29 Apr 2010 07:00
SOLO OIL PLC
("Solo" or "The Company")
29, April 2010
PROPOSED INVESTMENT IN CANADIAN RESOURCES COMPANY
Solo Oil plc, the AIM listed International Oil and Gas Exploration and Development Company, today announces it has agreed terms for an investment (subject inter alia to regulatory approval and due diligence) in TSX Venture Exchange company Reef Resources Ltd ("Reef") by way of a participating loan agreement.
Highlights:
·; Stage one loan investment of $750,000 CDN to re-establish oil and gas production in Ontario production asset with Solo receiving 60% of net production revenue post tax. Production is estimated to re-commence within two months
·; Stage two loan investment of another $900,000 CDN once production recommences to fund additional production enhancements, including new wells, re-completions and tie-ins.
·; On repayment of the loans, Solo will revert to 50% of the net operating income from the funded stage developments.
Agreement Terms:
Under the terms of the investment, Solo will provide a loan finance facility of $1,650,000 CDN to Reef. The financing will be issued in two stages, with the first stage of $750,000 CDN issued immediately and the balance on the re-commencement of production from Reef's Ontario asset which is expected within two months of the first stage funding. A Solo representative shall act as an advisor to the board of Reef providing commercial and operational advice.
The facility shall not accrue interest and be repaid through allocation to Solo of 60% of net Reef revenues post tax and royalties, equivalent to 48% of all oil gross revenues and 54% of gas gross revenues for all incremental production from the funded development stages. Thereafter upon loan repayment, Solo shall continue to receive 50% of the net operating income from the funded development stages with an exclusive first right option to increase its participation in both the Ontario asset and Reef shareholding structure.
The financing facility shall be secured with a general security agreement based upon the equivalent NI51-101 reported proved and probable reserves at current market valuation. The funds will be used to restart and expand production on Reef's Ontario asset through the purchase of equipment, various well completions, gas recycle stimulation, two new wells and tie-in to company owned facilities.
The financing facility provides Solo with the opportunity to participate in a producing asset with immediate production revenue payback and reserves security, as well as the opportunity of establishing a working relationship with Reef with a view to increasing collaboration both in the Ontario basin and other assets throughout Canada. Reef currently retains options for the acquisition and development of other production assets throughout Canada.
The financing facility is subject to a number of conditions, including TSXV approval and the finalisation of due diligence by Solo. Completion on the investment is anticipated to take place by start May 2010.
About Reef:
Reef is an incorporated oil and gas exploration and production company with existing assets in Ontario and ongoing negotiations and options for the acquisition of other assets in Canada. Reef's strategy is to build shareholder value through internally generated exploration and development drilling through selective acquisitions, joint ventures and farm-ins. Reef's primary asset in Ontario has estimated proved and probable reserves of 35,533 boe and 159,370 boe respectively as assessed by a qualified reserves evaluator in July 2009. The Ontario production asset is currently shut-in awaiting development financing.
The Ontario asset also has gas storage rights and a gas re-injection permit for gas re-cycle arbitrage and enhanced oil recovery. A key component of Reef's strategy is to identify and exploit undervalued prospects in the Ontario basin by utilizing the company's 23,500 acres of proprietary 3D seismic. In addition to its Ontario asset, Reef has identified multiple oil and gas acquisition and development opportunities throughout Canada.
Reef has established a four stage production development program on its Ontario asset which includes the drilling of a series of multi-zone well targets (vertical and horizontal) and executing recompletions and tie-ins. The loan from Solo covers the first two stages of expenditure on this program. The successful execution of this program will also enable Reef to capitalize on the gas storage and gas recycling rights on the acreage once depleted.
Reef's website is www.reefresources.ca
Competent Person's Statement:
The information contained in this announcement has been reviewed and approved by Fraser S Pritchard, Board Advisor for Solo Oil Plc (member of the SPE) who has over 20 years relevant experience in the oil industry.
David Lenigas, Executive Chairman, commented:
"Solo's investment in Reef is an exciting development in the Company's growth to acquire a diverse portfolio of direct and indirect interests in exploration, development and production oil and gas assets in the Americas, Europe and Africa."
"The financing facility for Reef provides a new country entry for Solo in Canada, participation and revenues in a proven production asset and the potential for further growth opportunities. We look forward to working closely with Reef to maximise the value of its assets."
"The revenue from Canada shall also help provide additional cash for funding unbudgeted commitments to the Company's commitments in Tanzania."
Enquiries:
Solo Oil PLC: +44 (0) 20 7016 5100
David Lenigas/Kiran Morzaria
Beaumont Cornish - Nominated Adviser +44 (0) 20 7628 3396
Roland Cornish
Astaire Securities: +44 (0) 20 7448 4400
Jerry Keen/Toby Gibbs
NOTES TO EDITORS
Solo Oil Plc is petroleum resources exploration and development company, with objectives to acquire and develop a diverse portfolio of direct and indirect interests in exploration, development and production oil and gas assets which are based in the Americas, Europe and Africa. More information on Solo can be found at www.solooil.co.uk.
Reserves are estimated with an effective date of July 31, 2009. Additional information on the reserves of Reef may be found in the filings made by Reef on SEDAR pursuant to National Instrument 51-101 of Canada.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of the contents of this release.
This news release contains certain forward-looking statements, which include assumptions with respect to reserves, funds raised from financing and future capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
GLOSSARY
boe = barrels of oil equivalent calculated on the basis of six thousand cubic feet of gas equals one barrel of oil