We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Solo Oil Plc | LSE:SOLO | London | Ordinary Share | GB00BF1BK408 | ORD 0.20P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.85 | 1.80 | 1.90 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSOLO
RNS Number : 1283I
Solo Oil Plc
15 June 2017
FOR IMMEDIATE RELEASE
7.00am 15 June 2017
Solo Oil plc
("Solo" or the "Company")
AUDITED ANNUAL RESULTS FOR THE YEARED 31 DECEMBER 2016
Solo Oil (AIM: SOLO), the investment company focused on acquiring and developing a diverse, non-operated portfolio of strategic interests in resources assets, is pleased to announce the publication of its Annual Results for the year ended 31 December 2016.
Period highlights:
-- First gas and cash flow achieved from Kiliwani North-1 in April -- Ntorya-2 appraisal well spudded in December -- Successful testing of Horse Hill-1 well -- Restructured balance sheet and ended period with zero debt
Post-period highlights:
-- Appraisal well Ntorya-2 successfully drilled and tested at a rate of 17 mmscfd
-- Significant increase to resources estimates on Ruvuma as a result of Ntorya-2; 466 bcf gross discovered gas in place with a most likely gross contingent resource of 186 bcf;
-- Strategic investment in Helium One Limited to gain access to a potentially world scale helium project in Tanzania.
Commenting on the results, Neil Ritson, Executive Chairman, said:
"We have seen progress across all the core assets within the portfolio, with a number of important strategic, commercial and operational milestones being achieved during the last 18 months. Our historic investments are now reaching monetisation milestones as we seek to maximise the returns from our investments."
For further information:
Solo Oil plc Neil Ritson / Dan Maling +44 (0) 20 3794 9230 Beaumont Cornish Limited Nominated Adviser and Joint Broker Roland Cornish +44 (0) 20 7628 3396 Shore Capital Joint Broker Jerry Keen +44 (0) 20 7408 4090 Beaufort Securities Joint Broker Jon Belliss +44 (0) 20 7382 8300 Buchanan (PR) Ben Romney / Chris Judd +44 (0) 20 7466 5000
Chairman's Statement
I am pleased to be delivering my first statement since I assumed the role of Executive Chairman in May 2017. The Board is pleased with the progress that has been made over the last 18 months and we are satisfied that we have significantly enhanced the overall value of our portfolio of investments; the metric against which we believe any investment company's performance should primarily be assessed.
Throughout 2016, and the first few months of 2017, Solo oversaw a significant maturing of the Company's portfolio with first gas and revenues from Kiliwani North, the successful testing of the Horse Hill oil discovery in the UK and the successful appraisal of the Tanzanian Ntorya gas-condensate discovery in early 2017. As the core assets within the portfolio mature, we have begun to consider the next cycle of investment strategy. Bearing in mind our investment ethos of first mover advantage and the application of extensive technical expertise we announced the addition of the Helium One investment in early 2017, something we truly believe holds significant future value.
We are entering an exciting phase in the Company's development, benefitting from our historic investment whilst also capitalising on opportunities presented by the prevailing market conditions. We are approaching some crucial investment decisions that will require the Company to decide on the best approach and timing of monetisation of certain assets within the portfolio.
Investment review
As an investment company, Solo's primary objective is to maximise the returns on our investments and in doing so, create value on behalf of our shareholders over time. We seek early stage entry points in order to obtain a meaningful equity position at attractive valuations. Solo seeks to add value to the assets as they progress through exploration, appraisal and development. As a result of the early stage entry, Solo is required to fund its proportionate share of costs or farm down its equity in an asset in return for cash or carried operations. Furthermore, as we enter assets at an early stage, the Board is required to adopt a long-term view on the investment horizon from original investment to the point of monetisation. It is the responsibility of the Board, to assess the optimum point and method of monetisation, whether that be early in order to realise value and enable the gains to be reinvested into new opportunities, or to follow our money with further proportionate investment in an asset with the belief that greater returns can be generated at a later point in time. Whilst the latter approach may result in some short-term dilution of shareholders as we raise the necessary funds through the issue of equity, it is ultimately likely to deliver greater returns on investment over the medium to long term by increasing the core value of the asset. It is intended in future to make an open offer to existing shareholders whenever this is practical in order to ensure the impact of dilution is minimised.
Solo is developing a track record for generating value from its investments overall, with Kiliwani North and Ruvuma both representing successful case studies. Solo leveraged its equity in Kiliwani North to maintain an interest through to production, and whilst our interest in the asset is relatively small it provides us with sufficient cash flow to cover our corporate G&A costs, which is important to us as an investment company. Solo also has a material 25% interest in the world-class gas-condensate discoveries in the Ntorya Appraisal Area, which was recently the subject of a major resources upgrade following the successful drilling and testing of Ntorya-2 ("NT-2") in March 2017. This flagship asset has generated industry interest and will continue to do so as the licence is progressed further in the coming months. Our decision to maintain our material stake in the licence by paying our proportionate share of the NT-2 well has been validated and similar decisions will be required as further operational activity occurs. It is the responsibility of the Board to ensure we effectively communicate the various value scenarios to our shareholders so they can understand our recommendations and the rationale for our investment decisions.
Our post-period decision to acquire a 10% interest in Helium One was driven by our ambition to replicate the success we had previously had in Tanzania, a geography and jurisdiction that we know well. Whilst Helium One's Rukwa project is not conventional oil and gas, it has many parallels with Ruvuma in terms of early entry into a world class asset with significant upside and transformational potential. The downstream elements to the Helium One story are unlike anything Solo has done before, however, the upstream elements are similar to conventional hydrocarbon exploration and it is in this area that we can provide industry expertise and experience in order to progress the project to a drill ready status. The drivers for the helium industry, underpinned by compelling supply vs demand dynamics, have caused increased investor attention on this little known industry and we predict that this trend will continue as investors become more aware of the commercial and unique technical aspects of helium. We were therefore pleased to have capitalised on our first mover advantage on this exciting and compelling opportunity and look forward to communicating progress on it throughout the rest of the year as we move towards the catalyst of an exploration well next year.
Closing remarks
Solo has taken great strides in the last 18 months and is being rewarded in its commitment to an effective strategy to develop a diverse portfolio of non-operated assets. Whilst we are not operators of any of the assets within the portfolio, the executive team plays a highly active role in the technical and commercial decisions required on each asset; thereby ensuring we closely oversee our investments and seek to maximise value on behalf of the Company and its shareholders. It is this value add that enables us to obtain our interests at attractive entry points and is a unique selling point that differentiates Solo from other resources investment vehicles.
The Company's portfolio, size and profile has evolved significantly as a result of the changes that we have implemented to the way that Solo is managed in terms of management structure, governance process and investment strategy. To reflect these enhancements and to emphasise our position as an independent investment company, we will be undertaking a re-branding exercise in the second half of this year. We look forward to providing further information to our shareholders on this exercise.
I would like to take this opportunity to congratulate my colleagues on the executive team for their hard work in helping progress Solo to this point. It has been, and will continue to be, a busy, intense and exciting period of operational and commercial activity, and I am confident that their commitment, expertise and passion will result in further progress and value creation within our portfolio. Lastly, I would like to thank our shareholders for their continued support and we look forward to rewarding them for their patience as historic investments begin to bear fruit and realise value.
Neil Ritson
Chairman
14 June 2017
Operational & Financial Review
Highlights for the period include:
Tanzania
-- Gas Sales Agreement ("GSA") was executed with the Tanzanian Petroleum Development Corporation ("TPDC") for a price of US$3.00 per mmBTU;
Hot Features
Premium
-- First gas was achieved from Kiliwani North-1 ("KN-1") on 4 April 2016;
-- Commissioning of the Songo Songo Island Gas Plant was completed and testing of the KN-1 well up to over 30 mmscfd was undertaken;
-- Solo increased its interest in KN-1 from 6.175% to 7.175% and holds an option to increase its interest to up to 8.75% when commerciality is declared;
-- US dollar revenues were received from Kiliwani North in line with the GSA;
-- A 12-month extension of the Ruvuma PSA was granted by TPDC and endorsed by the Tanzanian Minister of Petroleum;
-- Site preparation for the Ntorya-2 and -3 appraisal wells were completed and Ntorya-2 was spudded on 21 December.
United Kingdom
-- Horse Hill-1 well ("HH-1") was tested with the Kimmeridge Limestones producing at natural flow rates of over 460 and 900 barrels of oil per day gross ("bopd") from naturally fractured intervals in the Lower and Upper Kimmeridge respectively;
-- Pumped production, constrained by pump size, of up to a gross 320 bopd was obtained from the Portland Sandstone reservoir during testing of that interval at HH-1 in March;
-- The Company was formally awarded a 30% working interest in PEDL 331 on the Isle of Wight and announced its intention, with operator UK Oil and Gas Investments ("UKOG"), to pursue the previously discovered Arreton-2 field as part of an initial work program;
-- Planning application lodged to carry out long-term testing of the HH-1 reservoirs and to carry out additional drilling in future years.
Highlights in 2017 year to date
-- Appraisal well Ntorya-2 was successfully drilled to a total depth of 2,795 metres and tested at a rate of 17 mmscfd over a 34 metre interval and through a 40/64-inch choke;
-- As a result of Ntorya-2 the discovery resource estimates were increased substantially to 466 bcf gross discovered gas in place with a most likely gross contingent resource of 186 bcf;
-- Solo made a strategic investment in Helium One Limited to gain access to a potentially world scale helium project in Tanzania.
Portfolio Review
Tanzania, Kiliwani North (7.175% interest)
In 2014, Solo agreed with Aminex to acquire up to a 13% working interest in the Kiliwani North Development Licence ("KNDL") on Songo Songo Island. The Kiliwani North-1 ("KN-1") well was drilled by Aminex and its partners in 2008 and discovered gas in a 60 metre column in the Lower Cretaceous.
Solo acquired an initial 6.5% interest in the KNDL project for US$3.5 million in 2015 and subsequently announced its intention to increase its stake to up to 10% through the acquisition of three additional tranches of project equity linked to project milestones at the Company's option. Solo's original stake of 6.5% was subsequently reduced by way of TPDC's intended back-in to the project for a 5% interest which reduced Solo's holding to 6.175%.
The condition precedent for further acquisition of project equity by Solo was the signature of a gas sales agreement ("GSA") which was achieved in January 2016. The subsequently agreed tranche milestones were the commencement of gas production which was achieved in April 2016, the receipt of first cash revenue and the declaration of commercial (post-commissioning) gas production under the take-or-pay arrangements of the GSA. The first of these milestones has been reached and Solo has increased its direct participation to 7.175%. Receipt of first revenue occurred in August 2016 and the Company has elected not to increase equity in KNDL to 8.425% in order to focus on investments in the Ruvuma PSC. The Company retains the option to increase its KNDL stake by a further 1.575% to 8.75% when commercial operations are officially declared by TPDC.
