Interim Results

RNS Number : 8800N

Solo Oil Plc

27 September 2019

 

27 September 2019

Solo Oil plc

("Solo" or the "Company")

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019

Solo Oil (AIM: SOLO), a natural resources investing company focused on acquiring a balanced portfolio of production, development and exploration assets, is pleased to announce its Unaudited Interim Results for the six months ended 30 June 2019.

Period Highlights:

·    Completion of disposal of Company's 30% interest in PEDL331 on the Isle of Wight

·    Strengthening and reconstitution of the Board with Alastair Ferguson assuming the role of Executive Chairman

·    Management team strengthened with appointment of Douglas Rycroft as General Manager

·    Intervention and work-over operations resolved the Kiliwani North-1 subsurface safety valve issue with gas flowing to the plant during test period

·    Change of representation by Solo on the Helium One board to support the progress of the company to a more operative phase

·    The Company participated in a Convertible Loan Note ("CLN") pre-IPO funding round for Helium One Limited ("Helium One" or "He1")

·    Board announced a new strategic focus for the Company aimed at delivering a balanced, full lifecycle portfolio comprised of production, development and exploration assets that provide a sustainable path for growth alongside funded G&A

·    Signed Heads of Terms ("HoT") in March 2019 for the divestment of Solo's 28.56% in Reef Resources Limited ("Reef")

·    Group cash at 30 June 2019 £3.0m

Post Period Highlights:

·    Completion of reprocessing of the selected 2D seismic lines over the Kiliwani North Development

·    Ongoing planning work to perform the re-entry and remedial work at Kiliwani North-1

·    Disposal of the Company's remaining UKOG share position

·    Announcement of partnership and risk sharing agreements with top-quartile service providers

·    Management further strengthened with the announcement of Douglas Rycroft joining as Chief Operating Officer and Romina Mele-Cornish joining as Chief Financial Officer

·    Further portfolio clean-up with disposal of the Company's interests in the Burj Petroleum Africa Limited

·    Continued screening process in line with Company's New Business Development strategy to acquire assets that support the Board's objective to achieve net production of at least 5,000 boepd within three years

Commenting on the Interim Results, Alastair Ferguson, Executive Chairman said:

"The Company has made further significant steps in H12019 towards its strategic goals with the additional rationalisation of its portfolio and strengthening of the management team to prepare the Company for a period of what we hope to be defined as strong growth and value creation.  The work carried out to date in monetising the Company's non-core assets provides us with a strong balance sheet enabling the Board and Management a platform to execute a strategic vision focused on returning value for shareholders.  We aim to establish this company as a mid-cap E&P underpinned by high quality assets and solid cash flow. Furthermore, we feel confident that we have the right team and strategy in place to achieve these ambitious objectives within our stated timeframes."

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

For further information:

Solo Oil plc Alastair Ferguson	[phone]
Strand Hanson Nominated & Financial Adviser Rory Murphy / James Spinney / Ritchie Balmer	[phone]
Shore Capital Broker Jerry Keen Buchanan PR Ben Romney / Kelsey Traynor / James Husband	[phone] [phone]

 Chairman's Statement

Introduction

I am pleased to be providing this statement in my capacity as Executive Chairman of Solo. H12019 and through to now has been a significant period for Solo with major corporate and operational changes across the Company and within the portfolio. The Company has now clearly defined a strategic vision and positioned itself for sustainable long-term growth.

The Board's focus in the first half the year was three-fold:

o  Complete the heavy lifting organizational transformation so that the Company is ready for a sustainable growth plan with a dual focus on acquiring assets and realizing value from the existing core portfolio;

o  Strengthen the Company's board and management and ensure that governance, structures and policies are in place to support the growth plan; and

o  Commence a highly active period of screening opportunities (c.20) in line with strategic objectives - the Board has taken 5 identified opportunities forward through due diligence and carried 3 into detailed negotiation.

New Strategy

In March 2019, the Board completed an extensive review of the Company and its growth strategy. The Board has identified the following strategic objectives as being core to long-term value creation and will shape the business going forward around these considerations:

o  Critical importance of free cash flow in building a sustainable business;

o  Identification of the dynamics of the European gas market as being particularly attractive for investment;

o  Continued portfolio rationalization;

o  Actively screening acquisition opportunities with a net production target of at least 5,000 boepd within 3 years;

o  Initial screening focus is on European gas assets and also North African countries with benign jurisdictions and attractive pricing dynamics

o  Develop a 'low-cost' investment model that maximises risk adjusted value returns to shareholders and minimises equity dilution; and

o  The inorganic growth model is not dependent on the rationalisation of the Company's existing assets due to the focus on capital efficient transaction structures. 

