Acquisition

RNS Number : 1017H

Solo Oil Plc

24 May 2011

 



Immediate Release

24 May 2011

Solo Oil plc

('Solo' or 'the Company')

Acquisition of Canadian Interests

Solo Oil plc is pleased to announce that it has entered into a binding Heads of Agreement ("the Heads of Agreement") with Reef Resources Ltd ("Reef") to earn a 38.1 % direct working interest in the Ausable Field and surrounding properties in  South Western Ontario ("the Properties").

Highlights:

·      Production testing will soon commence on Ausable#5

·      Ausable #5 contains 72 metres of net hydrocarbon bearing pay

·      Further wells are planned along with expansion of the production facility during 2011

·      To gain a 38.1% working interest Solo will:

1.     Convert its existing Participating Loan of CDN$ 1.65 million into a direct working interest in the Properties, and

2.     Invest up to an additional CDN$ 2.35 million in the Properties

Neil Ritson, Solo Executive Director, commented:

"The initial facilities upgrade and drilling of Ausable#5 has provided proof of concept at Ausable in the last 6 months and Solo now has sufficient confidence to convert its existing loan to a direct participation in the Reef properties and to commit to co-invest with Reef in the further development of the field and the surrounding opportunities. This is an important watershed in the project and we look forward to reporting on it further as the year progresses."

About the Properties

The Properties include the Ausable, Airport North and Airport South reefs as well as surface equipment, a 23,000 acre 3D seismic survey and other associated gas storage rights.  The Properties cover an area of approximately 1,800 acres in South Western Ontario.  The principle oil and gas play is contained in Guelph formation reef carbonates that are known to be developed extensively in the area.  The Ausable Field is currently on production and is generating revenue from the initial Enhanced Oil Recovery (EOR) program which commenced in 4th quarter 2010 deploying the Ausable#1 and #4 wells.

During April 2011 petrophysical analysis at the Ausable#5 well, drilled between early February and end March 2011, showed the presence of 72 meters of net pay.   Production testing at Ausable#5 is expected to start by end May.  Following successful production testing; the well will be connected to the existing production facilities and placed on production as an oil and natural gas liquids (NGL) producer.

Due to the presence of extensive oil and natural gas liquids pay zones in the Ausable#5 well, Reef will now begin detailed scheduling for the drilling of additional wells and the continued expansion of the Ausable production facility including the purchase of a de-ethaniser and compression gas. Currently it is hoped to complete this additional work by the end of 2011.

Further phases of development at the Ausable reef include the increase of gas cycling and eventual gas storage after oil depletion.

Reef also has rights to an extensive 3D seismic survey covering 23,000 acres around the Ausable Field, data which shows the presence of a number of similar features many of which are untested and offer further development potential.

Terms of the Working Interest Acquisition

·              Solo will convert its existing Participating Loan to a direct working interest in the Properties at a rate of 1% interest per CDN$105,000.

·              Solo will advance a further CDN$200,000 following execution of the Heads of Agreement on the same terms.

·              These additional funds will be used for the testing and completion of the Ausable #5 well, the tie-in of the South Airport gas well to the Ausable Field production facilities and the return to production of the Ausable#2 well.

·              Solo and Reef will, within 30 days, agree and sign a First General Conveyance Agreement totalling 23.8% direct working interest in the Properties. On signature of this agreement Solo will advance a further CDN$650,000 to the project.

·              Upon execution of the conversion of the Participating Loan as envisaged in the Heads of Agreement, Solo has additionally agreed to pay CDN$2.5 million to purchase an additional 14.3% direct working interest in the Properties.

·              This additional payment will be released against agreed work programmes and budgets following execution of a Second General Conveyance Agreement and Joint Operating Agreement, and when Reef raises equivalent equity funding of CDN$1.5 million.

Additional information relating to this transaction requiring disclosure in accordance with Schedule Four:

(a)  Particulars of the transaction: detailed above

(b)  Description of the assets subject to the transaction: detailed above

(c)   Profits attributable to the assets: None

(d)  Value of the assets acquired if different from the consideration: Value of the direct working interest acquired is the same as the consideration being CDN$ 4 million

(e)  Full consideration and how satisfied: detailed above

(f)   The effect on Solo : Company will now have a direct working interest in the Properties and will co-invest through a standard Joint Operating Agreement with Reef

(g)  Details of service contracts for proposed directors: Not applicable

(h)  Not applicable

(i)   Not applicable

(j)   Not applicable

Competent Person's Statement:

The information contained in this announcement has been reviewed and approved by Neil Ritson, Chief Executive Officer and Director for Solo Oil Plc who has 35 years of relevant experience in the oil industry.  Mr. Ritson is a member of the Society of Petroleum Engineers, an Active Member of the American Association of Petroleum Geologists and is a Fellow of the Geological Society of London.

For further information:

Solo Oil plc David Lenigas Neil Ritson	[phone]
Beaumont Cornish Limited Nominated Adviser and Joint Broker Roland Cornish	[phone]
Shore Capital Joint Broker Pascal Keane Edward Mansfield	[phone]
Pelham Bell Pottinger Financial Public Relations Mark Antelme Henry Lerwill	[phone]

 

END

 

 

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