The GSA signed with TPDC for KN-1 gas contains payment guarantees in US Dollars ("US$") and is linked to a price escalation formula commencing at US$3.00 per million British Thermal Units ("mmBTU") and rising from January 2016. The main contract phase is a depletion contract with take-or-pay provisions for 85% of the daily minimum quantity of gas to be supplied, initially set at a gross 20 million cubic feet per day ("mmscfd"). Payment for gas during the commissioning phase is based on the agreed tariff on an "as supplied" basis and no minimum quantity is guaranteed under the contract. Commissioning of the Songo Songo Island gas processing plant commenced in early April 2016 and was essentially complete by end July. Following that date KN-1 has been produced at a rate of roughly 15 mmscfd being the call on gas being made by TPDC. Overall gas market development continues to lag supply in Tanzania, however, this is expected to change to a supply shortage in future years as new power projects and distribution to domestic and industrial customers are brought on-line.
All payments due under the GSA by end 2016 have been received from TPDC and payment continues on approximately 60 day terms in 2017. Condensate produced by the KN-1 well has been aggregated and is being sold on behalf of the Joint Venture by TPDC. The average price received for the gas sold in 2016 was US$3.25 per mscf with additional value accruing to the condensate which is sold separately.
Independently verified gas in place was confirmed by LR Senergy in a Competent Person's Report ("CPR") in May 2015. LR Senergy computed gross mean gas in place of 44 bcf of which 28 bcf have been attributed as best estimate contingent resources. These contingent resources will be converted to reserves once the GSA comes into full force on declaration of commercial gas production.
Tanzania, Ruvuma Basin (25% interest)
Solo holds a 25% interest in the Ruvuma Petroleum Sharing Agreement ("Ruvuma PSA") in the south-east of Tanzania covering an area of approximately 3,447 square kilometres of which approximately 90% lies onshore and the balance offshore. The Ruvuma PSA is in a region of southern Tanzania where very substantial gas discoveries have been made offshore in recent years and where gas has also been discovered onshore and along the coastal islands at Ntorya, Mnazi Bay, Kiliwani North and Songo Songo.
The Ntorya gas-condensate discovery, made in 2012 and operated by Aminex plc ("Aminex"), represents the most immediate commercialisation opportunity in the Ruvuma PSC. The Ntorya-1 well was flow testing over a 3.5 metres zone at the top of the gross 25 metre gas bearing interval produced at a maximum gross flow rate of 20.1 million cubic feet per day ("mmscfd") and 139 barrels per day ("bpd") of 53 degree API condensate through a 1-inch choke. The well is suspended as a discovery for subsequent additional testing or production.
Based on an infill 2D seismic programme around Ntorya-1 a re-estimation of the discovered and prospective resources in the Likonde-Ntorya area was made and subsequently audited by Senergy (GB) Limited ("LR Senergy") who issued a CPR in May 2015. LR Senergy estimated that Ntorya contained a gross 158 billion cubic feet ("bcf") of proven gas in place, of which they attributed a gross 70 bcf as best estimate contingent resources. Overall in the Ruvuma PSA, LR Senergy estimated gross 4.17 trillion cubic feet ("tcf") of discovered and undiscovered gas in place.
In order to further appraise the Ntorya gas condensate discovery made in the Ntorya-1 well it was decided to drill an updip well, Ntorya-2, at a location approximately 1.5 kilometres east of the discovery well, Ntorya-1. The location was prepared in late 2016 along with a possible further appraisal site, Ntorya-3, located further updip to the east. The Caroil-2 rig was moved to site in December and the well spudded on 21 December 2016.
During early 2017 drilling continued on prognosis with 17-inch casing set at 1,326 metres in early January and the well reached the anticipated reservoir section at a depth of 2,593 metres in early February 2017. A gross gas bearing sandstone reservoir interval of 51 metres thickness was encountered and the well was deepened to a final total depth of 2.795 metres and a 7-inch liner set prior to testing. A 31 metre interval of the gross reservoir was perforated and flowed dry gas at a stabilised rate of 17 mmscfd through a 40/64-inch choke. Analysis of the well during testing and interpretation of electric logs strongly suggests that high mud weights, used to control gas influx during drilling, had caused formation damage around the well bore and these effects were reducing the test flows. Remedial operations prior to production would be used to target higher flow rates.
As a result of the new data from Ntorya-2 the gross most likely in place gas ("GIIP") in the Ntorya discovery was increased by over 200% from 153 bcf in the LR Senergy report in May 2015 to 466 bcf. Based on this GIIP Solo estimate that the gross mostly contingent resources in the portion of the Ntorya filed proven to date are 186 bcf. The upside or high estimate gross contingent resources also increased by over 230% to 766 bcf, with the high estimate GIIP of 1.3 tcf. The Company is fully satisfied that such volumes, now discovered, are commercially exploitable and along with the operator, Aminex, Solo has applied for a 25-year development licence covering the entire Ntorya field area. An early production scheme involving local use of the gas or its conversion to power or CNG is also under consideration.
Once a development licence has been awarded, Solo and Aminex will carry out an approved work programme, yet to be agreed with the Tanzanian authorities, which is likely to include 3D seismic acquisition and further drilling including the Ntorya-3 location. Solo is currently assessing its options with regards to its future participation in the project. Amongst such considerations is further proportionate investment, a possible farm-down, or sale of all or some of its 25% interest in the discovery so as to monetise its investment in the Ruvuma PSC and return funds to the Company to invest in its other operations.
Horse Hill, Weald Basin, UK (6.5% interest)
In 2014, the Company acquired a 10% interest in a special purpose company, Horse Hill Developments Limited ("HHDL"), which became the operator and 65% interest holder in two Petroleum Exploration and Development Licences, PEDL 137 and 246, in the northern Weald Basin between Gatwick Airport and London. PEDL 137 covers 99.29 square kilometres (24,525 acres) to the north of Gatwick Airport in Surrey. PEDL 246 covers an area of 43.58 square kilometres (10,769 acres) and lies immediately adjacent and to the east of PEDL 137.
The Horse Hill-1 ("HH-1") well commenced drilling operations in September 2014 and reached total depth at 8,870 feet MD in November 2014. Evaluation of electric logs and other data collected from the well resulted in the announcement on 24 October 2014 of a conventional Upper Portlandian Sandstone oil discovery. Subsequent analysis of the Kimmeridge, Oxfordian and Liassic sections in the well indicated that there was also substantial in place oil in the naturally fractured Kimmeridge Limestones and associated mudstones.
Approval for the testing of all three oil bearing zones was granted in late 2015 and the tests commenced in early February 2016. Tests lead to naturally flowing oil rates of the Kimmeridge Limestones at a gross rate of 460 bopd from the Lower interval and 900 bopd from the upper interval. The Portland Sandstone was placed on pump to stimulate flow and achieved a maximum gross stable rate in excess of 320 bopd. These flow rates substantially exceeded the expectations for the well and rank alongside some of the highest rates ever achieved on test for any UK onshore well.
Following the testing of the Portland Sandstone, where higher productivity and a lower than expected water cut were observed, further analysis on the electric logs has led to a 200% increase in the anticipated gross oil in place at this stratigraphic level. Previous estimates of oil in place within the Portland Sandstone were 7.7 mmbbls per square mile and were increased to 22.9 mmbbls per square mile. Based on the original closure estimated by Xodus in 2015 this would increase the overall gross oil in place within the Horse Hill Portlandian discovery to 62.5 mmbbls.
The relevant licences have been extended to permit further work and UK Oil and Gas Investments plc ("UKOG") has indicated that it hopes to perform long term testing on all hydrocarbon bearing zones as part of a wider appraisal program that includes 3D seismic and further drilling. Planning permission is presently being sought for the next phase of testing which will establish the parameters of any development scheme and the commerciality of production from the various oil bearing intervals. It is anticipated that planning consent will be granted during the third quarter of 2017 with testing underway before year-end.
PEDL 331, Isle of Wight, UK (30% interest)
An application was made jointly with UKOG and Angus Energy Limited (who subsequently sold this interest to Doriemus plc ("Doriemus")) for a 200 square kilometre onshore block in the south and central portion of the Isle of Wight in the UK 14th Landward Licensing Round. Solo holds a 30% interest in this joint venture.
The UK Oil and Gas Authority ("OGA") have now issued the licence, PEDL 331, to the UKOG-Solo-Doriemus partnership. Based on work by UKOG and confirmed by independent work by Solo Arreton-2, originally drilled in 1974 but never tested, is now considered to be an oil discovery on the Arreton Main Field. When taken together with the adjacent prospects Xodus has calculated a P50 gross oil in place estimate of 219 mmbbls in conventional reservoirs within the Purbeck, Portland and Inferior Oolite limestone reservoirs at Arreton. Arreton Main is considered by Xodus to contain most likely (P50) contingent resource net to Solo's interest in PEDL 331 of 4.7 mmbbls.
UKOG will become operator of PEDL 331 and has commenced discussions with the local planning authorities and expects to seek regulatory consents to appraise the Arreton Main oil discovery in the coming years.
Burj Africa, Nigeria, West Africa (20% interest)
Between 2013 and 2015 Solo made an investment into various ventures aimed at accessing known reserves in fields in Nigeria. These have resulted in a 20% interest in Burj Petroleum Africa Limited ("Burj Africa") a company which had applied for various undeveloped fields in the 2014 Nigerian Marginal Fields Bid Round ("Marginal Fields Round") along with joint venture partners Global Oil and Gas and Truvent Consulting.
Two adjacent marginal fields containing 10 wells previously drilled by an international major oil and gas company have been applied for. These fields are believed by Burj Africa and its partners to contain gross proven, probable and possible recoverable oil reserves of 59.3 mmbbls, or approximately 13.5 mmbbls net to Burj Africa after payment of royalties.
Award of these blocks and any subsequent operations continues to be subject to Nigerian government approval. Recent developments in the world oil markets and specific to Nigeria have significantly delayed the issue of new licences under the envisaged Marginal Fields Round. The Company continues to monitor developments in Nigeria and has noted some positive movements in this regard in recent months. The Company hopes to report further developments in this investment during the remainder of 2017.
Ontario, Canada (28.56% interest)
Solo continues to hold an interest in 23,500 acres of petroleum leases in southern Ontario that contain various Ordovician reefal structures and which host oil, gas and condensate. The operator, Reef Resources Inc., has been unable to raise the necessary capital to continue the development of the Ausable gas condensate field and no alternative funding has so far been found to unlock the potential. Solo's management continues to seek ways to advance or monetise the investment made in the Ausable and adjacent Airport fields, and will report progress in due course. No material progress was achieved during 2016.