The Board has been actively reviewing acquisition opportunities and continues to be involved in a number of ongoing processes. Further updates will be provided if, and when, appropriate. Any acquisition would be consistent with the strategy, set out above to create a scalable oil and gas business with a focus on capital efficiency and one that can deliver shareholder returns in all oil price environments.

Material events year-to-date

Disposal of interest in PEDL331 License

In December 2018, the Board was pleased to announce that it had entered into a conditional sale and purchase agreement ("SPA") to dispose of its entire 30 per cent. interest in PEDL331 on the Isle of Wight ("IOW") to UK Oil and Gas plc ("UKOG") for a total consideration of £350,000.

With an effective date of 11 December 2018, the total consideration was satisfied through the issue of 17,989,326 new ordinary shares in UKOG ("Consideration Shares") and cash of £90,450. The Consideration Shares were calculated based on the 5-day volume weighted average price to 10 December 2018 of 1.4428 pence.

Following the completion of the conditions precedent the deal was completed in January 2019. Based on the £350,000 consideration, Solo has made an investment return of 2.25 times its historical investment in the IOW.

Ruvuma

The Ruvuma Gas Development remains the core asset within the Solo portfolio and following the successful farmout of Aminex's interest in the Ruvuma Gas development to The Zubair Corporation (subject to government approval) the Joint Venture continues to prepare for the drilling of the Chukumi-1 well and future development. The Company is fully funded for its share of the Chikumbi-1 well due to be drilled upon receipt of the licence extension. The well will be a key test of the Ntorya Gas Field, designed to encounter the Albian aged reservoirs 120 meters up-dip of the Ntorya-2 well alongside a potential play opening test of the Late Jurassic in a deeper exploration target.  

Work completed in late 2018 by Aminex plc (operator of the Ruvuma PSC) along with independent reserve work conducted by RPS Energy Consultants Ltd. ("RPS") has assigned the Albian aged Ntorya Gas Field a mean un-risked GIIP of 1.87 TCF (468 BCF net to Solo), with total combined gross 2C Resources of 763 BCF (191 BCF net to Solo), and has additionally assigned 936 BCF (234 BCF net to Solo) of 2U Resources (previously equivalent to "Best Estimate" Prospective Resource) to the Jurassic aged Chikumbi prospect.

With its existing gas infrastructure and growing market demand for gas, the Ruvuma Gas Development can play a critical role in the supply of the domestic market in Tanzania. The Company regards the investment by the government in the critical gas infrastructure of pipelines and processing facilities as a huge value add to the project. The Joint Venture continues to progress a phase 1 development targeting an early gas production / commercialisation development allowing for accelerated cash flow to the partnership and providing much needed gas into the Tanzania domestic market. This will provide the foundation of a full field development currently scoped to provide 140 MMSCFD. The Joint Venture is confident of the underlying market requirements to subsume this volume. The Aminex / Zubair farmout demonstrates the commercial validity and the operational viability of the Ruvuma project as a key domestic gas project in East Africa.

Portfolio

Helium One

Solo saw positive progress with regards to its early-stage investment in Helium One during H12019. In May, He1 underwent a significant Board and Management were augmented to introduce greater operational expertise and capability to the company as it transitions to the public market and moves into a critically important phase of establishing value through targeted exploration drilling of its exploration acreage in Tanzania. He1 is currently completing a pre-IPO fundraise and plans to list on the ASX during October 2019. Exploration drilling is planned to follow IPO in early 2020.

The Company now holds 20.0 million shares in He1 equivalent to a c.13.8% interest. Solo participated in a CLN pre-IPO funding round earlier in the period which is expected to be convert into equity as part of the pre-IPO and IPO process. This will deliver an additional 1.1 million shares in He1 to Solo. Solo's final ownership interest in He1 will be determined by the exact number of shares issued during the pre-IPO and the IPO but the Company estimates is shareholding will be between 9-10%.

Solo continues to monitor its investment in He1 closely as it progresses to public market in 2H 2019 and advances the planned drilling programme in early 2020.

Kiliwani North

During the period, on the Kiliwani North asset, in which Solo holds 8.39% interest, the operator Aminex have progressed further remedial work on the Kiliwani North-1 well, in order to reinstate production from the field.

