Solo Oil (LON:SOLO) has raised £150,000 from its equity drawdown facility as it prepares to test its recent discovery in East Africa.

Solo issued 32.3 million shares at a “small premium” to the market price and will use the money to fund its 25 per cent share of the testing of the Ntorya-1 well gas discovery in the Ruvuma Basin in Tanzania

In February, Solo and partner Aminex (LON:AEX) reported the  discovery in a 25 metre (80 foot) gross sandstone interval at Ntorya.

The drawdown has been taken from at three year £10 million equity line facility with Dutchess Opportunity Cayman Fund.

Last month, Solo said it will invite offers from potential partners to participate in the next round of exploration at Ruvuma, commencing with the acquisition of additional seismic data later in 2012.

The firm and partner, Aminex (LON:AEX) told investors that the rig had now been released from the well site and rigless testing equipment was due to arrive in the coming weeks. 

A production string has been run in the well and a ‘Christmas tree’ had been installed in preparation for the planned test.

The plan is to test the gas discovery identified in recent drilling.

In February, the partners reported a gas discovery in a 25 metre (80 foot) gross sandstone interval, which will now be tested to establish how much production can be obtained.

The firms have also commissioned new studies to establish the extent of the Ntorya discovery and to locate further prospects in the Ruvuma Production Sharing Agreement (PSA) where Solo plans to invite offers from potential partners to participate in the next round of exploration, beginning with the acquisition of additional seismic data later in 2012.

Solo's executive director Neil Ritson said: "This discovery is ideally located just 20 kilometres from Mtwara where there is an existing gas to power facility and where there are plans to install additional gas facilities and pipelines to commercialise the reported 70 tcf of gas already discovered in the Ruvuma Basin.

"Having low cost gas onshore close to Mtwara is a significant advantage and we hope to capitalise on that jointly with Aminex.  We also look forward to further exploration in this highly prospective area."

Analyst Barney Gray, of old Park Lane Capital, who rates the stock a 'buy', said: "Solo has noted that Ntorya-1 appears to be on the edge of a deep gas play system where prospectivity increases in the direction of the offshore region of Tanzania. 

"This is apparent from the recent Jodari-1 discovery made by BG Group (LON:BG.) and Ophir Energy (LON:OPHR) at a subsea depth of 4,465 metres. Jodari-1 is estimated to contain recoverable resources of 3.4 TCF and is located only 27 km from Solo’s acreage."

He added: "With strong indications that Solo’s acreage is increasingly prospective towards the offshore region of the basin, we await news of the next round of exploration activity with great interest."

Gray targets a price of 1.5 pence for the stock.

Craig Howie, at house broker Shore Capital, said: "Today's update confirms progress towards testing at Ntorya, where we look forward to the announcement of test results in due course."

Howie added that the broker had calculated a risked net asset value (NAV) of 1.6p/share (fully diluted).

The project is operated by Reef Resources (CVE:REE). Solo has a 38.1 per cent stake in the Ausable Reef venture, as a result of a loan it made to Reef in April 2010.

The Ausable Reef EOR project reached an important milestone this week as gas injection began, using bought in gas, to start building pressure in oil reservoirs, thereby maximising oil and gas condensate production.

"The provision of utility gas to the Ausable field is a major milestone in the EOR program and confirms our confidence that production will rise steeply in the second half of 2012 towards the anticipated 500 bopd year end exit rate,” said Neil Ritson, executive director of Solo Oil.

Reef said that the injection of the gas, supplied by Union Gas, started after the meter was commissioned on April 6. So far 3 million cubic feet of gas has been free flowed into the Ausable pool, and as of yesterday the injection rate was increased to 1 million cubic feet per day.

Meanwhile, Reef also revealed progress at the nearby Airport projects which are being developed to supply gas for injection into the Ausable Reef.

It said that petrophysical analysis of the recently drilled North Airport 1 well has confirmed 63 metres of net hydrocarbon pay. Additionally it said that 57 metres of net pay has been confirmed in the existing Airport South 1 well.

