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Solo Oil, Predator Oil & Gas/Columbus

09/10/2019

Solo Oil

Well, we thought there might be something in the pipeline which has been proved to be correct, this is a significant deal by Solo whichever way you look at it. It comprises an asset acquisition, equity and debt fund raise, change of name, share cap re-organisation, senior management changes and of course suspension from trading.

Solo is doing what it said it would by buying a package of gas assets that includes production, development and exploration in the Dutch sector of the North Sea. The cost is €30.1m rising by €2m upon first production of currently rated 2C resources.

To fund this Solo is proposing a new debt facility with Mercuria as well as new equity and existing resources. As a reverse takeover the shares will be suspended pending usual approvals and of course an Aim admission document which it is hoped will be published by mid Q4 2019.

There are also management changes and a name change, Solo will become Scirocco Energy which should be a breeze. As to management changes, it is recognised that as the company moves towards becoming a European, gas infrastructure and energy player it will need a focussed CEO, to this effect Tom Reynolds , an existing NED is stepping up to that role. Alastair Ferguson will remain as Non-exec Chairman giving the company an extraordinarily strong board and senior executive slate punching well above its weight which bodes well for the future.

To flesh out the details a bit, they are buying three core areas with 14 gas fields operated by ONE-Dyas, Neptune and Total, a great team and ONE- Dyas are retaining an interest in certain of the assets and remaining an operator. It is worth noting that the package is self funded in the future from re-investment of free cash flow.

As for reserves and production the company’s pro-forma net 2P reserves at 1 January are expected to increase by 3.6mmboe net 2P NPV 10 of c.€40m pre-tax. Production from the assets in 1H 2019 was approximately 1,750 boepd expected to rise to approximately 2,125 boepd in 2020 and with 3,300 boepd by 2022. We are reminded that there is ‘significant development upside’ within each core area to give the deal yet more clout.

Funding is being made by the debt facility as above of €18m from Mercuria, and a £20m equity raise via a placing and Open Offer for institutional and existing shareholders.

This is a deal that certainly ticks all the boxes that the company paraded when they changed course only a few months ago. European gas was at the top of the list and this deal certainly fulfills that promise. It is also a transformational transaction and no one can accuse the company of not being brave or adventurous without betting the farm. It is like a microcosm of the Solo strategy all in one deal. Ru

Other  assets in the portfolio will become smaller parts of the whole just as was envisaged, about which shareholders should be grateful. With the longer term ambitions of producing 20,000 b/d in the next five years holders should also see significant upside to come. Solo has delivered on the promise and I expect plenty more where this came from, Gneiss work you might say…..

Predator Oil & Gas/ Columbus

The companies have announced an update whereby they have recently finalised and formally submitted the updated CO2 injection pilot proposal to Heritage for approval. The civil works are planned for completion in December 2019 and Predator has ordered a number of long lead items to begin the CO2 injection pilot by January 2020.

In a separate move Predator has entered a Confidentiality agreement with another operator of a mature producing oilfield onshore Trinidad which the c9mpany believes may be another suitable geological candidate for a pilot CO2 EOR project.

All this is further good news for Predator as it continues to develop this and other potentially exciting projects. Signing another agreement is neither capital intensive or high in labour and is just what the company should be doing 8n Trinidad.

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