It has struck a deal with UKOG, which will see Solo receive £4.5mln of cash, used for a simultaneous purchase of 234mln UKOG shares amounting to a 4.2% stake in the company.
Dan Maling, Solo’s recently appointed managing director, in a Proactive Investors interview with Andrew Scott, said that the UKOG shares will be held for sale and that some of the proceeds would be directed to the company’s other assets - such as its gas projects in Tanzania.
For UKOG, the transaction increases its stake in the Horse Hill discovery to 46.73% (as it will hold 71.9% of the HHDL vehicle which owns 65% of the underlying asset).
"This transaction is in line with our investment strategy and provides evidence of our now proven ability to monetise assets within our portfolio and generate value for shareholders,” said Alastair Ferguson, Solo’ non-executive chairman.
“The transaction enables Solo to retain significant exposure to the Horse Hill project as it undergoes the pivotal testing activities, the results of which have been very positive to date."
Dan Maling, Solo managing director, meanwhile, added: "The board has seized the opportunity to monetise its investment in HHDL and is pleased with the return we have made on our investment.
“The transaction enables a more liquid balance sheet and frees Solo from future direct operational expenditure at Horse Hill, but ensures we retain the exposure to the exciting upside potential of the projects within UKOG's diverse portfolio.
“Importantly, we will retain the option to monetise our shares in UKOG at the appropriate time.”
In a separate statement, UKOG chief executive Stephen Sanderson said: "This further strategic acquisition firmly cements UKOG as the dominant player in the Horse Hill Portland and Kimmeridge oil discoveries and Licences.
“UKOG's three recent HHDL acquisitions provide a valuable controlling interest and exemplify the rationale behind our recent change of AIM status to an operating company.
“With the positive Portland test results to date, UKOG, supported by its remaining three coventurers, can now steer the way towards permanent HH oil production in 2019."