6.5% of the KNDL and expects to complete this additional acquisition in 2015 once the GSA has been executed.
In May 2015, a new Competent Person's Report (CPR), provided by independent consultant Senergy, defined 44bcf of gas at the Kiliwani North Development Licence; some 28bcf of booked as best estimate (2C) contingent resources.
Upon the signing of a Gas Sales Agreement ("GSA") in the KNDL, which is expected prior to gas delivery, the Kiliwani North-1 resources are expected to be upgraded to a reserves category.
Additional information concerning Kiliwani can be found at the company's website: www.aminex-plc.com
The Ruvuma PSA originally covers 12,360 square kilometres in the south-east of Tanzania of which roughly 80% is onshore and 20% offshore when first granted in October 2005.
The Ruvuma Basin PSA includes two specific, adjoining licence areas, known as Lindi and Mtwara. Following the first exploration period and an extension 50% of the area was relinquished and the remaining PSA covers 6,079 square kilometres.
Prior to the award of the current PSA 1153 kilometres of 2D seismic had been acquired in the area of the PSC between 1981 and 2002. No wells had been drilling within the boundaries of the PSA, but a well at Lukeledi-1 to the north had been drilled by Texaco in 1992 and the Mnazi Bay-1 well to the southeast had been drilled by Agip in 1982. Following award of the PSA Ndovu Resources, a subsidiary of Aminex, acquired 370 kilometres of offshore seismic in the Lindi Block and a further 430 kilometres of 2D seismic onshore in the Lindi and Mtwara Blocks.
The First test
The first well under the Ruvuma PSA was drilled in 2010 on the Likonde prospect. Likonde-1 is located in the Lindi Block and encountered thick sands with hydrocarbon shows. The well was drilled to a total depth of 3,647 metres and results of drilling, wireline logs and side-wall coring showed that the well intersected two sandstone intervals of over 250 metres (820 feet) combined thickness with evidence of residual oil and gas. Drilling had to be terminated in the deepest objectives due to the high rate influx of gas.
Based on the encouraging results of the Likonde-1 well the available 2D seismic was reprocessed and reinterpreted to select the location for a second exploration well, within the Mtwara Block. The chosen location, Ntorya-1, was intended to target the updip extent of the sands encountered in the Likonde-1 well.
On 6 October 2011, prior to the drilling of Ntoya-1, Solo announced that it has increased its stake in the Ruvuma Basin PSA from 12.5% to 18.75% by assuming the additional obligations associated with the additional interest relinquished by Tullow Oil who reduced their over holding from 50 to 25%.
Ntorya-1 was spudded on 22 December 2011 and intersected a gross 25 metre section of Mid-Cretaceous sandstones with gas. The upper 3.5 metres of the gas bearing zone were tested at a maximum rate of 20.1 mmscfd with 139 barrels oil per day of 53 degree API condensate through a 1” choke. The flow rate was considered to be of potential commercial interest and well has been suspended.
After intersecting the primary target, but prior to deepening to the eventual discovery level in the Ntorya-1 well Tullow Oil elected to transfer their remaining 25% interest to the partners, Ndovu and Solo in proportion to their existing interests in return for the assignees accepting future obligations in the second exploration period. As a result Solo increased its interest in the Ntorya-1 discovery and the Ruvuma Basin PSA to 25%.
The Ntorya-1 discovery is now covered by an appraisal licence to carry out a two-year programme of additional infill seismic and further drilling. Elsewhere in the PSA an additional seismic programme and additional exploration wells are planned to follow-up the success of the first two wells.
In 2013 Solo and Aminex agreed to conduct a joint farm-out of up to 50% of their mutual interests. Expressions of interest were received from a number of parties, however, no final agreement was reached and the partners agreed to proceed to acquiring additional seismic data, especially over the Ntorya discovery, in order to better define the resource potential prior to reoffering the area for potential farm-out in 2014. The 1st Extension period drilling commitments be deferred in to the 2nd Extension period and the joint venture has until late 2016 to complete the commitments of both exploration periods; namely the drilling of two wells in each of the Lindi and Mtwara licence areas.
Construction of the Chinese financed 36” gas pipeline from Mtwara to Dar es Salaam has been completed at end of 2014. Due to its close proximity of the pipeline to the Ntorya/Likonde area this provides an early route to commercialize gas discovered in the Ruvuma PSC. The Ruvuma PSC predominantly covers the onshore extension of the highly prolific basin in which multiple giant gas fields have been discovered offshore in both Tanzania and Mozambique during recent years.
