Home » News » PLC News » Solo Oil plc publish results for year end 2014
Company Interviews

Solo Oil plc publish results for year end 2014

Solo Oil plc LON:SOLO announces that the Company’s audited Report and Accounts for the 12 months to 31 December 2014 are being posted to Shareholders and will shortly be available from the Company’s website.

 

Chairman’s Statement

I am pleased to present the report of the Company’s activities during the year ended 31 December 2014. In my first year as Chairman I am pleased to report continued progress in creating value within the portfolio and towards the Company being cash generative following the acquisition of a material stake in the Kiliwani North development on Songo Songo Island, Tanzania where first gas sales are expected in 2015.

 

Solo continues to grow and diversify with the addition of a new area of investment in the United Kingdom and with significant advances in our existing investments in both the onshore Ruvuma Basin in Tanzania and in West Africa. Further opportunities to increase our exposure to the petroleum sector are under active review and we look forward to making further investments in the years ahead.

 

Investment Strategy

The Company has continued to pursue its original investing policy, as approved by the shareholders in 2009, which is to develop a diverse worldwide portfolio of exploration, development and production interests, with the primary focus being in Africa. At the time of writing Solo holds material assets in Tanzania, Nigeria, the United Kingdom and Canada.

 

Highlights for the period include:

 

  • Tanzania
    The exploration drilling commitment in the Ruvuma PSA were extended into the 2nd Extension Period to allow additional seismic to be acquired prior to further drilling
  • A total of 180.6 kilometres of infill 2D seismic data were acquired and processed over the Ntorya-1 and Likonde-1 discoveries in Tanzania
  • New seismic resource estimates in the Ruvuma PSA led to a substantial upgrade to over 4 trillion cubic feet gross un-risked prospective gas in place
  • Ntorya-1 has been attributed independent discovered gross gas in place of 153 bcf, with mean contingent resources of 70 bcf
  • An un-appraised Ntorya-Likonde gross mean gas in place of 2.6 tcf remains to be proven by further drilling
  • Solo acquired a 6.5% interest in the Kiliwani North Development Licence in Tanzania from Aminex in early 2015
  • Solo also agreed an option to acquire a further 6.5% on the same terms at a later date
  • Kiliwani North-1 has discovered gross gas in place of 44 bcf, with mean contingent resources of 28 bcf.
  • United Kingdom
    Solo acquired a 6.5% interest in the Horse Hill prospect and associated licences, PEDL137 and 246, in the Weald Basin
  • The Horse Hill-1 well was successfully drilled to a depth of 8,870 feet MD and resulted in the discovery of oil in the Portlandian Sandstone and in older Kimmeridgian, Oxfordian and Liassic rocks
  • The Portlandian Sandstone discovery is estimated to contain 21 million barrels of oil (“mmbbls”) initially in place (gross) and a flow test is planned in 2015 to increase the understanding of the commerciality of this discovery
  • The discovery in the Jurassic Kimmeridgian, Oxfordian and Liassic limestones and mudstones has been credited with very significant gross oil in place between 158 and 255 mmbbls
  • Work is still ongoing to establish the possibility of contingent resources at the Jurassic level in the licence area and in the wider Weald Basin
  • In conjunction with UK Oil and Gas Investments plc and Angus Energy Limited the Company lodged an application for onshore acreage in the Isle of Wight as part the UK 14th Onshore Licence Round

 

 

  • West Africa
    Ongoing discussions with Pan Minerals through 2014 resulted (after the current year-end) in an agreement to acquire a 20% interest in Burj Petroleum Africa Limited, a company which has made applications for a number of “marginal field” interests in Nigeria

 

 

  • Corporate
    During the year, the Company raised a total of £2.76 million before financing costs through the allotment of 416,466,166 shares in private placements and an equity swap agreement with YA Global Master Fund
  • A US$5 million loan facility was entered into in September 2014 with YA Global Master Fund and a total of US$1 million was drawn on that facility during 2014
  • Fergus Jenkins and Donald Strang joined the Board as executive directors in October 2014, whilst company founder David Lenigas retired having served as Solo’s executive chairman since January 2008. Neil Ritson was appointed as chairman.

 

 

Asset Review:

Tanzania, Ruvuma Basin

Solo has a 25% interest in the Ruvuma Petroleum Sharing Agreement (“Ruvuma PSA”) in the south-east of Tanzania that covers approximately 3,447 square kilometres of which approximately 10% lies offshore and the balance onshore. The Ruvuma PSA is in a region of southern Tanzania where very substantial gas discoveries have been made offshore in recent years.