Morocco
In 2015, Solo acquired a small seed interest in the Canadian listed oil and gas company, Maxim Resources, with a view to acquiring an interest in a possible onshore gas production asset in Morocco. This is a very early stage seed investment and will be reported on more fully as the project takes shape. The Company, however, notes the significant recent success of Sound Energy plc in the Moroccan Triassic TAG-I and Palaeozoic gas fairway and will monitor developments with interest.
Helium One, Tanzania (10%)
Following the year end Solo entered into a sale and purchase agreement with Helium One Limited ("He1") to acquire an initial 10% stake in He1 with an option to acquire a further 10% stake. He1 owns exploration licences in a number of highly prospective and extremely rare helium properties in Tanzania. The most mature of the projects, at Rukwa, in the East African Rift Valley has been independently assessed by Netherland & Sewell Associates International as having the gross potential for close to 100 bcf of helium in place. With current world helium demand of approximately 6 bcf per annum the Rukwa project represents a material potential contribution to future helium supply.
Originally identified by means of helium macro-seeps the prospects under investigation have been mapped per soil geochemistry anomalies and are in part mapped on legacy 2D seismic data acquired previously during failed hydrocarbon exploration. The identified macro-seepage shows high concentrations of helium (up to in excess of 10% by volume) in association with nitrogen. He1 recently acquired an airborne gravity and magnetic survey and plans to integrate the interpretation of that data into their subsurface modelling before acquiring additional 2D seismic to further define traps for drilling, potentially as early as 2018.
World helium demand has been growing at a rate of about 3 per cent per annum over the last decade and is a vital component of many modern technologies, notable Magnetic Resonance Imaging ("MRI") devices used in modern medicine. As a result of its unique properties as a super fluid, it plays a vital role in devices which use super conducting magnets; as in MRI machines. As an inert gas helium is also vital in the production of many critical electronic components such as disk drives and fibre optics and for industrial testing, purging and leak detection. Helium, as a lifting gas in hybrid air vehicles, has also begun to have increased significance. Though relatively abundant in the earth's atmosphere, helium is lighter than air and is progressively lost to space and it is extremely difficult to recycle effectively.
The current supply of helium comes from several large deposits in the USA and as an impurity removed from hydrocarbon gas in a number of liquefied natural gas ("LNG") projects such as in Qatar and Algeria. However, the US government has been selling its strategic reserve and will close the facility for international sales no later than 2021, after which there is projected to be a significant shortage of helium available on world markets. To date, only the Tanzanian projects and additional helium associated with hydrocarbon gas in Siberia have been identified as large scale future producers. With these weak supply-demand fundamentals helium prices, which are currently approximately US$145 per million cubic feet (crude helium), are expected to rise significantly.
The He1 Tanzania projects have excellent supply economics and, once liquefied, the helium can be transported to world markets via the deep-water port at Dar es Salaam. Given the competitive demand for crude helium on world markets Solo and He1 expect to sell helium at the wellhead through an offtake agreement with a large industrial gas company who would liquefy and transport the helium to market.
Solo completed the acquisition of the initial 10% interest in He1 on 22 March 2017 through the payment of GBP1.2 million in cash and the issue to He1 of 236,842,105 shares in Solo Oil plc. After subsequent renegotiation Solo also holds an option to acquire an additional 9% in He1 for the payment of GBP3 million by end June 2017, which will be automatically extended to 31 July 2017 depending on certain conditions. Daniel Maling was also appointed to the Board of He1 as Solo's representative.
Immediate Outlook
The Company has made significant advances in its investments in Tanzania and the UK in the last reporting period and is now on production and receiving revenue from its Kiliwani North investment. The Ruvuma PSC, which holds the Ntorya gas-condensate discovery, has been extended and in 2017 was successfully appraised by means of the Ntorya-2 well. The Horse Hill discovery has yielded exceptionally high flow rates at all three productive levels and further long term testing is now planned to design a commercial development. Additionally, the Company has added prospective acreage in a new onshore licence in the Isle of Wight, and in 2017 commenced acquiring access to highly prospective helium exploration acreage in Tanzania, providing further material prospectivity potential for future years.
Financial & Corporate Review
The financial year 2016 witnessed the first generation of revenues within the portfolio as gas sales were realised during the commissioning of Kiliwani North-1 in April. Solo's working interest of 7.175% resulted in GBP0.5m of gas sales net to Solo for the period. All revenues were received in US dollars, in line with the Gas Sales Agreement ("GSA") that was executed during the period with the Tanzanian Petroleum Development Corporation ("TPDC") at an initial price of US$3.00 per mmBTU.
Solo ended the period in a significantly stronger financial position than in the prior year. The company's balance sheet carries zero debt after the repayment of the YA Global Master SPV debt facility. The Company maintained its commitment to strict capital discipline and reduced administrative expenses by 20% - from GBP900,000 in 2015 to GBP720,000 in 2016.
During the period, Solo raised GBP2.8 million of equity through two private placements. Proceeds raised through the placements were used to settle the YA Global debt facility and to fund the acquisition of an additional 1% of Kiliwani North (increasing from 6.175% to 7.175%) and Solo's share of the Ntorya-2 appraisal well.
Post period end Solo raised GBP2.0 million to test the Ntorya-2 well. On 22 March 2017 Solo acquired a 10% interest in He1 for GBP2.55 million, which was funded through a private subscription raising GBP1.2 million with the balance of GBP1.35 million through issuing new Ordinary Shares to He1.
Daniel Maling was appointed to the Board as Finance Director during August 2016 to lead the finance, business development and capital markets functions of the Company. Post period end, Neil Ritson assumed the role of Executive Chairman having previously been non-executive. Solo's executive team is now comprised of three executive directors; Neil Ritson as Chairman, Daniel Maling as Finance Director and Fergus Jenkins as Technical Director.
Fergus Jenkins, Technical Director
Daniel Maling, Finance Director
14 June 2017
Competent Person's statement:
The information contained in this document has been reviewed and approved by Neil Ritson, Chairman for Solo Oil Plc. Mr Ritson is a member of the Society of Petroleum Engineers, a Fellow of the Geological Society, an Active Member of the American Association of Petroleum Geologists and has over 39 years relevant experience in the oil industry.
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
Glossary and Notes
2D seismic seismic data collected using
the two-dimensional common depth
point method
---------------------- -----------------------------------------
3D three-dimensional
---------------------- -----------------------------------------
AIM London Stock Exchange Alternative
Investment Market
---------------------- -----------------------------------------
API American Petroleum Institute
---------------------- -----------------------------------------
barrel or bbl 45 US gallons
---------------------- -----------------------------------------
bbls barrels of oil
---------------------- -----------------------------------------
bcf billion cubic feet
---------------------- -----------------------------------------
best estimate the most likely estimate of a
or P50 parameter based on all available
data, also often termed the P50
(or the value of a probability
distribution of outcomes at the
50% confidence level)
---------------------- -----------------------------------------
billion 10 to the power 9
---------------------- -----------------------------------------
bopd barrels of oil per day
---------------------- -----------------------------------------
CNG condensed natural gas
---------------------- -----------------------------------------
contingent resources those quantities of petroleum
estimated, at a given date, to
be potentially recoverable from
known accumulations, but the
associated projects are not yet
considered mature enough for
commercial development due to
one or more contingencies
---------------------- -----------------------------------------
CPR Competent Persons Report
---------------------- -----------------------------------------
discovery a petroleum accumulation for
which one or several exploratory
wells have established through
testing, sampling and/or logging
the existence of a significant
quantity of potentially moveable
hydrocarbons
---------------------- -----------------------------------------
electric logs tools used within the wellbore
to measure the rock and fluid
properties of the surrounding
formations
---------------------- -----------------------------------------
GIIP gas initially in place
---------------------- -----------------------------------------
GSA gas sales agreement
---------------------- -----------------------------------------
HH-1 Horse Hill-1 well
---------------------- -----------------------------------------
HHDL Horse Hill Developments Limited
---------------------- -----------------------------------------
KN-1 Kiliwani North-1 well
---------------------- -----------------------------------------
KNDL Kiliwani North Development License
---------------------- -----------------------------------------
m thousand (ten to the power 3)
---------------------- -----------------------------------------
mm million (ten to the power 6)
---------------------- -----------------------------------------
mmbbls million barrels of oil
---------------------- -----------------------------------------
mmscf million standard cubic feet of
gas
---------------------- -----------------------------------------
mmscfd million standard cubic feet of
gas per day
---------------------- -----------------------------------------
OGA UK Oil and Gas Authority (formally
the Department of Energy and
Climate Change)
---------------------- -----------------------------------------
oil in place stock tank oil initially in place,
or STOIIP those quantities of oil that
are estimated to be in known
reservoirs prior to production
commencing
---------------------- -----------------------------------------
pay reservoir or portion of a reservoir
formation that contains economically
producible hydrocarbons. The
overall interval in which pay
sections occur is the gross pay;
the portion of the gross pay
that meets specific criteria
such as minimum porosity, permeability
and hydrocarbon saturation are
termed net pay
---------------------- -----------------------------------------
PEDL Petroleum Exploration and Development
License
---------------------- -----------------------------------------
permeability the capability of a porous rock
or sediment to permit the flow
of fluids through the pore space
---------------------- -----------------------------------------
petrophysics the study of the physical and
chemical properties of rock formations
and their interactions with fluids
---------------------- -----------------------------------------
play a set of known or postulated
oil or gas accumulations sharing
similar geologic properties
---------------------- -----------------------------------------
porosity the percentage of void space
in a rock formation
---------------------- -----------------------------------------
prospective resources those quantities of petroleum
which are estimated, at a given
date, to be potentially recovered
from undiscovered accumulations
---------------------- -----------------------------------------
proven reserves those quantities of petroleum,
which, by analysis of geoscience
and engineering data, can be
estimated with reasonable certainty
to be commercially recoverable
(1P), from a given date forward,
from known reservoirs and under
defined economic conditions,
operating methods, and government
regulations
---------------------- -----------------------------------------
probable reserves those additional reserves which
analysis of geoscience and engineering
data indicate are less likely
to be recovered than Proved Reserves
but more certain to be recovered
than Possible Reserves. It is
equally likely that actual remaining
quantities recovered will be
greater than or less than the
sum of the estimated Proved plus
Probable Reserves (2P)
---------------------- -----------------------------------------
possible reserves those additional reserves which
analysis of geoscience and engineering
data suggest are less likely
to be recoverable than Probable
Reserves. The total quantities
ultimately recovered from the
project have a low probability
to exceed the sum of Proved plus
Probable plus Possible (3P) Reserves,
which is equivalent to the high
estimate scenario
---------------------- -----------------------------------------
PSA petroleum sharing agreement
---------------------- -----------------------------------------
PRMS Petroleum Resources Management
System
---------------------- -----------------------------------------
reserves those quantities of petroleum
anticipated to be commercially
recovered by application of development
projects to known accumulations
from a given date forward under
defined conditions
---------------------- -----------------------------------------
reservoir a subsurface rock formation containing
an individual natural accumulation
of moveable petroleum
---------------------- -----------------------------------------
SPE Society of Petroleum Engineers
---------------------- -----------------------------------------
tcf trillion cubic feet
---------------------- -----------------------------------------
trillion 10 to the power 12
---------------------- -----------------------------------------
unconventional widely accepted to mean those
reservoir hydrocarbon reservoirs that are
tight; that is have low permeability
---------------------- -----------------------------------------
The estimates provided in this statement are based on the Petroleum Resources Management System ("PRMS") published by the ("SPE") and are reported consistent with the SPE's 2011 guidelines. All definitions used in the announcement have the meaning given to them in the PRMS.