“The presence of over 60 metres of net gas pay in the new North Airport well and confirmation of a similar amount of pay in the Airport South well, also contributes strongly to the project economics,” Ritson adds.

Reef is now in the final stages of completion programmes and field completion work is scheduled for May.

Furthermore it says that dry weather conditions have allowed the acceleration of pipelining and production optimization programs. The pipeline from Airport South to Ausable is nearly finished and it believes it should be substantially complete by end of April.  

"Solo and Reef Resources are making good progress in Ontario," Old Park Lane Capital analyst Barney Gray said in a note to clients.

"The provision of utility gas to the Ausable field represents major progress particularly during a period of historically low gas prices. 

"Additionally the contribution of gas output from both Airport wells will improve the overall economics of the EOR programme significantly and enable Solo to push towards the target of 500 bopd from the Ausable field by the year end."

Solo Oil (LON:SOLO) said its director Kiran Morzaria has resigned from the board to “dedicate more time to his other business interests”.

“The board would like to sincerely thank Mr. Morzaria for his valuable contribution to the company over the past few years,” Solo said in a brief statement this morning.

In its latest operational update released three weeks ago, Solo said good progress was being made with the critical elements of the Ausable enhanced oil recovery project in Ontario and added that lifting production depended on a number of technical modifications at the field.

These modifications are currently being carried out by Solo’s partner Reef Resources, and its work has run into a couple of delays. However, Reef remains upbeat about the project.

Reef said it will be able to start gas injection operations once the gas flow is reversed and it has made a number of modifications to facilities.

Elsewhere, drilling continues on another gas well, this time at the North Airport site. It is currently at a depth of 280 metres and it will be drilled down to a total depth of 608 metres.

Solo has a 38.1 per cent stake in the Ausable Reef venture, as a result of a loan it made to Reef in April 2010.

In Tanzania, Solo and partner Aminex (LON:AEX) successfully confirmed the discovery of a gas reservoir in the Ntorya-1 well in February.

The well was deepened after it initially missed its primary pre-drill target. However, it did encounter gas deeper in the well.

Old Park Lane analyst Barney Gray said this month that Solo is significantly undervalued, while placing a ‘buy’ recommendation on the stock with a target price of 1.5 pence.

He said Solo has the potential for continued positive news flow over the next three months.

“Solo Oil possesses a highly prospective exploration play in Tanzania and a significant interest in a longer term development opportunity in Ontario, Canada,” he said in a note to clients.

“The company recently participated in an exciting gas discovery in the Ruvuma Basin in Tanzania and drilling is continuing in order to probe a deeper oil target.”

Shares in Solo traded at 0.62 pence this morning, up 1.6 percent from Friday’s close.

Analyst Barney Gray today initiated his coverage on the stock with a ‘buy’ recommendation and a 1.5p price target, which implies the stock could almost treble in value from the current price of 0.57p.

He says Solo has the potential for continued positive news flow over the next three months.

“Solo Oil possesses a highly prospective exploration play in Tanzania and a significant interest in a longer term development opportunity in Ontario, Canada,” he said in a note to clients.

“The company recently participated in an exciting gas discovery in the Ruvuma Basin in Tanzania and drilling is continuing in order to probe a deeper oil target.”

Gray reckons Solo’s core assets are worth US$74 million, or 1.5p a share, to the company.

However, he also says that Solo’s very exciting upside in Tanzania, and further news from the Ntorya-1 well, could propel the current valuation to ‘a highly attractive multiple of the current share price.’

Drilling began on the Ntorya-1 well in December. The initial pre-drill target was unsuccessful project operator Aminex and Solo decided to drill the well deeper to target additional prospects.

This decision was rewarded as the partners made a gas discovery, and the partners subsequently decided to drill on again to test an oil target. Drilling continues and the results are expected shortly.

Solo currently has a 25 per cent stake in the project, while Aminex owns a 75 per cent stake. Tullow Oil was previously a partner in the project however it decided not to participate in the well deepening exercise.

Lifting production depends on a number of technical modifications at the field, it said.

