Monday, 15 June 2015

Company Snapshot ~ Solo Oil

This week we popped along to Jermyn Street to meet up with Neil Ritson, a lucky break for us as CEO of LGO Energy and chairman of Solo Oil he’s a busy man. Despite sharing management, the two groups offer distinctly differing strategies; whilst LGO focusses on mature field redevelopment in Trinidad, Solo Oil is largely focussed on the development of gas assets in Tanzania. What follows is our representation of the current picture at Solo, with LGO to follow in due course.

Solo Oil (Ticker, SOLO) Mkt Cap £25.5m (No Debt)

Attendee; Neil Ritson (Chairman)

Solo Oil is a junior oil & gas company listed on the London AIM market. The group’s strategy is to acquire and develop a diverse, global, non-operated portfolio of oil & gas assets. The group currently holds interests In Tanzania, UK, Canada and Nigeria.

Despite an abundance of press coverage for Solo’s Horse Hill oil discovery in the Weald basin (UK), the primary focus remains Tanzania where the group awaits signing of a gas sales agreement (GSA) at its recently developed gas field, Kiliwani North. The stakes are high as near-term cash flow from Kiliwani could have a ‘multiplier’ effect for Solo in Tanzania, funding both appraisal of the group’s gas discovery; Ntorya-1 and enabling further exploration within the wider Ruvuma PSA.

As Solo Oil is a non-client of Edison, we present the following key asset snapshots and background discussion of Solo’s key assets for information purposes only.

Kiliwani North (Tanzania) Asset snapshot.
13% WI (6.5% + 6.5% contingent on operator Aminex signing the GSA. 28Bcf (2C contingent on GSA) gas field located on Songo-Songo Island. First production exp. Q4 2015 at 20mmcf/d. Field is fully developed with timing of first production dependant on agreement and signing of a GSA with TPDC and the ministry of energy. Aminex operates with 75% WI.

Kiliwani North. (Tanzania) Production start dependant on gas sales agreement (GSA)
Solo recently took a 6.5% interest in gas discovery Kiliwani North (KN) from operator Aminex with acquisition of a further 6.5% agreed on the same terms but contingent on signing of a gas sales agreement. Development of KN is practically complete, the 2km export line to the Songo-Songo processing facility has been installed and tested, with tie-in from the well head to this line expected to be completed within weeks. The final hurdle to first production at KN remains the signing of a gas sales agreement, which Solo expects imminently. On signing of this agreement Solo will increase its interest in KN to 13%, with annual cash flows from KN estimated by Aminex at $20m (gross), as such the field would be a valuable source of funding for both Aminex and Solo. We expect the resulting cash flow from KN would be used to fund the Ntorya-2 appraisal well, and potentially further exploration in the Ruvuma licence generally. Commercial arrangements to get gas into the market in Dar Es Salaam.

Kiliwani North Gas Field, Songo Songo Island, Tanzania

Ruvuma PSA (Tanzania). Asset snapshot.

25% WI. The Ruvuma PSA covers two adjacent licences; Lindi & Mtwara licences ~ 6,079km2 split 80/20 onshore/offshore. Ntorya-1 gas discovery ~ 153Bcf (GIIP), upside to 1.4tcf on further appraisal, 4.17Tcf of exploration potential in PSA overall (4 prospects + 4 leads). Aminex operates with 75% WI.

Ruvuma PSA (Tanzania). Ntorya gas discovery requires further appraisal.
Within the Ruvuma PSC, the Ntorya gas discovery flowed 20mmcf/d and 139bbls of associated condensate from initial discovery well Ntorya-1. The field requires further appraisal to test the 1.5Tcf estimated GIIP for the entire Ntorya field. Operator Aminex plans an appraisal well (Ntorya-2) for the 2H of 2015 (subject to funding), with AFE for the well estimated at around $10m, down from a recent estimate of $12m based on rig rates falling in-line with oil prices. Once Ntorya is fully appraised, a ready market exists for the gas via the recently installed 36’ pipeline from Mnazi Bay to Dar ‘es Salaam, with a tie-in of around 20km required from the field to the 36’ line. Beyond the Ntorya discovery  the Ruvuma PSA contains material prospects identified from a seismic program carried out in 2014. These prospects, particularly Sudi (426Bcf), Namisange (1,183Bcf) and Likonde Updip (444Bcf) suggest a multi-well exploration program could be warranted at some point in the future, and indeed offers upside to future companies that may farm-in to the licence.

Ruvuma PSA (Green), Tanzania

Horse Hill Development Company (UK). Asset snapshot.
Solo’s 10% WI in HHDL equates to 6.5% WI in Horse Hill given HHDL owns 65% of Horse Hill. Upper Jurassic Portland sandstone discovery, 21mmbbl oil in place. Oil in place potential within the deeper Kimmeridge shale is estimated by Nutech at 158mmbbls/ square mile and more recently by Schlumberger at 255mmbbls/square mile.

Horse Hill (UK). Production test scheduled for 2015. Solo’s focus at Horse Hill remains the conventional upper Portland sandstone discovery, where estimates of oil in place have recently been upgraded to 21mmbbl. Estimates of recoverable oil from the Portland remain dependant on a pumped flow test being carried out at the well, a planning application has been submitted and the HHDL consortium expects to initiate and complete the test by end 2015. Beyond the Portland discovery much attention has been focussed on potential within the deeper Kimmeridge shale and Micrite limestone ‘hybrid’ play. Although reservoir consultants Nutech estimated oil in place for the Kimmeridge at Horse Hill of 158mmbbl per square mile, whether this oil can be produced and at what rate remains a long-term consideration for the consortium. As an unconventional shale play, commercial development is likely to involve fracking, in which case the biggest hurdles to a development are likely to be above ground given the location.          


Horse Hill, PEDL 137, UK 

Beyond Tanzania and the UK Solo holds an asset in Canada and a corporate entity on the hunt for assets in Nigeria, detailed in snapshots as follows.

Canada, Ontario Reefs 28.56%. Asset snapshot. On hold due to limited operator finance. Development plan to move asset from small-scale production to enhanced oil recovery ~ enhancing light oil recovery from re-pressurising proven reef structures.
   

Corporate holding; Burj Africa (20%). Asset snapshot. UK registered company established to participate in the current marginal field licencing round in Nigeria. Live application in place for two marginal fields containing 2P oil reserves of 59.3mmbbl (gross).

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