Financial Statements
Statement of Comprehensive Income for the year ended 31 December 2016
Year ended Year ended
Notes 31 December 2016 31 December 2015
GBP000's GBP000's
Revenue 501 -
Administrative expenses (721) (906)
----------------- -----------------
Loss from operations 3 (220) (906)
Impairment charge 8, 10 - (875)
Amortisation charge 9 (275) -
Finance costs 6 (29) (386)
Finance revenue 7 - -
Provision for losses on financial instrument 13 - (606)
Loss before taxation (524) (2,773)
Income tax 5 - -
----------------- -----------------
Loss for the period (524) (2,773)
================= =================
Other comprehensive income
Decrease in value of Available for sale assets (34) (78)
----------------- -----------------
Other comprehensive income for the year net of taxation (34) (78)
----------------- -----------------
Total comprehensive income for the period attributable to equity
holders of the parent (558) (2,851)
----------------- -----------------
Loss per share (pence)
Basic and diluted 7 (0.01) (0.05)
----------------- -----------------
Statement of Financial Position as at 31 December 2016
Notes 31 December 2016 31 December 2015
GBP000's GBP000's
Assets
Non- current assets
Intangible asset 8 10,231 11,392
Oil & gas properties 9 2,483
Available for sale assets 10 1,181 1,192
--------------------- ---------------------
Total non-current assets 13,895 12,584
Current assets
Trade and other receivables 12 1,336 523
Cash and cash equivalents 600 824
--------------------- ---------------------
Total current assets 1,936 1,347
--------------------- ---------------------
Total assets 15,831 13,931
--------------------- ---------------------
Liabilities
Current liabilities
Trade and other payables 14 (444) (234)
Derivative financial instrument 13 - (314)
Borrowings 15 - (112)
--------------------- ---------------------
Total liabilities (444) (660)
--------------------- ---------------------
Net assets 15,387 13,271
===================== =====================
Equity
Share capital 16 699 556
Deferred share capital 16 1,831 1,831
Share premium 27,559 25,077
Share-based payment reserve 933 884
AFS reserve (116) (82)
Retained loss (15,519) (14,995)
15,387 13,271
===================== =====================
The financial statements were approved by the board of directors and authorised for issue
on 13 June 2017.
They were signed on its behalf by ;
Daniel Maling Fergus Jenkins
Director Director
Statement of Cash Flows for the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
GBP000's GBP000's
Cash outflow from operating activities
Operating loss (220) (906)
Adjustments for:
Share-based payments 49 -
(Increase)/decrease in receivables (813) 451
Increase in payables 210 54
Foreign exchange loss 93 6
Net cash outflow from operating activities (681) (395)
----------------- -----------------
Cash flows from investing activities
Interest received - -
Payments to acquire intangible assets (1,597) (2,649)
Net payments on settlements of derivative financial instruments (450) (110)
Payments to acquire Available for sale investments - (132)
Net cash outflow from investing activities (2,047) (2,891)
----------------- -----------------
Cash flows from financing activities
Proceeds from borrowings - 336
Repayments of borrowings (119) (754)
Finance costs (2) (62)
Proceeds on issuing of ordinary shares 2,800 2,700
Cost of issue of ordinary shares (175) (131)
Net cash inflow from financing activities 2,504 2,089
----------------- -----------------
Net decrease in cash and cash equivalents (224) (1,197)
Cash and cash equivalents at beginning of the period 824 2,021
Cash and cash equivalents at end of the period 600 824
================= =================
The above Cash Flow should be read in conjunction with the accompanying notes.
Statement of Changes in Equity for the year ended 31 December 2016
Deferred Share AFS
Share share Share based reserve Accumulated Total
capital capital premium payments losses equity
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance at 31 December 2014 501 1,831 22,360 936 (4) (12,291) 13,333
--------- --------- --------- --------- --------- ------------ ---------
Loss for the period - - - - - (2,773) (2,773)
Decrease in value of Available for
sale assets - - - - (78) - (78)
--------- --------- --------- --------- --------- ------------ ---------
Total comprehensive income - - - - (78) (2,773) (2,851)
Share issue 55 - 2,848 - - - 2,903
Cost of share issue - - (131) - - - (131)
Share-based payment charge - - - 17 - - 17
Share options expired - - - (69) - 69 -
--------- --------- --------- --------- --------- ------------ ---------
Total contributions by and
distributions to owners of the
Company 55 - 2,717 (52) - 69 2,789
Balance at 31 December 2015 556 1,831 25,077 884 (82) (14,995) 13,271
--------- --------- --------- --------- --------- ------------ ---------
Loss for the period - - - - - (524) (524)
Decrease in value of Available for
sale assets - - - - (34) - (34)
--------- --------- --------- --------- --------- ------------ ---------
Total comprehensive income - - - - (34) (524) (558)
Share issue 143 - 2,657 - - - 2,800
Cost of share issue - - (175) - - - (175)
Share-based payment charge - - - 49 - - 49
Share options expired - - - - - - -
--------- --------- --------- --------- --------- ------------ ---------
Total contributions by and
distributions to owners of the
Company 143 - 2,482 49 - - 2,674
Balance at 31 December 2016 699 1,831 27,559 933 (116) (15,519) 15,387
--------- --------- --------- --------- --------- ------------ ---------
Notes to the financial statements for the year ended 31 December 2016
1 Summary of significant accounting policies
General information and authorisation of financial
statements
Solo Oil Plc is a public limited Company incorporated
in England & Wales. The address of its registered
office is Suite 3B, Princes House,
38 Jermyn Street, London SW1Y 6DN. The Company's
ordinary shares are traded on the AIM Market operated
by the London Stock Exchange. The financial statements
of Solo Oil plc for the year ended 31 December
2016 were authorised for issue by the Board on
13 June 2017 and the balance sheets signed on
the Board's behalf by Mr.Daniel Maling and Mr
Fergus Jenkins.
Investing policy
Solo's Investing Policy is to acquire a diverse
portfolio of direct and indirect interests in
exploration, development and production oil and
gas assets, and any other subsurface gas assets
of potential commercial significance, located
worldwide but predominantly in the Americas, Europe
or Africa.
The Company (Solo) may invest by way of outright
acquisition or by the acquisition of assets, including
the intellectual property, of a relevant business,
partnerships or joint venture arrangements. Such
investments may result in the Company acquiring
the whole or part of a company or project (which
in the case of an investment in a company may
be private or listed on a stock exchange, and
which may be pre-revenue), may constitute a minority
stake in the company or project in question and
may take the form of equity, joint venture debt,
convertible instruments, licence rights, or other
financial instruments as the Directors deem appropriate.
Solo intends to be a long-term investor and the
Directors will place no minimum or maximum limit
on the length of time that any investment may
be held.
There is no limit on the number of projects into
which the Company may invest, nor the proportion
of the Company's gross assets that any investment
may represent at any time and the Company will
consider possible opportunities anywhere in the
world.
All of the Solo's assets will be held in its own
name, or through wholly owned subsidiaries.
Statement of compliance with IFRS
The financial statements have been prepared in
accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union
and as applied in accordance with the provisions
of the Companies Act 2006. The principal accounting
policies adopted by the Company are set out below.
New standards, amendments and interpretations
adopted by the Company
No new and/or revised Standards and Interpretations
have been required to be adopted, and/or are applicable
in the current year by/to the Company, as standards,
amendments and interpretations which are effective
for the financial year beginning on 1 January
2016 are not material to the Company.
New standards, amendments and interpretations
not yet adopted
At the date of authorisation of these financial
statements, the following Standards and Interpretations
which have not been applied in these financial
statements, were in issue but not yet effective
for the year presented:
- IFRS 9 in respect of Financial Instruments which
will be effective for the accounting periods beginning
on or after 1 January 2018.
- IFRS 15 in respect of Revenue from Contracts
with Customers which will be effective for accounting
periods beginning on or after 1 January 2018.
- IFRS 16 in respect of Leases which will be effective
for accounting periods beginning on or after 1
January 2019.
There are no other IFRSs or IFRIC interpretations
that are not yet effective that would be expected
to have a material impact on the Company.
Basis of preparation
The consolidated financial statements have been
prepared on the historical cost basis, except
for the measurement to fair value of assets and
financial instruments as described in the accounting
policies below, and on a going concern basis.
The financial report is presented in Pound Sterling
(GBP) and all values are rounded to the nearest
thousand pounds (GBP'000) unless otherwise stated.
Basis of consolidation
Where the Company has the power, either directly
or indirectly, to govern the financial and operating
policies of another entity or business so as to
obtain benefits from its activities, it is classified
as a subsidiary. Consolidated financial statements
would represent the results of the Company and
its subsidiaries ("the Group") as if they formed
a single entity. Intercompany transactions and
balances between Group companies are therefore
eliminated in full. If a subsidiary has remained
dormant throughout its incorporated life, there
is no consolidation of that subsidiary required.
1 Summary of significant accounting policies (continued)
Available for sale financial assets
Available-for-sale financial assets are non-derivative
financial assets that are either designated to
this category or do not qualify for inclusion in
any of the other categories of financial assets.
The Group's available-for-sale financial assets
include unlisted securities. These available-for-sale
financial assets are measured at fair value. Gains
and losses are recognised in other comprehensive
income and reported within the available-for-sale
reserve within equity, except for impairment losses
and foreign exchange differences, which are recognised
in profit or loss. When the asset is disposed of
or is determined to be impaired, the cumulative
gain or loss recognised in other comprehensive
income is reclassified from the equity reserve
to profit or loss and presented as a reclassification
adjustment within other comprehensive income. Interest
calculated using the effective interest method
and dividends are recognised in profit or loss
within finance income
Revenue recognition
Revenue is recognised to the extent that the right
to consideration is obtained in exchange for performance.