 

 

The Ntorya-1 discovery well reached a final total depth of 3,150 metres and a gas zone between 2,663 and 2,688 metres was tested in June 2012. Flow testing on a 3.5 metres zone at the top of the gross 25 metre gas bearing interval produced a maximum flow rate of 20.1 million cubic feet per day (“mmscfd”) and 139 barrels per day (“bpd”) of 53 degree API condensate through a 1-inch choke. Following the completion of the test sequence the well was suspended as a discovery for subsequent additional testing or production.

 

 

An infill 2D seismic programme totalling 180.6 kilometres was acquired in April and May 2014 and was processed and interpreted by the PSA operator, Aminex plc. The new seismic data quality was markedly improved on earlier efforts due in part to close detail to the static corrections to the near surface portion of the data. On the basis of the improved quality some of the earlier legacy data was also reprocessed with the improved statics model and that data was subsequently integrated with the new interpretations.

 

 

The operator’s interpretation of the new 2D seismic lead to a re-estimation the discovered and prospective resources in the Likonde-Ntorya area leading to increased resources estimates in September and December. The operators work was subsequently audited by LR Senergy who issued a Competent Person’s Report (“CPR”) in May 2015. LR Senergy estimated that Ntorya contains gross 158 billion cubic feet (“bcf”) of proven gas in place, of which they attribute a gross 70 bcf as best estimate contingent resources. Overall in the Ruvuma PSA LR Senergy estimate gross 4.17 trillion cubic feet (“tcf”) of discovered and undiscovered gas in place. These estimates are tabulated in Table 1 below.

 

Table 1: Gross mean estimated discovered and undiscovered gas potential in Ruvuma PSC

 

 

Source

Date

Ntorya

Contingent Resources

bcf

Ntorya Discovered

GIIP

bcf

Ntorya area Undiscovered

Prospective Resources GIIP

tcf

Ruvuma PSC Discovered and Undiscovered unrisked GIIP

tcf

ISIS

2 July 2012

178

1.5

5.75

Aminex

11 September 2014

2.3

Aminex

18 December 2014

3.2

LR Senergy

14 May 2015

70

153

2.6

4.17

 

Note: ISIS report pre-dates the most recent acreage relinquishment and covers a larger pre-relinquishment area of the as compared to the Ruvuma Basin as compared to later estimates.

 

Tanzania, Kiliwani North

In October 2014 Solo announced that it had agreed with Aminex to acquire up to a 13% working interest in the Kiliwani North development on Songo Songo Island. Kiliwani North-1 well was drilled by Aminex and its partners in 2008 and discovered gas in a 60 metre column in the Lower Cretaceous. Based on well test results Kiliwani North-1 is expected to be flowed at a rate of at least 20 mmscfd once on stream through a 2 kilometre tie-in pipeline to the Songo Songo Island gas processing facility, and from there to the newly constructed 36-inch pipeline to Dar es Salaam.

 

Solo agreed in October 2014 to acquire a 6.5% interest in the project immediately and obtained an option to acquire a further 6.5% interest at a later date. By year end most conditions precedent for the acquisition had been met and the formal approval by the Tanzanian authorities of the assignment was expected in early 2015. That approval was granted in late February 2015 and Solo completed its acquisition of the initial 6.5% interest through the payment of US$3.5 million. Solo and Aminex also agreed to extend the option for Solo to acquire its second 6.5% interest to a date 30 days after the signing of a gas sales (“GSA”) agreement for the Kiliwani North gas. At the time of writing the GSA remains unsigned pending resolution of various payment guarantee terms, but is expected to be signed shortly.

 

Independently verified gross gas in place of 45 bcf were computed by Isis Petroleum Consultants Pty Ltd in 2013 and confirmed by LR Senergy in a Competent Persons Report in May 2015. LR Senergy computed gross mean gas in place of 44 bcf of which 28 bcf have been attributed as best estimate contingent resources.

 

UK, Weald Basin

In February 2014 the Company announced that it had signed a binding agreement (which was later converted into a definitive agreement and completed) to acquire a 10% interest in a special purpose company, Horse Hill Developments Limited (“HHDL”), which held the option to become operator and 65% interest holder in two Petroleum Exploration and Development Licences (“PEDL”) PEDL 137 and 246 in the northern Weald Basin between Gatwick Airport and London.

 

The PEDL 137 licence covers 99.29 square kilometres (24,525 acres) to the north of Gatwick Airport in Surrey and contains the Horse Hill prospect and several other exploration leads. PEDL 246 covers an area of 43.58 square kilometres (10,769 acres) and lies immediately adjacent and to the east of PEDL137. HHDL subsequently completed the farm-in to the two PEDLs to obtain the planned 65% working interest in September 2014.

