2nd Mar 2020 10:37
(Alliance News) - Solo Oil PLC on Monday said it has been unable to agree revised terms for the purchase of assets in the North Sea.
The company also said it will be beginning a formal sale process for its Tanzanian assets.
Shares were down 62% at 0.92 pence each. They resumed trading on Monday, having been suspended as the acquisition was considered a reverse takeover.
In October, London-based Solo announced it would be buying some natural gas fields from ONE-Dyas BV in the Dutch part of the North Sea. The average production from the fields in the first half of 2019 was 1,750 barrels of oil equivalent per day.
Solo was to pay EUR30.1 million upfront plus a deferred EUR2.0 million. In December, Solo then said it would be renegotiating the terms of the deal.
The company on Monday said it has been unable to agree revised commercial terms, so the deal will not be going ahead.
Chief Executive Tom Reynolds said it was "disappointing" for the company, but stressed the value of the assets changed "significantly" after the acquisition was first agreed.
The reason for the renegotiations was a fall in European gas prices to "unprecedented and historical lows", increases in expenditure estimates in the target assets, as was as political uncertainty in the UK which have contributed to weakening equity market sentiment.
"Over the past two months, the board and management have positively engaged with ONE-Dyas around a variety of deal structures that looked to deliver value for the company's shareholders in this challenging environment," said Solo.
"Unfortunately, despite the best efforts of both Solo and ONE-Dyas to find a mutually acceptable transactional construct and, noting the significant volatility in the European gas price and uncertainty in capital markets, no suitable compromise could be achieved," the company continued.
However, Solo has not been put off the European gas sector and said it is in talks with several parties over possible acquisitions.
"Despite the disappointment of not being able to complete the proposed transaction on mutually acceptable terms, the board remains committed to the company's broader European gas strategy as previously communicated," Solo said.
"The board and management continue to work with its advisers to identify additional opportunities with producing reserves and future development characteristics that would allow the company to realise the benefit from undertaking an acquisition during a cyclical price low in the gas market."
Turning to Tanzania, Solo has a 25% stake in the Ruvuma contract, which includes the Ntorya gas field operated by London-listed Aminex PLC. Aminex in July 2018 signed a farm-out with Zubari Corp LLC.
Zubari assigned the farm-out stake to ARA Petroleum Ltd, which was to become the operator.
However, the farm-out has yet to be approved by the Tanzanian government, though Aminex said last week it was hopeful of a resolution soon.
The board has determined the most appropriate course of action is to run a formal process to explore value realisation options for the assets including, but not limited to, the sale of Solo's interests in the certain, or all, of its Tanzanian assets," said Solo.
By George Collard; [email protected]
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