Speaking to Proactive Investors, he said this may also mean the Ntorya-3 appraisal well is delayed in favour of acquiring another batch of 3D seismic over the licence.
Ntorya-3 may not be in the best place
We would like to drill it, he said, but Ntorya-3 may not be the best place.
So we’d rather go down the 3D seismic acquisition route and know exactly where the next well should be drilled.
Ritson also played down concerns over the flow rates seen from the recent Ntroya-2 appraisal well.
The reason these were below the flows seen previously were well-bore related he said, an issue that should be resolved as it moves to production.
“Everything looks good”.
The reservoir was 50m or twice as thick as the first well and In place, there is half a TCF (trillion cubic feet) of proven gas volume and it is clearly commercial.
The need now is to turn it into a 25 year development licence and agree the work programme and schedule.
Ritson added it is also working on a gas demand survey that will be published shortly to understand why demand for gas from the producing Kiliwani field, also in Tanzania, is lagging. He said it is getting paid and in US dollars.
He added Ruvuma was also a classic case study of how Solo operates.
“Get in early and put in money highly leveraged to value.”
"Now Ntorya is demonstrably going to be commercial, we are looking to take money off table and re-invest elsewhere – and in the short term this means the Helium One project also in Tanzania."
Solo has taken a 10% stake in Heiium One but wants to double its to 20%, something Ritson admits he needs to explain to shareholders.
"It's new for us so we need to get shareholders to understand why we are doing it, why we are doing it now and our first mover advantage here."
Helium is used for MRI imaging, industrial processes, and so on. World demand is 6Bcf per year and Solo’s asset contains 100Bcf, os it is a world class aseet he says.
Patience required at Horse Hill
Finally, Solo is also a 10% stakeholder in the Horse Hill exploration well in Sussex.
An application to carry out appraisal testing and further drilling is on the council’s agenda for July and he says the HH consortium is happy to be patient as they are confident the long term flow test results will confirm “what we saw on short term tests.”
What is it worth?
Shore Capital tweaked its price target higher following as assessment of the appraisal drill result at Ntorya.
It follows a similarly bullish assessment of Solo’s partner Aminex (LON:AEX) last week from the broker.
The Ntorya-2 result has increased discovery size and de-risked additional prospectivity, said Shore.
Meanwhile, the 10% stake (possibly rising to 20%) stake in Tanzania-based Helium One interest represents a highly accretive and complementary acquisition.
Issues over the flow rate are not materially detrimental according to the broker and the current value offers an attractive entry point in anticipation of further drilling, development licence award and finalisation of early production plans at the successfully de-risked Ntorya discovery.
Including Helium One’s Rukwa project; the risked NAV (net asset value) estimate is upgraded to 0.9p/share (from 0.8p/share previously) or nearly three time the current market price of 0.326p