 

The Horse Hill-1 well is located approximately 7.5 kilometres southeast of the producing Brockham Oilfield and approximately 15 kilometres southwest of the Palmers Wood Oilfield. The pre-drill primary target reservoir horizons were the Portland Sandstone, which is productive in the Brockham Oilfield, and the Corallian Formation, which is the producing horizon in the Palmers Wood Oilfield. The Triassic, which is productive in the nearby Wessex Basin and has previously tested gas in the Weald Basin, and the Greater Oolite Formation, were seen as secondary targets for the well.

 

The Horse Hill-1 (“HH-1”) well commenced drilling operations on 2 September 2014 with 20-inch surface casing being set at 84 feet below ground level. The Marriott-50 rig was installed on the well by 22 September 2014 and the drilling of 17 1/2-inch hole to intermediate 13 3/8-inch casing depth at 1,795 feet measured depth (“MD”) completed on 28 September 2014. Drilling continued in 12 ½-inch hole and after a further intermediate casing was set at 6,612 feet MD the well reached total depth at 8,870 feet MD on the 4 November 2014.

 

Evaluation of electric logs and other data collected from the well resulted in the announcement on 24 October 2014 of a conventional Upper Portlandian Sandstone discovery with a preliminary most likely estimate of 3.1 million barrels (“mmbbls”) of gross oil in place in a 102-foot zone. A further 16.8 mmbbls of possible gross un-risked prospective oil in place were estimated in the Lower Portlandian Sandstone, in what was believed at the time, to be an untested fault block to the south of the well. Further hydrocarbon indications in the Kimmeridgian Formation were observed and were subject to additional analysis. The anticipated Triassic reservoir was not found to be present and the well was terminated in older Palaeozoic formations.

 

In December 2014, after the initial announcement of a Portlandian discovery further work, integrating the well results with a vertical seismic profile (“VSP”) and electric logs, demonstrated that the Collendean Farm-1 and Horse Hill-1 wells were in communication at Portland reservoir level and the fault previously interpreted to lie adjacent to HH-1 was a seismic artefact. The best estimated gross oil in place at the combined Portlandian Sandstone level was upgraded to 8.2 mmbbls. An independent reserves review by the Xodus Group released in May 2015, saw this estimate substantially increased again to 21.0 mmbbls. The estimated gross oil in place in the Portland Sandstone at the various stages of evaluation are tabulated in Table 2 below.

 

Table 2: Gross estimated discovered oil initially in place (“STOIIP”) in Portlandian Sandstone at Horse Hill (mmbbls)

 

 

Source

Date

Low (P90)

Best (P50)

High (P10)

Mean

Company Internal estimate

24 October 2014

1.5

3.1

4.8

na

Company Internal estimate

17 December 2014

5.7

8.2

12.1

na

Xodus Group

11 May 2015

14.3

21.0

30.4

21.8

 

na = not available

 

A flow test is planned to test the Portlandian Sandstones in order to establish the feasibility of a commercial development of the oil estimated to be in place in the reservoir. That test is expected to be performed in 2015.

 

During drilling it was also noted that the Kimmeridge limestones and surrounding shale contained oil and following the completion of the drilling of the well extensive geochemical analysis was conducted which showed the Kimmeridge formation was mature for oil generation. Armed with this knowledge Solo and its partner in the license, UK Oil and Gas Investments plc (“UKOG”), contracted NUTECH Inc. (“Nutech”), an industry specialist in tight reservoir analysis, to conduct further detailed petrophysical evaluation of the electric logs. This work resulted in the announcement in April 2015 of a potentially significant play with estimated gross oil in place of over 150 million barrels per square mile.

 

The results of the work by Nutech have subsequently been independently verified in May 2015 by Schlumberger, one of the world’s leading oil and gas service companies, using their proprietary modelling developed in tight reservoirs in the USA and applied extensively in the USA and elsewhere. Schlumberger’s estimate of oil in place in the Kimmeridge, Oxford and Lias mudstones and limestones is approximately 255 million barrels per square mile (gross). If confirmed, this largely unconventional play in the Kimmeridge opens up large areas of the Weald Basin that may have potential for oil production, not limited to the PEDL137 licence area where Horse Hill is located.

 

UK, Isle of Wight

In October 2014 Solo teamed up with two of its Horse Hill partners, UK Oil and Gas Investments plc (“UKOG”) and Angus Energy Limited to make an application in the UK 14th Landward Licensing Round. The application was made for a 200 square kilometre onshore block in the south of the Isle of Wight, adjacent to UKOG’s existing offshore licence which contains an undrilled prospect that is considered to lie both on and offshore the south coast of the island. At year end the application was still under consideration by the Department of Environment and Climate Change (subsequently the Oil and Gas Authority, (“OGA”)) and awards in the 14th Round are now expected in the second half of 2015. Solo holds a non-operated 30% interest in the application.