Payment received in advance of performance is deferred
on the balance sheet as a liability and released
as services are performed or products are exchanged
as per the agreement with the customer.
Revenue is generated from one main source of income
currently. In the current year, revenue is being
generated from the Company's Farm-in interests,
on an accrued monthly basis, along with the associated
costs.
Revenue from the production of gas, in which the
Company has an interest with other producers, is
recognised based on the Company's working interest
and the terms of the relevant production sharing
contracts. Differences between gas lifted and sold
and the Company's share of production are not significant.
Interest income is accrued on a time basis, by
reference to the principal outstanding and at the
effective interest rate applicable, which is the
rate that exactly discounts estimated future cash
receipts through the expected life of the financial
asset to that asset's net carrying amount.
Foreign currencies
Transactions in currencies other than Sterling
are recorded at the rates of exchange prevailing
on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that
are denominated foreign currencies are retranslated
at the rates prevailing on the balance sheet date.
Gains and losses arising on retranslation are included
in the income statement for the period.
On consolidation, the results of overseas operations
are translated into sterling at rates approximating
to those ruling when the transactions took place.
All assets and liabilities of the overseas operations,
including goodwill arising on the acquisition of
those operations, are translated at the rate ruling
at the balance sheet date. Exchange differences
arising on translating the opening net assets at
opening rate and the results of overseas operations
at actual rate are recognised directly in equity
(the "foreign exchange reserve").
Taxation
The tax expense represents the sum of the current
tax and deferred tax.
The current tax is based on taxable profit for
the period. Taxable profit differs from net profit
as reported in the income statement because it
excludes items of income or expense that are taxable
or deductible in other periods and it further excludes
items that are never taxable or deductible. The
liability for current tax is calculated by using
tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable
or recoverable on differences between the carrying
amount of assets and liabilities in the financial
statements and the corresponding tax bases used
in the computation of taxable profit, and is accounted
for using the balance sheet liability method. Deferred
tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are
recognised to the extent that it is probable that
taxable profits will be available against which
deductible temporary differences can be utilised.
Such assets and liabilities are not recognised
if the temporary difference arises from goodwill
or from the initial recognition (other than in
a business combination) of other assets and liabilities
in a transaction which affects neither the tax
profit nor the accounting profit.
Deferred tax is calculated at the tax rates that
are expected to apply to the period when the asset
is realised or the liability is settled. Deferred
tax is charged or credited in the income statement,
except when it relates to items credited or charged
directly to equity, in which case the deferred
tax is also dealt with in equity.
Externally acquired intangible assets
Externally acquired intangible assets are initially
recognised at cost and subsequently amortised on
a straight-line basis over their useful economic
lives. The amortisation expense is included within
the administrative expenses line in the consolidated
income statement.
Intangible assets are recognised on business combinations
if they are separable from the acquired entity
or give rise to other contractual/legal rights.
The amounts ascribed to such intangibles are arrived
at by using appropriate valuation techniques.
1 Summary of significant accounting policies (continued)
Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date the Group reviews the
carrying amounts of its tangible and intangible
assets to determine whether there is any indication
that those assets have suffered an impairment loss.
If there is such indication then an estimate of
the asset's recoverable amount is performed and
compared to the carrying amount.
Recoverable amount is the higher of fair value
less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are
discounted to their present value. Where the asset
does not generate cash flows that are independent
from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the
asset belongs.
If the recoverable amount of an asset is estimated
to be less that its carrying amount, the carrying
amount of the asset is reduced to its recoverable
amount. An impairment loss is recognised as an
expense immediately, unless the relevant asset
is carried at a re-valued amount, in which case
the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses,
the carrying amount of the asset is increased to
the revised estimate of its recoverable amount,
but so that the increased carrying amount does
not exceed the carrying amount that would have
been determined had no impairment loss been recognised
for the asset in prior periods. A reversal of an
impairment loss is recognised as income immediately,
unless the relevant asset is carried at a re-valued
amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.
Oil and gas properties and other property, plant
and equipment
(i) Initial recognition
Oil and gas properties and other property, plant
and equipment are stated at cost, less accumulated
depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase
price or construction cost, any costs directly
attributable to bringing the asset into operation,
the initial estimate of the decommissioning obligation
and, for qualifying assets (where relevant), borrowing
costs. The purchase price or construction cost
is the aggregate amount paid and the fair value
of any other consideration given to acquire the
asset. The capitalised value of a finance lease
is also included within property, plant and equipment.
When a development project moves into the production
stage, the capitalisation of certain construction/development
costs ceases, and costs are either regarded as
part of the cost of inventory or expensed, except
for costs which qualify for capitalisation relating
to oil and gas property asset additions, improvements
or new developments.
(ii) Depreciation/amortisation
Oil and gas properties are depreciated/amortised
on a unit-of-production basis over the total proved
developed and undeveloped reserves of the field
concerned, except in the case of assets whose useful
life is shorter than the lifetime of the field,
in which case the straight-line method is applied.
Rights and concessions are depleted on the unit-of-production
basis over the total proved developed and undeveloped
reserves of the relevant area.
The unit-of-production rate calculation for the
depreciation/amortisation of field development
costs takes into account expenditures incurred
to date, together with sanctioned future development
expenditure. An item of property, plant and equipment
and any significant part initially recognised is
derecognised upon disposal or when no future economic
benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the
asset (calculated as the difference between the
net disposal proceeds and the carrying amount of
the asset) is included in the statement of profit
or loss and other comprehensive income when the
asset is derecognised.
The asset's residual values, useful lives and methods
of depreciation/amortisation are reviewed at each
reporting period and adjusted prospectively, if
appropriate.
(ii) Major maintenance, inspection and repairs
Expenditure on major maintenance refits, inspections
or repairs comprises the cost of replacement assets
or parts of assets, inspection costs and overhaul
costs. Where an asset, or part of an asset that
was separately depreciated and is now written off
is replaced and it is probable that future economic
benefits associated with the item will flow to
the Company, the expenditure is capitalised. Where
part of the asset replaced was not separately considered
as a component and therefore not depreciated separately,
the replacement value is used to estimate the carrying
amount of the replaced asset(s) and is immediately
written off. Inspection costs associated with major
maintenance programmes are capitalised and amortised
over the period to the next inspection. All other
day-to-day repairs and maintenance costs are expensed
as incurred.
Provision for rehabilitation / Decommissioning
Liability
The Company recognises a decommissioning liability
where it has a present legal or constructive obligation
as a result of past events, and it is probable
that an outflow of resources will be required to
settle the obligation, and a reliable estimate
of the amount of obligation can be made.
The obligation generally arises when the asset
is installed or the ground/environment is disturbed
at the field location. When the liability is initially
recognised, the present value of the estimated
costs is capitalised by increasing the carrying
amount of the related oil and gas assets to the
extent that it was incurred by the development/construction
of the field. Any decommissioning obligations that
arise through the production of inventory are expensed
when the inventory item is recognised in cost of
goods sold.
Changes in the estimated timing or cost of decommissioning
are dealt with prospectively by recording an adjustment
to the provision and a corresponding adjustment
to oil and gas assets.
Any reduction in the decommissioning liability
and, therefore, any deduction from the asset to
which it relates, may not exceed the carrying amount
of that asset. If it does, any excess over the
carrying value is taken immediately to the statement
of profit or loss and other comprehensive income.
1 Summary of significant accounting policies (continued)
Provision for rehabilitation / Decommissioning
Liability (continued)
If the change in estimate results in an increase
in the decommissioning liability and, therefore,
an addition to the carrying value of the asset,
the Company considers whether this is an indication
of impairment of the asset as a whole, and if so,
tests for impairment. If, for mature fields, the
estimate for the revised value of oil and gas assets
net of decommissioning provisions exceeds the recoverable
value, that portion of the increase is charged
directly to expense. Over time, the discounted
liability is increased for the change in present
value based on the discount rate that reflects
current market assessments and the risks specific
to the liability. The periodic unwinding of the
discount is recognised in the statement of profit
or loss and other comprehensive income as a finance
cost. The Company recognises neither the deferred
tax asset in respect of the temporary difference
on the decommissioning liability nor the corresponding
deferred tax liability in respect of the temporary
difference on a decommissioning asset.
Borrowings
Borrowings are recognised initially at fair value,
net of any applicable transaction costs incurred.
Borrowings are subsequently carried at amortised
cost; any difference between the proceeds (net
of transaction costs) and the redemption value
is recognised in the income statement over the
period of the borrowings using the effective interest
method (if applicable).
Interest on borrowings is accrued as applicable
to that class of borrowing.
Provisions
Provisions are recognised for liabilities of uncertain
timing or amount that have arisen as a result of
past transactions and are discounted at a pre-tax
rate reflecting current market assessments of the
time value of money and the risks specific to the
liability.
Financial instruments
Financial assets and financial liabilities are
recognised on the balance sheet when the Group
has become a party to the contractual provisions
of the instrument
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand,
cash at bank and short term deposits with banks
and similar financial institutions.
Trade and other receivables
Trade and other receivables do not carry any interest
and are stated at their nominal value as reduced
by appropriate allowances for estimated irrecoverable
amounts.
Financial liability and equity
Financial liabilities and equity instruments are
classified according to the substance of the contractual
arrangements entered into. An equity instrument
is any contract that evidences a residual interest
in the assets of the Company after deducting all
of its liabilities.
Trade and other payables
Trade and other payables are non interest bearing
and are stated at their nominal value.
Equity instruments
Equity instruments issued by the Company are recorded
at the proceeds received, net of direct issue costs.
Share-based payments
Where share options are awarded to employees, the
fair value of the options at the date of grant
is charged to the consolidated income statement
over the vesting period. Non-market vesting conditions
are taken into account by adjusting the number
of equity instruments expected to vest at each
balance sheet date so that, ultimately, the cumulative
amount recognised over the vesting period is based
on the number of options that eventually vest.
Market vesting conditions are factored into the
fair value of the options granted. As long as all
other vesting conditions are satisfied, a charge
is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense
is not adjusted for failure to achieve a market
vesting condition.
Where the terms and conditions of options are modified
before they vest, the increase in the fair value
of the options, measured immediately before and
after the modification, is also charged to the
consolidated income statement over the remaining
vesting period.
Where equity instruments are granted to persons
other than employees, the consolidated income statement
is charged with the fair value of goods and services
received. Equity-settled share-based payments are
measured at fair value at the date of grant except
if the value of the service can be reliably established.
The fair value determined at the grant date of
equity-settled share-based payments is expensed
on a straight-line basis over the vesting period,
based on the Company's estimate of shares that
will eventually vest.