The Joint Venture took the decision to accelerate the reprocessing of the existing 2D seismic, to plan for the acquisition of new 3D seismic with the aim to transition Kiliwani South from a prospect to a drill ready target (operator estimates of 57 billion cubic feet gas initially in place). The decision was taken to advance this work as current market conditions allow the joint venture to take advantage of the competitive pricing environment.  

Post-period, the operator has announced the completion of the reprocessing of the select 2D seismic lines over the Kiliwani North Development Licence with minor re-iterations requested from the processor. Data from the reprocessing will benefit the design of a 3D seismic survey and remapping of the licence, using the reprocessed lines, will occur once we have received the final data. The joint venture continues to source equipment to perform the reentry and remedial work on Kiliwani North-1. The re-entry, which has been designed to be carried out at minimal costs, is of value to investigate fluid levels in the well and provide an accurate bottom hole pressure measurement which will provide useful reservoir data for future operations and production and Press Release equipment is being ordered.

Non-Core

In March 2019, Solo announced that it had signed a HoT with Levant Exploration and Production Corp. ("Levant") for the divestment of Solo's 28.56% in Reef Reef to Levant.  The Company's exit of its shareholding in Reef is subject to definitive documentation being agreed and further demonstrates the Company's commitment to rationalise its existing portfolio as it delivers its growth strategy. 

In addition, the Company announced that it had entered into a sales and purchase agreement ("SPA") to exit its 20% holding in Burj Petroleum Africa Limited ("Burj") with existing shareholder in Burj. Subject to no other shareholders in Burj exercising their pre-emption rights in relation to the proposed sale by Solo, Solo will so relinquish any future costs associated with Burj. The Board expect the deal will complete at the beginning of October 2019.

Post period, the Company has disposed of its full position of UKOG shares.

These divestments are part of the Board's ongoing efforts to rationalize the historic portfolio of the Company and ensure that exits can be delivered in way to either extract value or are relinquished  to limit any future costs, depending on which options are viable and in the interest of the Company.

Outlook

Solo is currently at a critical juncture with regards to executing its planned growth strategy and setting the Company on a path to sustainable growth. We continue to focus our efforts on the business development activities as we seek to underpin the Company with high quality, cash generative assets. Concurrently, we continue to explore value realisation opportunities from our existing portfolio, and believe we will be better placed to extract maximum value from these high impact assets as we achieve further scale. 

We expect the second half of the year to be a transformative period in which we intend to continue to deliver our strategic evolution in line with our ambitious growth objectives.

Alastair Ferguson

Executive Chairman

CONDENSED INTERIM INCOME STATEMENT

		Six months ended	Six months ended	Year ended
	Notes	30 June 2019	30 June 2018	31 December 2018
		(Unaudited)	(Unaudited)	(Audited)
		£ 000's	£ 000's	£ 000's
Revenue		-	-	-
Gain on sale of investment		-	-	1,758
Proceeds from shares held for trading		1,002	-	2,461
Cost of sales		(922)	-	(2,442)
Operating expenses		44	-	(181)
Administrative expenses:
G&A		(776)	(344)	(1,974)
Share based expense		-	(27)	-
(Loss) from operations		(652)	(371)	(378)
Impairment charge		-	-	(692)
Amortisation costs		-	-	-
Finance costs		-	(138)	(41)
Finance income		-	57	57
Exchange (loss)		(4)	(63)	(84)
Fair value through profit and loss		(144)	-	(529)
(Loss) on ordinary activities before taxation		(800)	(514)	(1,667)
Income tax		-	-	-
Retained (Loss) for the period attributable to equity holders of the Company		(800)	(514)	(1,667)
Loss per share (pence)
Basic	2	(0.16)	(0.11)	(0.33)

CONDENSED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME

	Six months ended	Six months ended	Year ended
	30 June 2019	30 June 2018	31 December 2018
	(Unaudited)	(Unaudited)	(Audited)
	£ 000's	£ 000's	£ 000's
Loss for the period	(800)	(514)	(1,667)
Fair value adjustment of Available for sale assets	-	1,315	-
Total comprehensive income	(800)	801	(1,667)

CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

		As at	As at	As at
	Notes	30 June 2019	30 June 2018	31 December 2018
		(Unaudited)	(Unaudited)	(Audited)
		£ 000's	£ 000's	£ 000's
Non-current assets
Intangible assets		15,062	14,660	15,119
Oil & gas properties		194	194	194
Available for sale assets	3	-	5,476	-
Investments		2,903	-	2,903
Total non-current assets		18,159	20,330	18,216
Current assets
Trade and other receivables	4	760	2,514	716
Shares held for trading		312	-	1,523
Cash and cash equivalents		2,958	147	2,999
Total current assets		4,030	2,661	5,238
Total assets		22,189	22,991	23,454
Current liabilities
Trade and other payables	5	(83)	(1,366)	(548)
Provisions		(184)	(897)	(184)
Total liabilities		(267)	(2,263)	(732)
Net assets		21,922	20,728	22,722
Equity
Share capital		1,264	926	1,264
Deferred share capital		1,831	1,831	1,831
Share premium reserve		37,316	33,885	37,316
Share-based payments		1,135	1,156	1,135
AFS reserve		-	622	-
Retained loss		(19,624)	(17,692)	(18,824)
Total equity attributable to equity holders of the parent		21,922	20,728	22,722

CONDENSED INTERIM STATEMENT OF CASH FLOWS

	Six months ended	Six months ended	Year ended
	30 June 2019	30 June 2018	31 December 2018
	(Unaudited)	(Unaudited)	(Audited)
		(restated)
	£ 000's	£ 000's	£ 000's
Cash outflow from operating activities
Operating loss	(652)	(371)	(378)
Adjustments for:
Share-based payments	-	27	27
Decrease/(increase) in receivables	(44)	(1,119)	(239)
Increase in provisions	-	-	184
Increase/(decrease) in payables	(452)	1,010	224
Foreign exchange loss	(227)	(63)	(84)
Net cash inflow/(outflow) from operating activities	(1,375)	(516)	(266)
Cash flows from investing activities
Interest received	-	-	57
Payments to acquire intangible assets	(97)	(842)	(1,341)
Proceeds from disposal of investments	1,507	-	-
Payments to acquire available for sale investment Issue of loan to investee	-                                 (76)	(935) -	- -
Net cash outflow from investing activities	1,334	(1,777)	(1,284)
Cash flows from financing activities
Repayments of borrowings	-	(183)	(967)
Finance costs	-	-	-
Proceeds on issuing of ordinary shares	-	2,387	5,431
Cost of issue of ordinary shares	-                             -	(160)	(311)
Net cash inflow from financing activities	-	2,044	4,153
Net (decrease) / increase in cash and cash equivalents	(41)	(249)	2,603
Cash and cash equivalents at beginning of period	2,999	396	396
Cash and cash equivalents at end of period	2,958	147	2,999

CONDENSED STATEMENT OF CHANGES IN EQUITY

		Share Capital	Deferred share capital	Share premium	Share based payments	ASF Reserve	Accumulated losses	Total
	£000's		£000's	£000's	£000's	£000's	£000's	£000's
Balance at 31 December 2017	785		1,831	31,749	1,129	(693)	(17,178)	17,623
Loss for the period		-	-	-	-	-	(1,667)	(1,667)
Decrease in value of Available for sale assets		-	-	-	-	-	-	-
Total comprehensive income		-	-	-	-	-	(1,667)	(1,667)
Share issue	479		-	5,567	-	-	-	6,046
Transfers		-	-	-	-	693	-	693
Share-based payment charge		-	-	-	27	-	-	27
Release of expired share options		-	-	-	(21)	-	21	-
Balance at 31 December 2018	1,264		1,831	37,316	1,135	-	(18,824)	22,722
Loss for the period		-	-	-	-	-	(800)	(800)
Fair value adjustment of Available for sale assets		-	-	-	-	-	-	-
Total comprehensive income		-	-	-	-	-	(800)	(800)
Share capital issued	-		-	-	-	-	-	-
Cost of share issue		-	-	-	-	-	-	-
Share-based payment charge		-	-	-	-	-	-	-
Balance at 30 June 2019	1,264		1,831	37,316	1,135	-	(19,625)	(21,921)

NOTES TO CONDENSED INTERIM FINANCIAL INFORMATION

1              BASIS OF PREPARATION

The financial information has been prepared under the historical cost convention and on a going concern basis and in accordance with International Financial Reporting Standards and IFRIC interpretations adopted for use in the European Union ("IFRS") and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The condensed interim financial information for the period ended 30 June 2019 has not been audited or reviewed in accordance with the International Standard on Review Engagements 2410 issued by the Auditing Practices Board. The figures were prepared using applicable accounting policies and practices consistent with those adopted in the statutory accounts for the period ended 31 December 2018. The figures for the period ended 31 December 2018 have been extracted from these accounts, which have been delivered to the Registrar of Companies, and contained an unqualified audit report.