 

West Africa, Nigeria

In 2013 Solo made an investment into Swiss private company Pan Minerals Oil and Gas AG (“Pan Minerals”) in order to assist Pan Minerals in progressing various opportunities in West Africa where Solo hoped eventually to take an equity stake in onshore oil assets. At the beginning of 2014 Solo held a 19.9% interest in Pan Minerals. During 2014 Solo and Pan Minerals worked together to assess various options and Pan Minerals independently sought other investors.

 

In early 2015 Pan Minerals approached Solo with an opportunity to invest in Burj Petroleum Africa Limited (“Burj Africa”) that had applied for various undeveloped fields in the 2014 Nigerian Marginal Fields Bid Round along with joint venture partners Global Oil and Gas (“Global”) and Truvent Consulting. Solo subsequently exchanged its 19.9% shareholding in Pan Minerals for a 15.9% in Burj Africa and made a further investment of US$500,000 in cash and shares to increase that shareholding to 20%. Solo also gained the right, at its sole election, to convert the equity position in Burj Africa to a direct participation in the joint venture with Global in Nigeria.

 

Global was founded and is controlled by Mr Phil Mulacek, an internationally known resource entrepreneur, and Global is the designated operator of the Burj Africa joint venture in Nigeria. Truvent Consulting is an indigenous Nigerian oil and gas development company.

 

Two adjacent marginal fields have been applied for containing 10 wells previously drilled by an international major oil and gas company. These fields are believed by Burj Africa and its partners to contain gross proven, probable and possible recoverable oil reserves of 59.3 million barrels (“mmbbls”), approximately 13.5 mmbbls net to Burj after payment of royalties.

 

Canada, Ontario

No substantive progress has been made on the Company’s assets in Ontario. Solo owns a 28.56% interest in 23,500 acres of petroleum leases in southern Ontario which contain a number of Ordovician reefal structures which contain variously oil, gas and condensate. The operator, Reef Resources Inc., has been unable to raise the necessary funds to continue the development of the Ausable gas condensate field and no alternative has so far been found to unlock the potential. Solo’s management continues to seek ways to advance or monetise the investment made in the Ausable and adjacent Airport fields, and hopes to report progress in due course.

 

Corporate

In October 2014 a number of Board changes were announced. David Lenigas the Company’s founder and executive chairman since 2008 retired from the Board and was replaced by Neil Ritson as chairman. Mr Ritson was replaced as executive director by the appointment of Fergus Jenkins. Donald Strang was also appointed as executive director responsible for finance.

 

During the year Solo invested in its operations in Tanzania, the UK and West Africa through new shareholder equity and an equity swap arrangement.

 

Financial Results

The Company’s loss for the year is £1.85 million (2013: £3.12 million).

 

During the year the Company spent £1 million on acquisition and enhancement of intangible assets (2013: £1.4 million). An impairment charge of £0.4 million has been provided against the value of intangible assets (2013: £1.7 million).

 

Immediate Outlook

The Company’s 25% stake in the Ruvuma PSA continues to represent the most significant asset in the Company and its further development is being vigorously pursued. We look to realise the full potential of our investment in Ruvuma over the next few years as the discoveries made are commercialised and new exploration is conducted. The acquisition of a stake in the Kiliwani North Development is expected to provide ongoing revenue once gas sales commence in 2015.

 

The Horse Hill-1 well has had a significant impact on the portfolio, containing both a potentially commercial conventional Portland Sandstone discovery and a major entry into a new unconventional play in the Jurassic. The ongoing UK 14th Landward Licensing Round may also lead to additional opportunities in the UK.

 

The possible award of field development assets in Nigeria also marks a further significant milestone in the planned development of the Solo portfolio in Africa.

The Company is also continuing to seek further investment opportunities, with several new opportunities currently being evaluated.

 

Conclusion

During 2014 the portfolio was significantly enlarged with the acquisition of additional assets in Tanzania and the UK. The Company’s track record in exploration was maintained through the drilling of the Horse Hill-1 well and the discovery of oil in the Portland Sandstone and indications of a major basin-wide Jurassic unconventional play in the Kimmeridge mudstones and limestones. To date the Company has been involved with four exploration wells; Likonde-1, North Airport-1, Ntorya-1 and Horse Hill-1, with all four wells having hydrocarbon indications, and three being considered potentially commercial. In addition to exploration, Solo has now acquired an interest in the Kiliwani North-1 well which is due to be on stream for gas production in 2015. The Company’s Ausable field wells in Ontario continue to be shut-in but to have production potential and efforts continue in order to unlock that potential.

 

I would like to thank the directors, past and present, and the shareholders for their continued support as Solo Oil plc LON:SOLO continues to grow and to seek additional opportunities to deploy capital in non-operated joint ventures with the potential for significant value growth.

 

Neil Ritson Chairman Solo Oil plc

Join us on our new LinkedIn page

Follow us on LinkedIn