On 3rd of February 2014 the company announced that an Addendum to the Ruvuma Production Sharing Agreement has been signed with the Minister of Energy and Mines for the Ruvuma onshore Petroleum Sharing Agreement ("PSA") in Tanzania. The Addendum allows for the remaining obligations under the First Extension Period to be completed in the Second Extension Period. The amended agreement requires that four wells are drilled by the end of 2016.
In March 2014, the company was informed by the operator that a programme of seismic data, required to assist in the selection of future drilling locations at the onshore Ntorya gas-condensate discovery.
The programme covers up to 250 Kilometres of full-fold 2D seismic on the Ntorya Appraisal Licence and it was tied to the Likonde-1 well in the adjacent Lindi Licence of the Ruvuma Petroleum Sharing Contract ("PSC"). This new seismic data aimed to enhance the value of the original Ntorya discovery and optimise the location of future production wells.
The Ntorya-1 well was tested over an initial 3.5 metre sand interval at a rate 20.1 million cubic feet per day (equivalent to 3,350 barrels of oil per day), with an estimated additional 140 barrels per day of 48 degrees API condensate. Unrisked contingent in place gas resources of 1.1 trillion cubic feet have been estimated for Ntorya, of which 178 billion cubic feet are considered discovered by the Ntorya-1 well.
The Ruvuma PSC covers the onshore extension of the highly prolific basin in which multiple giant gas fields have been discovered offshore in both Tanzania and Mozambique during recent years. The presence of condensate represents a further positive aspect of the onshore play, since liquid hydrocarbons add considerable further commercial value and suggest the presence of a potential oil play; which has yet to be discovered.
The 2D seismic acquisition to appraise up-dip portion of the Ntorya-1 discovery was completed in 2014 and the newest interpretation has shown that in addition to the previously announced target for an appraisal well in the Ntorya-Likonde appraisal area where 2.3 trillion cubic feet ("tcf") mean gas initially in place ("GIIP") was estimated, there is a further 900 billion cubic feet ("bcf") of gas in the Namisange prospect to the west. An appraisal well is planned for 2015.
In May 2015, a Competent Person's Report (CPR), provided by independent consultant Senergy, identified a potential 4.7 trillion cubic feet (tcf) of gas within the Ruvuma project. In addition, 153 billion cubic feet (bcf) of gas in place for the Ntorya 1 discovery; some 70bcf of booked as best estimate (2C) contingent resources. The CPR also upgraded the four main leads (Ntorya Updip, Namisange, Likonde Updip, Sudi), considered "drillable targets" and accounted for three trillion cubic fee (tcf) of gas in place.
According to Senergy the basin remains significantly underexplored according to international standards with further potential in various plays.
Further appraisal of Ntorya-1 and agreement to a development plan may also allow resources from that discovery to progress to reserves over time.
Additional information concerning Ruvuma can be found at the company's website: www.aminex-plc.com
In February 2014 the company announced that it had entered into a share acquisition agreement with Horse Hill Development Limited (HHDL), a special purpose company that though an exclusive farm-in agreement with Magellan Petroleum holds the rights to a 65% participating interest and operatorship, in licence PEDL137 onshore in the UK Weald Basin.
Solo acquired a 10% interest in HHDL, which is equivalent to a 6.5% interest in the Horse Hill prospect and in PEDL137. The prospect itself lies about 3 kilometres from Gatwick Airport and covers an area of up to 16 square kilometres in the south-west of PEDL 137. The prospect is a seismically defined tilted horst, similar to the Palmers Wood oil field, which lies only 20 kilometres to the north-east. The ESSO Collendean Farm-1 well, in the north-eastern edge of the Horse Hill Wood prospect found good oil shows at various Jurassic levels, confirms reservoir presence with porosity of up to 27% and a net to gross ratio of 0.95, with an expected oil recovery rate in the region of 30%. Recent seismic interpretation has shown that the Collendean Farm-1 well was drilled off structure on the downthrown side of the bounding fault and outside closure.
The Horse Hill Prospect could contain up to an estimated 671 million stock barrels (mmstb) oil in place, the majority in the Lower Portland sandstone which alone has an estimated upside oil in place potential of 284 mmstb. The reservoirs are sealed by the Purbeck anhydrite and calcareous mudstones. Potential probably also exists in the Corallian sands sealed by the overlying Kimmeridge Clay. Estimated total mean recoverable prospective resources of oil for the Portland sandstone, Corallian sandstone and Great Oolite limestone are 87 mmstb.