1 Summary of significant accounting policies (continued)
Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding
the future. Estimates and judgements are continually
evaluated based on historical experience and other
factors, including expectations of future events
that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from
these estimates and assumptions. The estimates
and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial
year are discussed below.
Impairment of goodwill
The Group is required to test, on an annual basis,
whether goodwill has suffered any impairment. The
recoverable amount is determined based on value
in use calculations. The use of this method requires
the estimation of future cash flows and the choice
of a discount rate in order to calculate the present
value of the cash flows - actual outcomes may vary.
If the carrying amount exceeds the recoverable
amount then impairment is made.
Useful lives of intangible assets and property,
plant and equipment
Intangible assets and property, plant and equipment
are amortised or depreciated over their useful
lives. Useful lives are based on the management's
estimates of the period that the assets will generate
revenue, which are based on judgement and experience
and periodically reviewed for continued appropriateness.
Changes to estimates can result in significant
variations in the carrying value and amounts charged
to the consolidated income statement in specific
periods.
Share-based payments
The Group utilised an equity-settled share-based
remuneration scheme for employees. Employee services
received, and the corresponding increase in equity,
are measured by reference to the fair value of
the equity instruments at the date of grant, excluding
the impact of any non-market vesting conditions.
The fair value of share options are estimated by
using Black-Scholes valuation method as at the
date of grant. The assumptions used in the valuation
are described in note 12 and include, among others,
the expected volatility, expected life of the options
and number of options expected to vest.
Income taxes
The Group is subject to income tax in several jurisdictions
and significant judgement is required in determining
the provision for income taxes. During the ordinary
course of business, there are transactions and
calculations for which the ultimate tax determination
is uncertain. As a result, the Group recognises
tax liabilities based on estimates of whether additional
taxes and interest will be due. The Group believes
that its accruals for tax liabilities are adequate
for all open audit years based on its assessment
of many factors including past experience and interpretations
of tax law. This assessment relies on estimates
and assumptions and may involve a series of complex
judgments about future events. To the extent that
the final tax outcome of such matters is different
than the amounts recorded, the differences will
impact income tax expense in the period in which
such determination is made.
Deferred taxation
Deferred tax assets are recognised when it is judged
more likely than not that they will be recovered.
Hydrocarbon reserve and resource estimates
Hydrocarbon reserves are estimates of the amount
of hydrocarbons that can be economically and legally
extracted from the Company's oil and gas properties.
The Company estimates its commercial reserves and
resources based on information compiled by appropriately
qualified persons relating to the geological and
technical data on the size, depth, shape and grade
of the hydrocarbon body and suitable production
techniques and recovery rates. Commercial reserves
are determined using estimates of oil and gas in
place, recovery factors and future commodity prices,
the latter having an impact on the total amount
of recoverable reserves and the proportion of the
gross reserves which are attributable to the host
government under the terms of the Production-Sharing
Agreements. Future development costs are estimated
using assumptions as to the number of wells required
to produce the commercial reserves, the cost of
such wells and associated production facilities,
and other capital costs. The current long-term
gas price assumption used in the estimation of
commercial reserves is US$3/MMTBU. The carrying
amount of oil and gas development and production
assets at 31 December 2016 is shown in Note 9.
The Company estimates and reports hydrocarbon reserves
in line with the principles contained in the SPE
Petroleum Resources Management Reporting System
(PRMS) framework. As the economic assumptions used
may change and as additional geological information
is obtained during the operation of a field, estimates
of recoverable reserves may change. Such changes
may impact the Company's reported financial position
and results, which include:
* The carrying value of exploration and evaluation
assets; oil and gas properties; property, plant and
equipment; and goodwill may be affected due to
changes in estimated future cash flows
* Depreciation and amortisation charges in the
statement of profit or loss and other comprehensive
income may change where such charges are determined
using the Units of Production (UOP) method, or where
the useful life of the related assets change
* Provisions for decommissioning may require revision -
where changes to the reserve estimates affect
expectations about when such activities will occur
and the associated cost of these activities
* The recognition and carrying value of deferred tax
assets may change due to changes in the judgements
regarding the existence of such assets and in
estimates of the likely recovery of such assets
1 Summary of significant accounting policies (continued)
Critical accounting estimates and judgements (continued)
Exploration and evaluation expenditures
The application of the Company's accounting policy
for exploration and evaluation expenditure requires
judgement to determine whether future economic
benefits are likely, from future either exploitation
or sale, or whether activities have not reached
a stage which permits a reasonable assessment of
the existence of reserves. The determination of
reserves and resources is itself an estimation
process that involves varying degrees of uncertainty
depending on how the resources are classified.
These estimates directly impact when the Company
defers exploration and evaluation expenditure.
The deferral policy requires management to make
certain estimates and assumptions about future
events and circumstances, in particular, whether
an economically viable extraction operation can
be established. Any such estimates and assumptions
may change as new information becomes available.
If, after expenditure is capitalised, information
becomes available suggesting that the recovery
of the expenditure is unlikely, the relevant capitalised
amount is written off in the statement of profit
or loss and other comprehensive income in the period
when the new information becomes available.
Units of production (UOP) depreciation of oil and
gas assets
Oil and gas properties are depreciated using the
UOP method over total proved developed and undeveloped
hydrocarbon reserves. This results in a depreciation/amortisation
charge proportional to the depletion of the anticipated
remaining production from the field.
The life of each item, which is assessed at least
annually, has regard to both its physical life
limitations and present assessments of economically
recoverable reserves of the field at which the
asset is located. These calculations require the
use of estimates and assumptions, including the
amount of recoverable reserves and estimates of
future capital expenditure. The calculation of
the UOP rate of depreciation/amortisation will
be impacted to the extent that actual production
in the future is different from current forecast
production based on total proved reserves, or future
capital expenditure estimates change. Changes to
the proved reserves could arise due to changes
in the factors or assumptions used in estimating
reserves, including:
* The effect on proved reserves of differences between
actual commodity prices and commodity price
assumptions
* Unforeseen operational issues
Recoverability of oil and gas assets
The Company assesses each asset or cash generating
unit (CGU) (excluding goodwill, which is assessed
annually regardless of indicators) each reporting
period to determine whether any indication of impairment
exists. Where an indicator of impairment exists,
a formal estimate of the recoverable amount is
made, which is considered to be the higher of the
fair value less costs of disposal (FVLCD) and value
in use (VIU). The assessments require the use of
estimates and assumptions such as long-term oil
prices (considering current and historical prices,
price trends and related factors), discount rates,
operating costs, future capital requirements, decommissioning
costs, exploration potential, reserves (see (a)
Hydrocarbon reserves and resource estimates above)
and operating performance (which includes production
and sales volumes). These estimates and assumptions
are subject to risk and uncertainty. Therefore,
there is a possibility that changes in circumstances
will impact these projections, which may impact
the recoverable amount of assets and/or CGUs.
Decommissioning costs
Decommissioning costs will be incurred by the Company
at the end of the operating life of some of the
Company's facilities and properties. The Company
assesses its decommissioning provision at each
reporting date. The ultimate decommissioning costs
are uncertain and cost estimates can vary in response
to many factors, including changes to relevant
legal requirements, the emergence of new restoration
techniques or experience at other production sites.
The expected timing, extent and amount of expenditure
may also change - for example, in response to changes
in reserves or changes in laws and regulations
or their interpretation.
Therefore, significant estimates and assumptions
are made in determining the provision for decommissioning.
As a result, there could be significant adjustments
to the provisions established which would affect
future financial results.
External valuers may be used to assist with the
assessment of future decommissioning costs. The
involvement of external valuers is determined on
a case by case basis, taking into account factors
such as the expected gross cost or timing of abandonment,
and is approved by the Company's Audit Committee.
Selection criteria include market knowledge, reputation,
independence and whether professional standards
are maintained. The provision at reporting date
represents management's best estimate of the present
value of the future decommissioning costs required.
Equity reserves
Share capital is determined using the nominal value
of shares that have been issued.
The share premium account represents premiums received
on the initial issuing of the share capital. Any
transaction costs associated with the issuing of
shares are deducted from share premium, net of
any related income tax benefits.
The share based payment reserve represents the
cumulative amount which has been expensed in the
income statement in connection with share based
payments, less any amounts transferred to retained
earnings on the exercise of share options.
Available Sale Financial Asset & Hedging reserve
represents the market value movement of AFS investments,
and the market value movement of the Company's
share price in accordance with the Derivative Assets
the Company holds, including the Equity Swap Asset.
Retained earnings include all current and prior
period results as disclosed in the income statement
1 Summary of significant accounting policies (continued)
Going Concern
The Directors noted the losses that the Company
has made for the Year Ended 31 December 2016. The
Directors have prepared cash flow forecasts for
the period ending 30 June 2018 which take account
of the current cost and operational structure of
the Company.
The cost structure of the Company comprises a high
proportion of discretionary spend and therefore
in the event that cash flows become constrained,
costs can be quickly reduced to enable the Company
to operate within its available funding.
These forecasts demonstrate that the Company has
sufficient cash funds available to allow it to
continue in business for a period of at least twelve
months from the date of approval of these financial
statements. Accordingly, the financial statements
have been prepared on a going concern basis.
It is the prime responsibility of the Board to
ensure the Company remains a going concern. At
31 December 2016 the Company had cash and cash
equivalents of GBP600,000 and borrowings of GBPnil.
The Company has minimal contractual expenditure
commitments and the Board considers the present
funds sufficient to maintain the working capital
of the Company for a period of at least 12 months
from the date of signing the Annual Report and
Financial Statements. For these reasons the Directors
adopt the going concern basis in the preparation
of the Financial Statements.
Turnover and
2 segmental analysis
An operating segment is a distinguishable component
of the Company that engages in business activities
from which it may earn revenues and incur expenses,
whose operating results are regularly reviewed
by the Company's chief operating decision maker
to make decisions about the allocation of resources
and assessment of performance and about which discrete
financial information is available. The chief operating
decision maker has defined that the Company's only
reportable operating segment during the period
is that of oil & gas exploration & production..
The Company's current revenue is all generated
in Tanzania from oil & gas production in accordance
with its farm-in/profit sharing agreements, within
Tanzania. However with this segment in its first
period of production, and with the only major related
transactions being the carrying value of the oil
& gas properties assets as described in note 9,
no further segmental analysis is deemed useful
to disclose currently. The first period's revenue
from this segmental was GBP501,000 (2015: GBPnil).
Subject to further acquisitions, the company expects
to further review its segmental information during
the forthcoming financial year and update accordingly.
In respect of the total assets, GBP2,541,000 (2015:
GBP1,963,000) arise in the UK, and GBP300,000 (2015:
GBP300,000) arise in Canada, GBP12,689,000 arise
in Tanzania (2015: GBP11,092,000), and GBP576,000
arise in Nigeria (2015: GBP576,000).
