# Solo Oil ONE-Dyas Transaction and Strategy Update

- Link: https://www.directorstalkinterviews.com/solo-oil-one-dyas-transaction-and-strategy-update/412807153
- Published: 2020-03-02T07:13:10+00:00
- Author: Giles Arbor

**Solo Oil** (LON:SOLO), a gas-focused production and development company targeting
attractive growth opportunities within the European gas market, announced today 
the following strategy update.

Further to the transaction updates provided to the market on 20 December 2019 and
4 February 2020, the Company has unfortunately been unable to agree revised commercial
terms with ONE-Dyas B.V. that would deliver appropriate value for Solo’s shareholders.
Accordingly, the conditional sale and purchase agreement entered into as part of
the proposed transaction with ONE-Dyas automatically terminated on 28 February 2020
and there are no further discussions ongoing with ONE-Dyas in regard to progressing
the Proposed Transaction.

Whilst Solo has enjoyed broad market support for its planned growth strategy through
selective acquisitions within the European gas market, the original economics associated
with the Proposed Transaction, as set out in the Company’s RNS issued on 9 October
2019, were substantially impacted since signature of the SPA as a result of a number
of factors outside of the Company’s control. These included:

 * European gas price for calendar year 2020 reaching unprecedented and historical
   lows having fallen from above €17.2/MWh in October 2019 to current trading at
   €10.2/MWh for the 2020 calendar year futures contract;

 * The target assets being subject to increases in both forecast opex and capex 
   numbers, during the interim period between 9 October 2019 and now, as well as
   into the future; and

 * Political uncertainty during the fundraising period, including the UK General
   Election and Brexit and, more generally, uncertain macro-economic conditions 
   which negatively affected equity market sentiment.

Over the past two months, the Board and management have positively engaged with 
ONE-Dyas around a variety of deal structures that looked to deliver value for the
Company’s shareholders in this challenging environment. Unfortunately, despite the
best efforts of both Solo and ONE-Dyas to find a mutually acceptable transactional
construct and, noting the significant volatility in the European gas price and uncertainty
in capital markets, no suitable compromise could be achieved.

In the reasonable opinion of the Board, the Company expects to have sufficient cash
resources to meet current firm budgeted commitments within its existing portfolio
of assets in Tanzania, and to cover general working capital needs for the remainder
of 2020.

Despite the disappointment of not being able to complete the Proposed Transaction
on mutually acceptable terms, the Board remains committed to the Company’s broader
European gas strategy as previously communicated. The Board and management continue
to work with its advisers to identify additional opportunities with producing reserves
and future development characteristics that would allow the Company to realise the
benefit from undertaking an acquisition during a cyclical price low in the gas market.
To that end, the Company is in discussions with several separate vendors in respect
of complementary acquisition portfolios. Further updates will be provided if and
when appropriate.

**Tanzania**

The Board is encouraged by the continued positive statements by the operator, Aminex,
and its prospective farm-in partner, APT, and the apparent progress being made with
the Government of Tanzania towards resolution of the outstanding licence renewal.

The Company continues to see a consistent level of unsolicited interest in its Tanzanian
natural gas assets. Within the last 18 months, a number of expressions of interest
have been received, alongside direct approaches, each of which was explored, but
found at the time, not to be considered in the best interest of shareholders.

As a result, the Board has determined that the most appropriate course of action
is to run a formal process to explore value realisation options for the assets including,
but not limited to, the sale of Solo’s interests in the certain, or all, of its 
Tanzanian assets. In particular, the Board is confident in the inherent value of
its 25% interest in the Ruvuma asset and will consider reasonable offers that reflect
the quality of the asset and its significant upside potential. A formal dataroom
has been established and the Company intends to launch a formal process in the course
of the next week 7-10 days. Further updates will be provided as and when appropriate.

**Restoration to trading on AIM**

The Company’s shares were suspended from trading on AIM at 7.30 a.m. on 9 October
2019 as a result of the announcement of the Proposed Transaction. Accordingly, the
release of this announcement facilitates lifting of the suspension, and trading 
on AIM of the Company’s shares is expected to recommence from 7.30 a.m. today.

> **Tom Reynolds, Solo Oil CEO, commented:**
> “It is clearly disappointing for management and shareholders that we could not
> complete the Proposed Transaction, however, the value of the asset package changed
> significantly after the signing of the SPA and it is the Board’s responsibility
> to ensure the Company does not overpay for acquisitions. Despite our best efforts
> to renegotiate mutually acceptable terms with ONE-Dyas, we were unfortunately 
> unable to find middle ground. We thank ONE-Dyas for their pragmatism throughout
> the process.
> “This package of assets was one of a number targeted by Solo and, whilst this 
> has resulted in a delay to achieving completion of a first transaction in line
> with our strategic vision, it does not alter our strategy to build the Company
> around opportunities in the European gas market. We have continued to screen and
> progress new opportunities in parallel with this process and hope to bring alternative
> opportunities to new and existing investors in due course.
> “The Company has invested time, energy and cost into this process, however the
> majority of costs were success based and therefore limited our exposure to this
> no-deal scenario. Our existing portfolio contains material unrealised value which
> we seek to unlock in the near-term through various initiatives. We will provide
> an update to shareholders on next steps and near-term objectives in the coming
> weeks.”

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