Solo Oil - CEO Q&A

http://www.solooil.co.uk/

Ausable #4 pump in Canada
This article is a follow-on from the below posts. For full context and information, read these articles first:
http://www.theel1tetrader.com/2012/08/solo-oil-medium-term-potential.html
http://www.theel1tetrader.com/2012/10/aminex-and-solo-step-up-gear.html

Solo Oil (LSE:SOLO) is an AIM listed oil and gas exploration company with a series of production assets in Canada whilst participating in exploration at the Ruvuma license in Tanzania where the company (partnered with Aminex) uncovered the Ntorya-1 gas and condensate discovery early in 2012. In this article CEO Neil Ritson answers some questions on the company.

Q: In a nutshell, what is Solo Oil?
NR: Solo is a non-operated oil and gas investment company which uses its management skills and relationships to access and manage projects which have good operators and where there is a need for investment. The dominant interest is in exploration projects and there are no defined geographic limitations though preference is given to Africa.


Ntorya-1 gas flare in Tanzania
Q: Oil has so far been eluded to within the Ruvuma basin despite significant and growing drilling programs offshore. Is there potential for ‘black gold’ to be found within the Tanzanian license?
NR: So far we have had good oil shows, plus gas, in Likonde-1 and a gas condensate discovery in Ntorya-1. There is good regional support for the presence of a Karoo age hydrocarbon play system and so oil is still a possibility; perhaps more likely onshore than off due to reservoir depth.

Q: Resource estimated for the Tanzanian project are currently based on outdated seismic. What are the potential implications of new seismic on the estimate?
NR: The new seismic is designed to infill the existing grid over known leads/prospects and will assist in positioning further well locations. Updated resource estimates may also occur as a consequence, but these will be refinements at this stage and the 5.75 TCF announced is unlikely to change much before further drilling planned in late 2013.

Q: Is access to the Dar Es Salaam - Mnazi Bay pipeline expected to be obtainable? What is the likely timescale for the bringing of Ntorya-1 online if commercial?
NR: The new pipeline is now underway and we will get an access point at Mtwara (25 km from Ntorya) and there will be easy access from all other parts of the Ruvuma PSA. All our prospects are within 40km of the planned pipeline route, some even straddle the route. Ntorya-1 needs, as a minimum, the new planned seismic and an appraisal well. We have applied for an appraisal licence which once granted will run for 2 years.

Q: Around 5.75TCF has been attributable to the Tanzanian license where Solo currently has a 25% stake. How will Solo seek to maximise value here in the future?
NR: Solo will maximise value through the farm-out that is underway. We plan to reduce our 25% paying interest to a 12.5% carried interest and anticipate seeing the resources estimates firm up and commercial gas sales commence which will greatly enhance the Solo valuation.


Solo is partnered with Reef Resources in Canada
Q: Solo has been adversely affected in recent months by delays and production problems at Reef Resources’ operations in Ontario where Solo has an interest. What were the causes of the problems that these operations have experienced?
NR: Facilities, surface and down hole, have had to be further upgraded and commissioned. This has not gone as smoothly as expected. Work is still ongoing.

The latest production update from Ontario stated: Two of the four wells at the Ausable Oil Field (Ausable #1 and Ausable #5) have now been put on line and total liquids potential of 275 barrel oil equivalent per day (boepd) gross has been computed based on the current gas cycling rate of 236 thousand cubic feet per day (mcfd). The initial two wells production rate averaged 13 boepd although this is now being rapidly scaled up as gas cycling rates are increased.

Q: What upside potential is possible at the Ontario operations and what form would this take?
NR: We hope that when the Ausable development has been achieved we will be able to take the facilities template and apply it to other Ontario reefs. Reef/Solo holds a large 3D seismic survey and there are other reefs that we can see that are undrilled or undeveloped. First we have to ensure we have a successful template for developments and that is the project that has been underway for the last 2 years at Ausable.

The Ontario project was acquired to give Solo a sustainable revenue stream I the longer term and is not a key component in the growth story that will be achieved predominantly through exploration lead projects like Tanzania.

Q: Recently Solo terminated their equity line facility (ELF) as it did not match forward funding plans. Why was the ELF cancelled at this point in time when there was still over 70% remaining? Does Solo have sufficient cash to pay for its share of the seismic at Ruvuma?
NR: The ELF was a valuable mechanism when the forecast cash needs for Ntorya were largely unknown and Solo had to access the market on an ad hoc basis to cover cash calls, however, we are now in a position to plan the cash requirements more fully. It is anticipated that a farm-in to Ruvuma will as a minimum carry Solo through the planned seismic and two further exploration wells so there is not a comparable funding need going forward.

Q: If Solo were to pursue other investments in the future would these target existing or new acreage and in which sort of geographical locations would Solo be looking at?
NR: Solo, by its strategy, is always looking for future investments that fit our criteria. We tend to favour Africa, but look at projects in North and South America too. This is an ongoing process.

Ausable #5 well
Q: 2013 holds many potential milestones for Solo. What news events are expected throughout 2013?
NR: Farm-out in Ruvuma is the key value driver in H1 2013. In the 2nd half we will be agreeing and spudding new wells in Ruvuma.
(Physical data room open from early December onwards. Bid date for the Ruvuma farm-out is currently stated as 8th February 2013. Aminex's IMS stated that: There has been significant interest in the farm out expressed by a diverse array of international companies.)

Q: Solo’s market capitalisation currently stands at around £14m. Assuming a best case scenario what is your target market cap for Solo and what are likely to be the key price drivers to help achieve this?
NR: A farm-in to Ruvuma will re-rate Solo as it will further validate the opportunity and provide the required funding. In this case we would expect to see the MC at a multiple of its current level.

Q: 12. In short, what unique opportunity does Solo provide investors with?
NR: Medium term re-rate and repeatable model with a track record of achieving exploration success. We will add new assets progressively to expand the corporate reach and reduce dependence on a small number of events in the portfolio.



Caroil rig at the Ntorya well
Ausable #5 well and processing plant
UPDATE 24/10/13: Solo Oil moved from Buy to No Rating following underperformance, at 0.299p. Shares look technically weak also. Take a ~15% loss at this point in time.

9 comments:

  1. Superr photos and great to see some proper ir at a company

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  2. Fantastic article!

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  3. Strongly agree with NR - will post this on other boards

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  4. Smashing blog and great responses by NR. - gives confidence

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  5. Fab. Well done Elite.

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  6. Great atricle. PJ

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  7. I concur with previous posts. Very confidence building article. Here's to the future

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  8. Great article and good to see the operations and wells it cements things for me and provides confidence. COME ON SOLO you can do it!!!

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