Year ended Year ended
31 December 31 December
2016 2015
3 Operating loss GBP000's GBP000's
Loss from operations has been arrived at after charging:
Directors fees 267 279
Salaries and wages 40 35
Audit fees 13 13
Share-based payments 49 -
Amounts payable to auditors and their associates in respect of both audit and
non-audit services:
Audit services - statutory audit - Chapman Davis LLP 13 13
------------- -------------
13 13
============= =============
4 Employee information and directors emoluments
Year ended Year ended
31 December 2016 31 December 2015
GBP000's GBP000's
------------------ ------------------
Staff information
The average number of employees (excluding executive directors) was : 1 1
------------------ ------------------
Their aggregate remuneration comprised : GBP000's GBP000's
Wages and salaries 40 35
------------------ ------------------
Total 40 35
------------------ ------------------
Directors' remuneration
Total 314 279
------------------ ------------------
Salary and fees Share-based payments Total
Year ended 31 December 2016 GBP000's GBP000's GBP000's
Neil Ritson 125 12 137
Don Strang 58 9 67
Dan Maling (*2) 24 15 39
Fergus Jenkins 40 11 51
Sandy Barblett (*1) 20 - 20
267 47 314
================ ===================== ==========
Salary and fees Share-based payments Total
Year ended 31 December 2015 GBP000's GBP000's GBP000's
Neil Ritson 125 - 125
Don Strang 90 - 90
Fergus Jenkins 40 - 40
Sandy Barblett 24 - 24
279 - 279
================ ===================== ==========
(*1) Resigned as a director on 10 August 2016.
(*2) Appointed as a director on 10 August 2016.
Year ended Year ended
31 December 2016 31 December 2015
5 Taxation GBP000's GBP000's
Current tax expense
UK corporation tax and income tax of overseas operations on profits for
the period - -
Total income tax expense - -
================== ==================
The reasons for the difference between the actual tax charge for the
period and the standard
rate of corporation tax in the UK applied to profits for the year are as
follows:
Loss for the period (524) (2,773)
Standard rate of corporation tax in the UK 20% 20/21%
Loss on ordinary activities multiplied by the standard rate of corporation
tax (105) (562)
------------------ ------------------
Expenses not deductible for tax purposes 70 304
Future income tax benefit not brought to account 35 258
------------------ ------------------
Current tax charge for period - -
================== ==================
No deferred tax asset has been recognised because there is uncertainty of the timing of suitable
future profits against which they can be recovered.
Year ended Year ended
31 December 2016 31 December 2015
6 Finance costs GBP000's GBP000's
Loan Interest 2 39
Finance fees - 23
Losses on settled equity swap payments 27 307
Share-based payments - 17
------------------ ------------------
Total 29 386
================== ==================
Year ended Year ended
31 December 2016 31 December 2015
7 Loss per share GBP000's GBP000's
The calculation of loss per share is based on the loss after taxation
divided by the weighted
average number of shares in issue during the period:
Net loss after taxation (GBP000's) (524) (2,773)
Number of shares
Weighted average number of ordinary shares for the purposes of basic loss
per share (millions) 6,091.4 5,390.5
Basic and diluted loss per share (expressed in pence) (0.01) (0.05)
================== ==================
As inclusion of the potential ordinary shares would result in a decrease in the earnings per
share they are considered to be anti-dilutive, as such, a diluted earnings per share is not
included.
8 Intangible assets
Deferred exploration expenditure Total
GBP000's GBP000's
Cost
As at 31 December 2014 11,101 11,101
--------------------------------- ----------
Additions 2,649 2,649
As at 31 December 2015 13,750 13,750
--------------------------------- ----------
Additions 1,597 1,597
Transfer to Oil & Gas Properties (2,758) (2,758)
As at 31 December 2016 12,589 12,589
--------------------------------- ----------
Accumulated amortisation and impairment
Balance at 31 December 2014 2,058 2,058
--------------------------------- ----------
Impairment charge 300 300
Balance at 31 December 2015 2,358 2,358
--------------------------------- ----------
Impairment charge - -
Balance at 31 December 2016 2,358 2,358
--------------------------------- ----------
Net book value
As at 31 December 2016 10,231 10,231
--------------------------------- ----------
As at 31 December 2015 11,392 11,392
--------------------------------- ----------
Impairment Review
The Directors have carried out an impairment review as at 31 December 2016, and determined
that an impairment charge is not currently required. The Directors based this assessment on
recent successful drilling at Ntorya-2 and continuing planned appraisal works in its Tanzanian,,
Ruvuma Basin licences.
9 Oil & Gas properties
Oil & Gas Properties Total
GBP000's GBP000's
Cost
As at 31 December 2014 and at 31 December 2015 - -
--------------------- ----------
Transfer from intangible assets 2,758 2,758
As at 31 December 2016 2,758 2,758
--------------------- ----------
Accumulated amortisation and impairment
Balance at 31 December 2014 and at 31 December 2015 - -
--------------------- ----------
Amortisation charge 275 275
Balance at 31 December 2016 275 275
--------------------- ----------
Net book value
As at 31 December 2016 2,483 2,483
--------------------- ----------
As at 31 December 2015 - -
--------------------- ----------
Impairment Review
The Oil & Gas properties comprise the 7.175% participating interest in the Kiliwani North,
in Tanzania.
The Directors have carried out an impairment review as at 31 December 2016, and determined
that an impairment charge is not currently required. The Directors based this assessment on
continuing operational work schedules that are ongoing to improve operational efficiencies
and production.
10 Available for sale financial assets
31 December 2016 31 December 2015
Investment in listed and unlisted securities GBP000's GBP000's
Valuation at beginning of the period 1,192 1,522
Additions at cost - 335
Foreign exchange (loss) - (12)
Impairment provision - Burj Africa - (575)
Decrease in value of listed investment (11) (78)
------------------- ------------------
Valuation at the end of the period 1,181 1,192
=================== ==================
The available for sale investments splits are as below:
Non-current assets - listed 5 16
Non-current assets - unlisted 1,176 1,176
------------------- ------------------
1,181 1,192
On 29 April 2015, the Company completed its exchange of its shareholding in Pan Minerals Oil
and Gas AG ("Pan Minerals") for a direct holding of 15.9% in Burj Petroleum Africa Limited
("Burj Africa"), a private UK registered company created with the purpose of participating
in the current marginal field licensing round in Nigeria. The Company also entered into an
agreement to increase its investment in Burj Africa by acquiring an additional 5% holding
in Burj Africa through a payment of US$200,000 in cash and, the equivalent of US$300,000 in
39,750,000 new Ordinary Shares at an issue price of 0.51 p per share. This was completed on
6 May 2015, as such the Company holds a total interest of 20% in Burj Africa. The holding
cost of the Company's shares in Pan Minerals was equal to the acquisition cost of those shares,
approximately GBP800,000. And thus following the transaction to convert those shares to a
holding in Burj Africa and the acquisition of additional Burj Africa shares took the total
holding value in Solo's accounts to approximately GBP1.1 million. On reviewing the carrying
value at 31 December 2015, the Directors made the decision to make an impairment provision
against Burj of 50%, GBP575,000. With recent improvements in the oil price and political landscape
and activity levels in Nigeria the Directors believe the carrying values at 31 December 2016
to be appropriate.
Available-for-sale investments comprise investments in unlisted and listed securities which
are traded on stock market throughout the world, and are held by the Company as a mix of strategic
and short term investments.
11 Investment in subsidiaries
31 December 2016 31 December 2015
GBP000's GBP000's
As at 1 July - -
Additions - -
At 31 December - -
-------------------------- ----------------------------------
The only subsidiary of Solo Oil Plc, which is dormant, and has been since incorporation, is
as follows:
Name Country of incorporation Proportion of ownership interest
Solo Oil International Limited UK 100%
12 Trade and other receivables
31 December 2016 31 December 2015
Current trade and other receivables GBP000's GBP000's
Trade receivables 583 -
Loan to Horse Hill Developments Ltd 658 369
Prepayments 14 66
Other debtors 81 88
---------------------- ----------------------
1,336 523
====================== ======================
The directors consider that the carrying amount of trade and other receivables approximates
to their fair value.
13 Derivative financial instrument
31 December 2016 31 December 2015
Equity Swap GBP000's GBP000's
Fair value at 1 January (314) 489
Settlements during the year 450 110
(Losses) on settlements (136) (307)
Provision at 31 December - (606)
-------------------------- --------------------------
Fair value at 31 December - (314)
========================== ==========================
On 24 September 2014, the Company announced that it had entered into an equity swap arrangement
("the Equity Swap Agreement") with YAGM over 157,894,737 of the Subscription Shares ("the
Swap Shares"). In return for a payment by the Company to YAGM of GBP750,000, twelve monthly
settlement payments in respect of such payment were to be made by YAGM to the Company, or
by the Company to YAGM, based on a formula related to the difference between the prevailing
market price (as defined in the Equity Swap Agreement) of the Company's ordinary shares in
any month and a "benchmark price" that is 5% above the Subscription Price. Thus the funds
received by the Company in respect of the Swap Shares are dependent on the future price performance
of the Company's ordinary shares.
By 31 December 2014, no swaps had been closed out and no payments received from or made to
YAGM. The full remaining balance has been fair valued at 31 December 2014, resulting in a
provision with the resultant charge disclosed in the Income Statement.
On 27 March 2015, the Company agreed in exchange for a deferral payment of US$50,000 to YAGM
to defer the start of the settlement Dates under the Swap Agreement until 1 May 2015.
During the year ended 31 December 2015, the Company completed 3 monthly settlements (October
- December 2015), which as a result of the decline in the Company's share price realised a
loss on settlement of GBP307,000 for the 3 months.
As at 31 December 2015, the remaining balance has been fair valued, resulting in a creditor
balance of GBP314,000, and incurring an unrealised loss on revaluation of GBP606,000 through
the income statement.
During the year ended 31 December 2016, the Company settled the swap for a total of GBP450,000
paid to YAGM, no further Swap arrangements have been entered into by the Company.
14 Trade and other payables
31 December 2016 31 December 2015
Current trade and other payables GBP000's GBP000's
Trade payables 404 55
Other payables 18 138
Accruals 22 41
444 234
======================== =======================
The directors consider that the carrying amount of trade payables approximates to their fair
value.
15 Borrowings
31 December 2016 31 December 2015
Current trade and other payables GBP000's GBP000's
Loans - other (unsecured) - 112
- 112
================= ==================
On 24 September 2014, the Company agreed a US$5million debt facility with YA Global Master
SPV ("YAGM"), and drew down the first US$1million on that date. This loan carried a twelve
month repayment schedule at a fixed coupon of 10%. Any subsequent drawdowns were to be on
the same terms and subject to approval by YAGM. This initial drawdown was fully repaid during
the year ended 31 December 2015.
