Solo Oil plc (LON:SOLO) has today released an update on its corporate activities and the Board’s plans for the immediate future.
· Solo is reviewing its position and options following Aminex’s farmout announcement, which the Board sees as a positive development for the project and as a validation of the commercial and technical viability of the Ntorya field development
· Initial discussions are being held with potential project financing partners for Solo’s 25% of the Ntorya development in parallel with the ongoing marketing process for Solo’s interest in the project
· Solo is awaiting news from the well testing which is underway at Horse Hill-1 with the initial focus on the Portland Sandstone
· Executive Chairman Neil Ritson is to retire before end of 2018 in a Board restructuring designed to transition the Company for the future
Ntorya Development Tanzania
Following the announcement made on Wednesday 11 July 2018 by Aminex plc concerning its decision to farm-out two-thirds of its 75% interest in the Ruvuma Petroleum Sharing Agreement containing the Ntorya gas and condensate field in Tanzania, Solo is currently reviewing its position and options, for example on the pre-emption rights it holds under the Joint Operating Agreement covering the Ruvuma PSA. The decision by Aminex to farm-down their interest to a well-capitalised group with existing diverse interests in Tanzania is seen as a positive move which will see the Ntorya project move towards early gas production.
Solo is in early stage discussions with a major bank on the provision of project financing for the development of the Ntorya field from completion of the planned Chikumbi-1 appraisal well until the development reaches at least 40 million standard feet per day. Solo holds a 25% interest in Ruvuma, including the Ntorya discovery.
Extended Well Tests at Horse Hill
Extended well testing at the Horse Hill-1 (“HH-1”) site is underway as announced on 27 June 2018 with work initially focussing on the Portland Sandstone where Solo believes that the reservoir, productive elsewhere in the Weald Basin, has a high chance of producing oil at commercial rates. Additional information is expected to follow from the operator, Horse Hill Developments Limited (“HHDL”), in due course. The Company holds a 9.75% beneficial interest in licences PEDL137 and PEDL246 containing the HH-1 oil discovery through its 15% shareholding in HHDL.
The Board has been informed by Mr Neil Ritson, a director since 2010 and currently the Company’s Executive Chairman, of his wish to retire as Chairman and as a director by the end of 2018. Mr Ritson has indicated that he will be available to the Company to remain as Chief Executive during a transitional period once a new Non-executive Chairman is appointed and thereafter as a technical advisor, as and when required. It is envisaged that Dan Maling, currently the Company’s Finance Director, will act as Managing Director following Mr Ritson’s eventual retirement from the Board.
As previously announced, the Board is seeking to appoint a new independent non-executive director from outside the Company as the Board moves to adopt a new corporate governance code by September 2018. A suitable candidate as an independent non-executive has now been identified and is presently undergoing customary checks prior to appointment. As previously reported, Don Strang plans to resign as a director once this new non-executive appointment is confirmed. A further announcement will be made in due course.
Neil Ritson, Solo Oil Plc Executive Chairman, commented: “The Company is now seeing its investments, and the Board’s efforts to monetise them, begin to fall into place. We believe Aminex’s proposed farmout represents a significant validation of the commercial and technical viability of the Ntorya gas development and allows us to consider our options with regard to possible pre-emption, project funding or the sale of our interest in the project. Whichever route we take, we see this as a positive development that proves we have a material stake in an asset with an implied value in excess of our current market capitalisation.”
“As we reach the point of monetising the first round of core assets, I think it is appropriate that a refreshed team be appointed to take Solo forward into the next phase of its corporate development. I look forward to assisting the Board through the transition and I will continue to provide my industry experience and technical expertise to Solo as required. I also remain a shareholder so I am fully aligned with the Company in anticipation that Solo can realise significant value for the investments made in the Ruvuma Basin, the Weald Basin and in early stage helium exploration.”
Future Allotment of Shares
Prior to the effective monetisation of at least one of the Company’s core assets the Board intends to seek shareholder approval for any new investments; or any further material acquisitions in any of its existing core portfolio assets. It is also the Board’s firm intention that an open offer, open for at least 21 days, will be made to shareholders as and when the Board believes that new funds are required to invest in the Company’s existing core assets.
To preserve the integrity of the Company’s investment strategy and be able to respond in a timely and effective manner to cash calls from investee companies the Board will consult with shareholders whenever possible, but reiterates that its request for authority to allot shares, and the disapplication of pre-emption rights on those shares, as set out in its Notice of Annual General Meeting, continues to be in the very best interests of all shareholders of the Company.
Future Distributions to Shareholders
The Board reiterates its existing policy on the distribution of cash or shares from the future monetisation of significant core investments, including the Ruvuma PSA, HHDL or Helium One Limited. The Board’s policy is to distribute to shareholders the majority of the proceeds of any sale or farm-out, in cash or in specie, depending on the terms of any such divestment and the commercial and tax effectiveness of a distribution. Any distribution to shareholders will be considered by the Board on a case by case basis bearing in mind also the Company’s Investing Policy.
Board and Management Remuneration
As indicated in the Annual Report and Account for 2017 the current members of the Board have voluntarily been accruing fees, to preserve cash resources, for some months and this is planned to continue whilst a review of the Company’s remuneration structure is undertaken. That review will seek to better align the Board remuneration with shareholder value and with emerging industry best practice.
On appointment of an independent director, who it is expected will chair the Remuneration Committee, this formal assessment will be concluded. It is nevertheless intended that approximately 50% of future executive directors’ fees will be taken in the form of shares and therefore linked to share price performance. Mr Ritson has additionally indicated to the Board his wish to take all accrued and future fees as a director in the form of Company shares. Further details will be announced at the upcoming Annual General Meeting and will be subject to regulatory compliance.
Some key advisors are also being consulted and it is intended that where possible new contracts will be negotiated that reflect a similar basis as with the directors.