These modifications are currently being carried out by Solo’s partner Reef Resources, and its work has run into a couple of delays. However, Reef remains upbeat about the project.

"While progress at times has suffered from some minor delays, all the components of what we believe will be a very successful and productive program are now coming together at Ausable," said Arnie Hansen, president of Reef Resources.

Extremely wet weather has caused a delay in building the pipeline from the South Airport gas well, which provides gas for injection into Ausable. Reef Resources says operations will resume once the ground conditions have improved.

Meanwhile an unrelated issue related to gas supplier Union Gas means the ‘bought in’ gas for Ausable will also be delayed. Union Gas was due to reverse the gas meter at the end of last month but an internal planning issue, at Union Gas, has delayed the work until March 19.

Reef said it will be able to start gas injection operations once the gas flow is reversed and it has made a number of modifications to facilities.

Additionally Reef explained that it has purchased some larger parts, and is contracting the manufacture of others, to handle the larger volumes of oil, natural gas and water in the upgraded EOR project.

There are also a number of technical changes being made in relation to the venture pumps.

Elsewhere drilling continues on another gas well, this time at the North Airport site. It is currently at a depth of 280 metres and it will be drilled down to a total depth of 608 metres.

"Meeting the field production target of 500 bopd by end 2012 depends on successfully implementing a range of technical modifications at the Ausable Field, the import of gas from Union Gas and from the joint ventures own Airport reefs, and the full commissioning of the venturi pumping system successfully trialled in 2011 at Ausable-1,” said Neil Ritson, executive director of Solo Oil.

“Good progress is being made on all the critical elements.  

“In addition, the North Airport exploration well is anticipated to reach the reservoir in April and may give a further boost to the available equity gas for the EOR scheme."

Solo has a 38.1 per cent stake in the Ausable Reef venture, as a result of a loan it made to Reef in April 2010.

Subsequently Solo converted its loan into an equity stake in the project and made additional investments to increase its stake to the currnent level.

In a note to clients, Shore Capital oil analyst Craig Howie said: "Solo reports that good progress is being made on all critical elements, and we continue to see the potential for strong production growth, notwithstanding any minor slippage."

The firm’s joint venture partner Reef Resources (CVE:REE) has reported significant progress on a number of field activities. 

Notably, Reef revealed that a new assessment of the field’s oil-in-place has been completed following detailed petrophysical analysis alongside 3D seismic data. The field is now estimated to contain 8.9 million barrels of oil, 10 per cent more than previous estimates.

"Appreciable progress has been made with the project so far this year including the increase in the oil-in-place resources providing further support for our investment case,” said executive director Neil Ritson. 

“The final reserves will depend on the details of the gas cycling scheme, however, based on analogous fields in Northern Alberta, such as the Golden Spike Field, recovery factors in excess of 70 per cent, and potentially as high as 90 per cent may be expected."

Also Reef reported the successful installation of a venture pump into the Ausable #5 well. It will now take 10-14 days for the pump to be commissioned and for flow rates to be stabilised.

Meanwhile the Ausable #1 well continues to produce oil, at rates up to 30 barrels a day. This output is, however, choked back and it will continue to be restricted until the gas injection phase of the EOR programme. 

Reef Resources is currently building the field flow-line to the Ausable #2 well. This will allow the well to be connected to the venturi pump system.  Additionally it said that a further pump skid is also being built and it is expected to be delivered in February.

Subsequently all four existing Ausable Reef wells will be connected to the field’s central processing facility. 

Drilling is currently underway on the nearby North Airport #1 well. Here Solo is looking for gas that can be injected and recycled through the Ausable Reef as part of the EOR programme.

The well is expected to reach an intermediate casing point by mid-February and reach target depth, of 608 metres, by early March.

Reef Resources president Arnie Hanson said: "We have been making very substantial progress so far this year, however, January and February are typically the worst weather months and although current forecasts are moderate some delays may occur.  

“We look forward to making a further update in the coming weeks."

