First Gas, Kiliwani North, Tanzania

RNS Number : 2900U

Solo Oil Plc

06 April 2016

 

FOR IMMEDIATE RELEASE, 7 am                                                                                                                                6 April 2016

SOLO OIL PLC

("Solo" or the "Company")

First Gas, Kiliwani North, Tanzania

Solo today announces that it has been informed by the operator, Aminex plc ("Aminex"), that first gas production has now been achieved from the Kiliwani North gas field, located onshore Tanzania, close to the large Songo Songo gas field.  The Kiliwani North Development Licence ("KNDL") containing the Kiliwani North-1 well ("KN-1") is operated by Aminex.  Solo currently owns a 6.175% working interest in the KNDL, which is set to rise in increments to 10% as announced on 4 April 2016.   Gas from KNDL will provide the Company with its first significant production revenue and its first revenue from its extensive investments in Tanzania.

Highlights:

·     Initial gas production commenced from KN-1 on 4 April 2016

·     KN-1 will deliver gas to the newly built Songo Songo processing plant which is tied into the main national pipeline infrastructure to the local Tanzanian market

·     Commissioning of the plant and associated pipeline will proceed over the next 90-100 days and production will build up to an expected rate of 25-30 mmcfd (approximately 4,000 to 5,000 barrels of oil equivalent per day gross)

·     All commissioning gas will be paid for and Solo will receive US$3.00 per mmbtu under the terms of its Gas Sales Agreement ("GSA") with the Tanzania Petroleum Development Corporation ("TPDC") with expected net cash generation of US$2.0-2.5 million per annum

Neil Ritson, Solo's Chairman, commented:

"Solo is delighted to see its investment in the Kiliwani North project move into production. This is a truly transformational step for the Company. Resulting revenues will initially be reinvested in growing our reserves base in Tanzania, a country which has new national gas infrastructure and huge prospects for growth in the local gas market.  Solo also looks forward to progress on the Ntorya appraisal in the Ruvuma PSC where a substantially larger gas discovery has been made and where Solo already holds a 25% working interest."

The partners in the KNDL will receive all revenue in United States Dollars and a gas price of US$3.00 per mmbtu (approximately US$3.07 per mcf) that will be adjusted annually by applying an agreed United States Consumer Price Index. The gas price is not linked to any commodity price so importantly is unaffected by current commodity market conditions. The gas delivery point is at the outlet flange of the Kiliwani North wellhead and by selling the gas at the wellhead the joint venture partners are not responsible for pipeline transportation and processing fees.

Initial production rates will be managed to allow for testing and commissioning of the Songo Songo Island gas processing plant and associated pipelines, while also recording critical pressure and flow rate measurements to determine the optimal flow rate to maximize the life of the KN-1 reservoir.  KN-1 is estimated to hold a gross contingent resources of 28 billion cubic feet ("bcf"). With production underway Solo expects to book gas reserves for Kiliwani North later this year. Net reserves to Solo's 6.175% interest are independently estimated as 1.7 bcf, rising to 2.8 bcf once the full 10% interest is acquired following final declaration of commerciality.

Current participants in the Kiliwani North Development Licence, following TPDC back in, are: Ndovu Resources Ltd (Aminex) 55.575% (operator), RAK Gas LLC 23.75%, Solo Oil plc 6.175%, Bounty Oil & Gas NL 9.5% and TPDC 5%.  On completion of the payments envisaged by the SPA Aminex will hold 51.75% and Solo will hold 10%.

Qualified Person's Statement:

The information contained in this announcement has been reviewed and approved by Neil Ritson, Chairman and Director for Solo Oil Plc who has over 38 years of relevant experience in the energy sector.  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 Neil Ritson	[phone]
Beaumont Cornish Limited Nominated Adviser and Joint Broker Roland Cornish	[phone]
Shore Capital Joint Broker Jerry Keen (Corporate Broker) Bell Pottinger                            Public Relations Henry Lerwill Cassiopeia Services LLP Investor Relations Stefania Barbaglio	[phone] [phone] [phone]

Glossary:

bcf	billion cubic feet
contingent resources	those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies
GSA	gas sales agreement
mmbtu	million British thermal units
mscf	thousand standard cubic feet
mmscfd	million standard cubic feet of gas per day
PSC	Petroleum Sharing Contract
reserves	reserves are defined by the SPE as those quantities of petroleum, here oil and gas, which are anticipated to be commercially recovered from known accumulations from a given date forward
US$	United States of America dollars

 

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