The condensed interim financial information contained in this document does not constitute statutory accounts. In the opinion of the directors the financial information for this period fairly presents the financial position, result of operations and cash flows for this period.

The comparative statement of cash flows for the period ended 30 June 2018 has been restated to reflect the adoption of IFRS 9 using retrospective approach.

This Interim Financial Report was approved by the Board of Directors on 26^th September 2019.

Statement of compliance

These condensed company interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union with the exception of International Accounting Standard ('IAS') 34 - Interim Financial Reporting. Accordingly, the interim financial statements do not include all of the information or disclosures required in the annual financial statements and should be read in conjunction with the Company's 2018 annual financial statements.

2              LOSS PER ORDINARY SHARE

The calculation of earnings per share is based on the loss after taxation divided by the weighted average number of share in issue during the period:

	Six months to	Six months to	Year ended
	30 June 2019	30 June 2018	31 December 2018
	(Unaudited)	(Unaudited)	(Audited)
Net loss after taxation (£ 000's)	(800)	(514)	(1,667)
Weighted average number of ordinary shares used in calculating basic earnings per share (millions)	509.36	437.6	509.36
Basic loss per share (pence)	(0.16)	(0.11)	(0.33)

As the inclusion of the potential ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive and, as such, a diluted loss per share is not included.

3              AVAILABLE FOR SALE ASSETS

Available-for-sale investments comprise investments in unlisted securities and are held by the Company as a mix of strategic and short-term investments.

	30 June 2019	31 December 2018
Non-current assets - unlisted investments	£000's	£000's
Valuation at 1 January	-	3,226
Additions at cost	-	277
Transfers to investments	-	(2,903)
Disposal	-	(600)
Valuation at balance sheet date	-	-

Solo disposed of its investment in Horse Hill Development in August 2018 for £4.5m. All remaining assets held for sale were disposed of prior to 31 December 2018 with the remainder no longer held for sale and reclassified at their carrying value to investments. In the 6 months to 30 June 2019 there was no movement in assets held for sale.

4              TRADE AND OTHER RECEIVABLES

	30 June 2019	31 December 2018
	£000's	£000's
Trade receivables	296	294
Loan to Horse Hill Developments Ltd	-	-
Loan to Helium One	176	100
Prepayments	63	22
Other debtors	225	300
	760	716
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

5              TRADE AND OTHER PAYABLES

	30 June 2019	31 December 2018
	£000's	£000's
Trade payables	32	171
Other payables	-	284
Accruals	51	93
	83	548
The directors consider that the carrying amount of trade payables approximates to their fair value.

6              EVENTS AFTER THE REPORTING DATE

On 16 August the Company announced that the joint venture reprocessing of the select 2D seismic lines over the Kiliwani North Development Licence acreage is complete with minor re-iterations requested from the processor.

On 10 September the Company announced had agreed to enter into a conditional sale and purchase agreement ("SPA") to dispose of its entire 20% interest in Burj Petroleum Africa Limited ("Burj") to an existing shareholder for a nominal consideration of £1. The deal is subject to no other shareholders in Burj exercising their pre-emption rights in relation to the proposed sale by Solo. In doing Solo will so relinquish and future cost associated with Burj. The transaction is expected to complete at the beginning of October 2019.

On 11 September the Company announced it had entered into a Service Collaboration and Risk Sharing Model Agreement with THREE60 Energy Limited to provide a range of specialist support services throughout the full asset life-cycle. The agreement provides subsurface, engineering and facilities management services in a flexible and cost-effective manner that ensure the Company is prepared to deliver on its strategic production growth plan to over 5kboepd. The agreement defines a model of risk sharing, that will minimise capital expenditure through incentive schemes linked to asset and production performance.

In addition, the Company announced it had entered a Framework Agreement with NRG Well Management, which provides engineering and project management solutions to the global upstream Oil and Gas Industry, and delivers a complete managerial and technical support package covering exploration, appraisal, development and P&A well life cycle. This agreement will provide Solo access to NRG's vast experience in executing top-quartile drilling performance and global knowledge of well integrity.

 There is no cost to the Company associated with putting in place either agreement; costs are only incurred by the Company as and when agreed activities are performed by either THREE60 and/or NRG.

7              A copy of this interim statement is available on the Company's website www.solooil.co.uk.

 

END

 

 

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