The company’s associate Reef Resources (CVE:REE) began drilling on December 29. The exploration well is located approximately 1 kilometre north of the Airport South reef. It has a targeted depth of 608 meters.  

Seismic data indicates the North Airport reef is potentially a gas and liquids prone reef, similar to Airport South, Reef said. The gas could be used as part of the Enhanced Oil Recovery (EOR) programme.

"Reef has made substantial progress across all aspects of the field development and we are delighted to be going into 2012 with additional stages of the Ausable gas cycling EOR programme well underway,” said Solo executive director Neil Ritson.

“The drilling of a further exploration well to assess further equity gas for the Ausable cycling scheme is a very positive additional aspect of the programme.   

“We expect further news on production and drilling through the first quarter."

If the North Airport well is successful it will be tied into the Ausable process facility for the EOR programme.  

Reef says that produced gas will be used for re-pressurization of the Ausable reef in order to increase oil production and natural gas liquids production recovered from the gas recycle process.  

The EOR programme involves pressurizing the reef formation with the gas that’s produced from the Airport South reef and, potentially, the North Airport well.  

Reef Resources could also accelerate the EOR program by purchasing natural gas from the local utility for recycling.

It is expected that Reef will complete and test the Upper Guelph and A2 gas zones in Airport South # 1 during the first quarter of 2012.  Construction work is expected to start later this month.  

Solo Oil currently has a 23.8 per cent working interest in the Reef properties and it will increase that stake to 38.1 per cent in the near future. 

The firm said that Aminex, the operator of the Ruvuma Basin production sharing agreement (PSA) where Ntorya lies on the Mtwara block, advised it that the Ntorya well site was completed in late Octover and that the rig accommodation has now been fully installed. The contract rig, Caroil-6, has been barged to Mtwara port and is now being moved 30 kilometres by road to the site.

Rig up is anticipated to take 12 days and the well is expected to spud around the third week of December.

The Ntorya-1 well will be drilled to a depth of approximately 2,026 metres and will test the Tertiary and late Cretaceous sandstone sequence identified in the Likonde-1 well that was previously drilled by the partners (who also include Tullow Oil) in the PSA 14 kilometres to the north. The Ntorya-1 well is expected to take 30 days to drill.

Ntorya-1 is the second well in the PSA and is targeting the same hydrocarbon play as has already been proved offshore. Solo estimates the Ntorya prospect to have a mean, un-risked potential resource of approximately 100 million barrels of oil or 600 billion standard cubic feet of gas, with a chance of success of one-in-four.

Solo has an 18.75 per cent interest in the PSA.

Solo Oil (LON:SOLO) announced this morning that it intends to acquire the rights to explore and develop the Mina El Carmen block in Argentina by buying Ilakon – a wholly-owned subsidiary of Obtala Resources (LON:OBT).

The geographically-diversified oil and gas firm, which already has assets in Africa and Canada, said a binding agreement had been signed with Obtala that values the Mina El Carmen block at US$750,000. Solo will acquire Ilakon and its Argentinian subsidiary, Spinell Sociedad Anomima, which holds a 100-per cent interest in the 25 claims that make up the block.

The block covers 4,940 acres on the northern side of the Golfo San Jorges basin, close to a number of producing fields, in northern Argentina. Oil and gas exploration started in this area more than 100 years ago and, to date, more than three billion barrels of oil have been produced. Around one-third of current Argentina production comes from San Jorges.

On the Mina El Carmen block itself a total of 12 wells were drilling before 1945. Four wells tested gas in the Palaeocene-age Glauconitico Formation and one well, CA-1, located in the centre of the block, reported oil and gas shows. There is only limited seismic coverage on the block and many of the older wells were drilled without any viable sub-surface information and so, said Solo, cannot be considered valid tests of the prospectivity of the block.

“The Mina El Carmen Block presents an exciting opportunity to acquire an early phase exploration project in a proven basin setting,” said Neil Ritson, Solo’s executive director. “This investment is in line with Solo’s investing policy of holding a diverse portfolio of oil and gas interests at different stages of maturity.”