Importantly, the Horse Hill Prospect is considered to have additional prospectivity of 456 billion cubic feet (bcf) gas in place in the proposed Triassic gas play. The Triassic sandstone is the expected reservoir with an anticipated porosity of in the order of 18%, net: gross of 0.58 and recovery factor of up to 70%. The stacked play potential of this prospect is, therefore, considered substantial.
The well was spud in September 2014 and successfully tested. In October 2014, the company announced the Portland Oil Discovery in the Jurassic with a preliminary most likely estimate of 3.1 million barrels of oil. Further testing suggested a further most likely unrisked undiscovered 16.8 million barrels of oil in a separate lower sand. In December 2014, the calculated estimates of the discovered oil have increased to a current likely OIIP of 8.2 million barrels of oil. Work is underway to conduct flow test from the HH-1 Upper Portland conventional oil pool in order to assess the recoverable volume of oil. The recent well analysis conducted by UKOG and Nutech identified, in addition to the previously reported 102 feet of Portland sandstone gross oil pay, a further 407 feet of potential net oil pay exists within the Kimmeridge, Oxfordian and Lias sections.
On 8th April, US-based Nutech estimated that the Horse Hill-1 ("HH-1") well indicates a total oil in place ("OIP") of 158 million barrels of oil ("mmbo") per square mile, excluding the previously reported Upper Portland Sandstone oil discovery. Nutech's report states that this OIP lies within a 653 feet aggregate net pay section, primarily within three argillaceous limestones and interbedded mudstones of the Kimmeridge, and additionally in the mudstones of the Oxford and Lias sections. Approximately 72% of the OIP, or 114 mmbo, lies within the Upper Jurassic Kimmeridge interbedded limestone and mudstone sequence. In order to establish estimates of total OIP within the 55 square mile licence area further analysis work is ongoing under the contracted alliance between Nutech, UKOG and Solo. The results of the estimated OIP within the licence will be reported when completed. In May 2015, the Company has been informed by Horse Hill Developments Ltd ("HHDL") that the exploration stage of the Horse Hill ("HH") PEDL137 licence, in which the Company has a 6.5% interest, has been extended for a further year (to 30 September 2016) by the Oil & Gas Authority ("OGA") (formerly the Department of Energy and Climate Change).
An independent study of the Portland Sandstone reservoir has been conducted for UKOG by Xodus Group ("Xodus") an international energy consultancy based in the UK. The results, published in May 2015, show that the Upper Portland Sandstone conventional reservoir contains a "Best Estimate" (P50) gross STOIIP of 21.0 million barrels ("mmbbls") entirely within PEDL137 and encompasses both the HH-1 and CF-1 wells. This is an increase of 12.8 mmbbls from the 8.2 mmbbls (P50) gross STOIIP reported on 17 December 2014. This results largely from the new petrophysical evaluation of HH-1 and CF-1 electric logs.
In June 2015 Schlumberger, acting in an advisory capacity to UKOG, has independently evaluated the unconventional oil potential of the Horse Hill-1 well ("HH-1”) and it has estimated approximately 271 mmbbls per square mile for the Jurassic section. A total of 255 mmbbls gross OIP lies within the tight limestone and mudstone plays of the Kimmeridge, Oxford Clay and Lias (Upper Portland Sandstone discovery). This figure of 255 mmbbls per square mile can be compared with the OIP estimated by NUTECH Ltd ("Nutech") which suggest a significant oil potential in the Horse Hill area.
In June 2015, Nutech has provided UKOG with an additional independent report of the estimated oil in place ("OIP") contained within the 55 square mile area covered by the Horse Hill licences (PEDL 137 and PEDL 246) ("Horse Hill”). The new study calculates a best estimate oil in place ("OIP") of 9,245 million barrels ("mmbbls") within the Jurassic section contained within the mudstones and tight limestone sequences of the Kimmeridge Formation, with a calculated best estimate total Kimmeridge OIP of 5,230 mmbbls. Note that the calculated OIP figures estimated by Nutech do not include the OIP for the Portland Sandstones and should not be construed as contingent resources or reserves.
Additional information concerning Horse Hill can be found at the company's website: www.horsehilldev.co.uk
In April 2010, Solo agreed commercial terms for a CDN$1,650,000 participating loan agreement with Reef Resources Limited, a Toronto listed public company, for the financing of the development of a proven oil and gas production asset in Ontario centred on the Ausable Field.
Solo would receive 60% of net post tax production revenue until loan repayment and 50% net earnings thereafter from the funded developments. A Solo representative was entitled to join the Board of Reef and in September 2010 Mr David Lenigas was appointed as a Director to provide commercial and operational advice.
