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Solo Oil PLC

Solo Oil rings changes with Dutch deal, new management and will rename as Scirocco

The soon-to-be-relaunched company has agreed a €32.1mln asset acquisition to be funded by a €18mln loan and a £20mln equity raise

Solo Oil PLC - Solo Oil rings the changes with Dutch deal, new management and will rename as Scirocco
Dutch gas is the future for the company, to be renamed Scirocco Energy

Solo Oil PLC (LON:SOLO) has unveiled a series of major changes including a €32.1mln asset acquisition, constituting a reverse takeover, new management and a rebrand.

The company, soon to be called Scirocco Energy Plc, has agreed a deal to acquire natural gas fields in the Dutch section of the North Sea from ONE-DYAS.

WATCH: Solo Oil: Analyst Malcolm Graham-Wood expects 'significant valuation uplift' when trading resumes

It will pay the Netherlands firm €30.1mln upfront, plus €2mln deferred, with the deal funded by a new €18mln loan financing provided by Mercuria Energy Group and a planned £20mln equity raise to be run by brokers Peel Hunt and Canaccord Genuity.

Solo’s shares have been suspended to facilitate the transactions, though for context the market value of the company prior to the deal was £15.29mln.

An open offer share sale will simultaneously be launched to give existing Solo Oil shareholders the opportunity to participate in the funding round.

Chairman Alastair Ferguson said the company was delighted to have agreed the “truly transformative” deal.

“[It] is the culmination of 12 months of hard work by the board in re-determining the company's strategy. 

“Our priority has been on ensuring the first deal we bring to shareholders is value accretive and reflects the ambition of the board to build a new mid-cap company backed by high quality assets and stable cash flow.

“This is a major step towards the board's strategic goal of evolving into a European gas, infrastructure and energy player focused on delivering investor returns in the transitional energy economy."

The Dutch gas assets

As Scirocco, it will own three core areas in Dutch waters together comprising non-operated interests in 14 gas fields.

These assets are run by high quality multinational operators such as ONE-DYAS, Neptune Energy and Total.

The fields themselves are described as being ‘mid-life’. They produced an average of 1,750 barrels oil equivalent per day net in the first half of 2019, and, the rate is expected to rise to 2,125 boepd in 2020.

Further, there’s said to be “significant development upside” in each of the three core areas via ‘near field’ resources with proximity to existing infrastructure. The company said there’s a well defined work programme in place to upgrade known resources into producible reserves.

It highlighted that there’s potential to increase net production to more than 3,300 boepd by 2022.

Altogether the acquired assets are expected to provide the company with “a self-funding platform with clear path to increased scale and value”.

The company note that the assets immediately deliver cash flow for re-investment, that the Dutch growth activities will be self-funded and the business will have the basis for both organic and inorganic growth in the future.

It provides the “optionality” for the company to extract maximum value from Solo’s existing assets in Tanzania, the company added.

The transaction is an early step in the company’s stated five-year target of building a production business with 20,000 boepd.

New management

Scirocco will be led by new chief executive Tom Reynolds, who has been a non-executive director at Solo since last year and has held a range of technical and commercial roles at BP and Total, and the company will also bring aboard a new finance and operations chiefs.

Executive chairman Ferguson will move to non-executive chair.

In Wednesday’s statement, the company highlighted that the broader executive team has the required experience in North Sea M&A, public markets and gas value chain.

"I am delighted to step up to the role of CEO at this pivotal juncture in the company's development and look forward to driving the growth agenda, building on this significant transaction,” Reynolds said.

“The acquisition transforms Solo into a leading independent producer in the Netherlands and secures a portfolio of cash-generative, producing assets that sets us on a path to sustainable growth. 

“We are excited by the low-risk development opportunities within the portfolio and we look forward to pursuing the work programme to prove up the development potential which offers a clear route to growing net production volumes.”

Quick facts: Solo Oil PLC

Price: 2.425 GBX

Market: AIM
Market Cap: £15.32 m
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Solo Oil: Analyst Malcolm Graham-Wood expects 'significant valuation uplift'...

Analyst and commentator Malcolm Graham-Wood says this week's acquisition by Solo Oil (LON:SOLO) of producing natural gas fields in the Dutch section of the North Sea 'ticks all the boxes'. ''I was really impressed by this to be honest''. ''This deal they've done really does hit every nail...

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