Aminex PLC (LSE: AEX) said it has farmed out a 12.5 percent interest in the Likonde-1 well in Tanzania to Solo Oil PLC (AIM: SOLO). Likonde-1 is the first well scheduled to be drilled on Aminex's Ruvuma Production Sharing Agreement (PSA) in southern Tanzania with spudding likely to occur in about two months, the precise date depending on rig move logistics. A rig contract has been signed.
Aminex currently has a 50 percent interest in the Ruvuma PSA and the remaining 50 percent is held by Tullow Oil PLC (LSE: TLW) which is the operator.
Under the terms of the farm-out agreement Solo will reimburse Aminex for 12.5 percent of pre-drilling costs amounting to US$1.25 million and pay 18.75 percent of the drilling cost of Likonde-1 amounting to US$3.4 million.
After the drilling of Likonde-1, Solo will have earned the right to participate in any further drilling on the licences covered by the Ruvuma PSA through contributing 12.5 percent of ongoing costs. If Solo exercises this right it will also then become a full party to the Ruvuma joint operating agreement.
Aminex chairman Brian Hall commented: “Solo is an AIM company which is new to oil exploration but with a highly experienced management team. There is rapidly rising interest in this under-explored area and a first well is currently being drilled by Anadarko and partners in the Mozambique part of the basin. Likonde is a robust prospect and we are looking forward to commencing drilling and putting it to the test.”
In a separate statement, Solo Oil announced a placing of 1.28 billion new shares at 0.5 pence each to raise £6.4 million. The first tranche of 224.7 million shares is expected to start trading on AIM on November 23 2009, while the second part of the placing requires approval from shareholders at a general meeting called for December 9. The second tranche is planned to start trading on December 11.
The placing shares will represent approximately 61.5 percent of the enlarged issued share capital of the company.
The placing proceeds will provide Solo with the funds to pursue its new investing policy as approved by shareholders in July 2009 and specifically will be used to farm in to the Likonde- 1 well. Participation in this agreement will cost approximately £2.79 million.
The balance of the funds which is expected to exceed £3 million is expected to be used to strengthen the company's balance sheet and for general working capital purposes.
Solo’s strategy 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 Ruvuma licence area is adjacent to the Mnazi Bay gas field currently under commercial development for power generation. The area includes several leads and prospects while drilling in the past has resulted in oil shows. The southern boundary of the licence is the Ruvuma River which divides Tanzania and Mozambique. On the Mozambique side, most of the available acreage has now been licensed to international oil companies including Statoil, ENI and Anadarko.
The PSA covers approximately 12.000 square kilometres of which roughly 80 percent is onshore and 20 percent offshore. Within the PSA are two specific, adjoining licence areas, known as Lindi and Mtwara. The Likonde-1 well is expected to be spudded in about two months and drilled to a depth of approximately 3,200 metres to test multiple targets throughout the Tertiary, Cretaceous, Jurassic and Permo-Trias Karoo intervals.
Aminex have reported that the Likonde prospect is thought to have the potential for up to 500 million barrels of oil in place, according to Solo Oil.
The author and certain Proactiveinvestors directors hold stock in Solo Oil.