Following the successful drilling of a crestal well; Ausable #5, in early 2011 and the re-establishment of commercial production at Ausable, Solo converted the participating loan to a 23.8% direct working interest in all the Reef owned Ontario properties and obtained an option agreement to acquire a further 14.3%, to a total of interest of 38.1%, through investing a further CDN$1.5 million in the Reef properties. In June 2012 Solo had invested a further CDN$500,000 and held a 28.56% working interest. The remaining 9.53% interest in the properties was still subject to the option agreement and ongoing discussions between the parties.
The Ausable#5 well was drilled in early 2011 to a total depth of 615 metres and showed excellent net oil pay of 72 metres in the centre of the reef. The Ausable reef structure is estimated to contain overall liquid hydrocarbon resources of 8.9 million barrels oil equivalent in–place. Based on other analogous gas cycling schemes in Canadian reefs, such as Golden Spike Field, it is expected that recovery rates in excess of 70%, and potentially as high as 90%, can be achieved.
A key component of Reef's strategy is to identify and exploit undervalued prospects in the Ontario basin by utilizing the company's 23,500 acres of proprietary 3D seismic. Based on this data Reef, with Solo's participation, successfully drilled the Airport North#1 well in 2012 and as a result discovered additional gas reserves. This gas, in addition to the gas already owned by Reef and Solo at the Airport South reef, will be piped to the Ausable field and re–injected into the reservoir to increase overall oil and condensate recovery. The Airport reefs also contain natural gas liquids which will be recovered at Ausable. The pipeline tie–in from Airport South to Ausable has been constructed.
Additional gas can also be acquired from the local gas utility company's pipeline to which a connection and metering was added during the development of the Ausable field. The combination of utility gas, gas swap contracts and equity gas will be used at Ausable to re–pressurise the reef to provide maximum liquids recovery.
Further exploration drilling may be undertaken once the Ausable field development has been successfully finalised and the engineering template fully tested and is available for repeat developments. An additional five to ten unexplored reefs are recognised in the area.
Longer term, once oil production has finished, the reefs have the potential for gas storage and the sale of gas used in cycling scheme will provide additional revenue to the project.
To ensure complete recovery of the natural gas liquids it is envisaged that a refrigeration plant will be added to the existing production plant at Ausable in due course.
David Lenigas stepped down from the Reef Resources Board of Directors in November 2012. In the same month Reef Resources made an unsolicited offer to repurchase Solo’s 28.56% interest in November 2013 subject to financing. To date Reef has been unable to close financing and no progress has been made with either the project or any potential sale.
MR. RITSON - NON-EXECUTIVE CHAIRMAN
Mr Ritson has worked in the energy sector for over 35 years, initially with BP plc, where he held the roles of International Chief Geophysicist, Head of Geoscience Research and Business Unit Leader for both Norway and Alaska Exploration. Subsequently Mr. Ritson managed the international operations of Burlington Resources Inc. and more recently he was CEO at Regal Petroleum plc before founding the Vanguard Energy Group where he was Chairman and CEO. Mr. Ritson is a member of both the Audit and Remuneration committees.
MR. MALING - FINANCE DIRECTOR
Daniel (“Dan”) Maling has over 15 years of senior commercial management experience primarily in the oil and gas and resources sectors. Dan has worked with several AIM, ASX and TSX listed companies providing corporate finance, business development and corporate governance advice. He is currently director of a number of private companies and is Managing Director of boutique investment bank East Star Capital (UK) Limited. Dan is a member of the Chartered Accountants Australia & New Zealand.
MR. JENKINS - TECHNICAL DIRECTOR
Mr Jenkins is a Chartered Engineer with a Bachelor of Engineering degree in Mining Engineering and a Master of Engineering degree in Petroleum Engineering. He has 20 years of experience working in industry, initially in mining before moving to petroleum. Mr Jenkins worked in a variety of technical and increasingly senior managerial positions in mid-sized independent oil companies, including Enterprise Oil, LASMO, OMV (UK) Ltd and Afren plc and he currently serves as Chief Operating Officer to the AIM-traded Leni Gas & Oil plc.
MR. STRANG - NON-EXECUTIVE DIRECTOR
Mr Strang is a member of the Australian Institute of Chartered Accountants and has been in business over 20 years, holding senior financial and management positions in both publicly listed and private enterprises in Australia, Europe and Africa. Mr Strang has considerable corporate and international expertise and over the past decade has focused on mining and exploration activities in the oil and gas and natural resources sectors. He was Finance Director before the appointment of Daniel Maling and he is currently a director of a number of AIM listed companies including Rare Earth Minerals Plc, Doriemus Plc and Polemos Plc.
Solo Oil plc,
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