On 26 March 2015, the Company drew down a further US500,000 from the agreed debt facility,
under the same repayment terms as above. As at 31 December 2015, four instalments remained
outstanding, all of which have now been fully repaid during the year ended 31 December 2016
in accordance with the terms of the loan. No further debt facilities have been entered into
by the Company.
16 Share capital
Number of shares Nominal value
GBP000's
a) Called up, allotted, issued and fully paid: Ordinary
shares of 0.01p each
----------------- ------------------
As at 31 December 2014 5,013,194,207 501
================= ==================
10 February 2015 - Placing for cash at 0.5p 140,000,000 14
21 April 2015 - Placing for cash at 0.55p 363,636,364 37
30 April 2015 - Non-cash issue at 0.51p on acquisition of
Burj Petroleum Africa Ltd 39,750,000 4
As at 31 December 2015 5,556,580,571 556
================= ==================
7 April 2016 - Placing for cash at 0.25p 320,000,000 32
23 September 2016 - Placing for cash at 0.18p 1,111,111,111 111
================= ==================
As at 31 December 2016 6,987,691,682 699
================= ==================
b) Deferred shares
Deferred shares of 0.69 pence each (2015: 265,324,634) 265,324,634 1,831
================= ==================
c) Total Share options in issue
During the year 212,500,000 options were granted (2015: nil).
As at 31 December 2016 the options in issue were:
Exercise Price Expiry Date Options in Issue
31 December 2015
1.54p 30 April 2018 7,000,000
0.5p 31 December 2020 204,000,000
0.5p 31 December 2020 68,500,000
0.3p 31 December 2020 100,000,000
0.35p 31 October 2021 212,500,000
592,000,000
-------------------------------------
No options were exercised during the period (2015: nil).
No options lapsed during the period (2015: 28million). No options were cancelled during the
period (2015: nil).
d) Total warrants in issue
During the year, no warrants were issued (2015: 15,328,167).
No warrants lapsed or were cancelled or exercised during the year (2015: nil).
As at 31 December 2016 the 31,952,777 warrants at 1.2p & 0.69p per share were outstanding.
(2015: 31,952,777)
17 Share based payment
During the year the Company issued no options
but did issue warrants in relation to loan draw-down
financing. The total options and warrants and
movements therein during the year were as follows:
31 December 31 December
2016 2015
Weighted Number Weighted Number
average average
exercise exercise
price price
(pence) (pence)
Outstanding at the
beginning of the period 0.333 411,452,777 0.497 424,124,610
Granted during the
period - warrants - - 0.69 15,328,167
Granted during the
period - options 0.35 212,500,000 - -
Cancelled during the - - - -
period - options
Exercised during the - - - -
period
Lapsed during the period
- options - - 0.5 (28,000,000)
Lapsed during the period - - - -
- warrants
---------------- ------------ ------------ -------------
Outstanding at the
end of the period -
Options & warrants 0.452 623,952,777 0.333 411,452,777
---------------- ------------ ------------ -------------
The exercise price of options outstanding at the
end of the year ranged between 1.54p and 0.30p,
and the exercise price of warrants outstanding
at the end of the year ranged between 1.2p and
0.69p.
The weighted average fair value of each option
granted during the period was 0.12p (2015: options
nil).
The Company used the Black-Scholes model to determine
the value of the options and the inputs were as
follows:
Issue 1/11/2016
Share price at
grant (pence) 0.21
Fair Value price
at grant (pence) 0.12
Expected volatility
(%) 82.2%
Expected life (years) 5 years
Risk free rate
(%) 0.61%
Expected dividends nil
(pence)
Expected volatility was determined by using the
Company's share price for the preceding 12 months.
The total share-based payment expense in the year
for the Company was GBP49,000l expense in relation
to options (2015: GBPnil) and GBPnil finance charges
in relation to warrants (2015: GBP17,000).
Employee Benefit Trust
The Company established on 7 December 2012, an
employee benefit trust called the Solo Oil Employee
Benefit Trust ("EBT") to implement the use of
the Company's existing share incentive plan over
5% of the Company's issued share capital from
time to time in as efficient a manner as possible
for the beneficiaries of that plan. The EBT is
a discretionary trust for the benefit of directors
and employees of the Company and its subsidiaries.
No further subscriptions for shares in the Company
has been made by the EBT during the years ended
31 December 2016 and 2015.
18 Financial instruments
The Company is exposed through its operations
to one or more of the following financial risks:
-- Fair value or cash flow interest rate risk
-- Foreign currency risk
-- Liquidity risk
-- Credit risk
-- Market risk
Policy for managing these risks is set by the
Board. The policy for each of the above risks
is described in more detail below.
Fair value and cash flow interest rate risk
Currently the Company does not have external borrowings.
However, the Company has a policy of holding debt
at a floating rate. The directors will revisit
the appropriateness of this policy should the
Company's operations change in size or nature.
Operations are not permitted to borrow long-term
from external sources locally.
Foreign currency risk
Foreign exchange risk arises because the Company
has operations located in various parts of the
world whose functional currency is not the same
as the functional currency in which the company's
investments are operating. The Company's net assets
are exposed to currency risk giving rise to gains
or losses on retranslation into sterling. Only
in exceptional circumstances will the Company
consider hedging its net investments in overseas
operations as generally it does not consider that
the reduction in volatility in consolidated net
assets warrants the cash flow risk created from
such hedging techniques.
Liquidity risk
The liquidity risk of each entity is managed centrally
by the treasury function. Each operation has a
facility with treasury, the amount of the facility
being based on budgets. The budgets are set locally
and agreed by the board annually in advance, enabling
the cash requirements to be anticipated. Where
facilities of entities need to be increased, approval
must be sought from the finance director. Where
the amount of the facility is above a certain
level agreement of the board is needed.
All surplus cash is held centrally to maximise
the returns on deposits through economies of scale.
The type of cash instrument used and its maturity
date will depend on the forecast cash requirements.
Credit risk
The Company is mainly exposed to credit risk from
credit sales. It is Company policy, implemented
locally, to assess the credit risk of new customers
before entering contracts. Such credit ratings
are taken into account by local business practices.
The Company does not enter into complex derivatives
to manage credit risk, although in certain isolated
cases may take steps to mitigate such risks if
it is sufficiently concentrated.
Market risk
As the company is now investing in listed companies,
the market risk will be that of finding suitable
investments for the company to invest in and the
returns that those investments will return given
the markets that in which investments are made.
19 Related party transactions
The company had the following amounts outstanding
from its investee companies (Note 10) at 31 December: 2016 2015
GBP'000 GBP'000
Horse Hill Development Ltd ("Horse
Hill") 658 369
--------- ---------
The above loan outstanding is included within trade
and other receivables, Note 12. The loan to Horse
Hill has been made in accordance with the terms
of the investment agreement whereby it accrues
interest daily at the Bank of England base rate
and is repayable out of future cash flows.
There were no transactions between the parent and
its dormant subsidiary, which are related parties,
during the period. Details of director's remuneration,
being key personnel, are given in note 4.
Remuneration of Key Management Personnel
The remuneration of the directors, and other key
management personnel of the Company, is set out
below in aggregate for each of the categories specified
in IAS24 Related party Disclosures.
Year ended Year ended
31 December 31 December
2016 2015
GBP'000s GBP'000s
Short-term employee benefits 317 314
Share-based payments 47 -
---------------------------- ----------------------------
364 314
---------------------------- ----------------------------
20 Ultimate controlling party
In the opinion of the directors there is no controlling
party.
21 Retirement benefit scheme
The Company does not operate either a defined
contribution or defined benefit retirement scheme.
22 Commitments
As at 31 December 2016, the Company had no material
commitments.
23 Post balance sheet event
On 16 February 2017, Solo announced that the Company
had raised GBP2,000,000 (before expenses) through
a Company sponsored placing (the "Placing") of
400,000,000 new ordinary shares of 0.01p (the
"Placing Shares") at a price of 0.50p per Placing
Share (the "Placing Price") representing approximately
5.7% of the issued share capital prior to Admission
of the Placing Shares..
On 22 March 2017, Solo announced that it had agreed
to acquire a 10% interest in Helium One Limited
("Helium One") for a total consideration of GBP2.55
million (the "Initial Investment"). Solo has also
been granted a 90-day call option to increase
its investment in Helium One by a further 10%,
for an additional investment of GBP4million, which
would increase its stake to 20%. The Initial Investment
is for 10% of the post-money issued capital of
Helium One. The consideration totalling GBP2.55
million is comprised GBP1.2 million in cash and
GBP1.35 million payable by the issue to Helium
One of such number of fully paid ordinary shares
in Solo ("Consideration Shares") at a Solo share
price equal to the five trading day VWAP immediately
prior to the issue of those shares. The Consideration
Shares will be issued subject to the terms of
a standard orderly market agreement and admission
to trading on AIM. The cash element payable by
Solo is being funded by the Subscription as set
out below. Upon closing of the Initial Investment
the Company shall grant to Solo the right to subscribe
for one share for every one share subscribed for
under the Initial Investment at a price of US$0.40
per share for a period of 2 years from the date
of grant. Helium One will additionally be issued
236,842,105 shares based on the calculated five
trading day VWAP of 0.57p per Consideration Share.
Also on 22 March 2017, Solo announced it had raised
GBP1,200,000 (before expenses) with institutional
and private investors through a Company arranged
subscription (the "Subscription") of 222,222,222
new ordinary shares of 0.01p (the "Subscription
Shares") at a price of 0.54p per Subscription
Share (the "Subscription Price") representing
approximately 3.0 % of the issued share capital
prior to Admission of the Subscription Shares.
On 11 May 2017, Solo announced that the Company's
Non-Executive Chairman, Neil Ritson, will take
up the role of Executive Chairman with immediate
effect.
On 23 May 2017, Solo announced that they had cancelled
the General Meeting, notice of which was given
on 19 May 2017, in regards to the approval of
further fund-raising, investment policy update,
and authority to allot the shares necessary to
complete the second stage investment into Helium
One Ltd as detailed above The Company announced
they had made the decision not to exercise the
call option with Helium One, and thus had terminated
plans to raise the funds to complete that transaction..
Note to the announcement:
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015. The financial information for the year ended 31 December 2015 is derived from the statutory accounts for that year. The audit of statutory accounts for the year ended 31 December 2016 is complete.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LZLLFDQFXBBZ
(END) Dow Jones Newswires
June 15, 2017 02:00 ET (06:00 GMT)
1 Year Solo Oil Chart |
1 Month Solo Oil Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
