TIDMSOLO
RNS Number : 6453T
Solo Oil Plc
22 March 2019
22 March 2019
Solo Oil plc
("Solo" or "the Company")
Strategy Update
Solo Oil (AIM: SOLO), is pleased to provide the following
corporate strategy update that sets out the medium-term growth
objectives for the Company.
Strategic Vision
Under the stewardship of the recently appointed and experienced
Board, Solo is seeking to assemble a balanced, full lifecycle
portfolio comprised of production, development and exploration
assets that provide a sustainable path for growth alongside funded
G&A.
Leveraging the requisite technical, corporate and operating
expertise of the Board, the Company intends to achieve scale
through organic and acquisition led growth and has set a net
production target of at least 5,000 boepd within the next three
years.
In order to achieve this strategic vision, the Company has
identified the following key strategic drivers:
-- Transition to an operating company to provide Solo greater
control over the outcome of its investment decisions;
-- Disciplined investment strategy to be delivered by capital efficient transactions;
-- Targeted acquisition strategy based on well-defined screening
criteria in place to deliver shareholder value;
-- Targeting acquisitions that can attract a wide audience of
potential non-equity funding partners through transaction
structures that limit or negate the Company's requirement to raise
equity;
-- Delivered in parallel with a continued focus on value realisation of existing assets;
-- Future focus on cash flow to build a self-sustaining business;
-- Strong pipeline of deal flow - Solo has recently evaluated
more than 15 target acquisitions across a number of geographies and
the Company remains active in a number of ongoing processes;
and
-- The Board and senior management have the necessary operating
expertise, M&A capabilities and industry relationships to
deliver on the strategy.
Strategic focus
As part of a wider review of the Company and its growth
strategy, the Board has identified the following strategic
objectives as being core to long-term value creation and will shape
the business going forward around these considerations:
-- The Board recognises the importance of free cash flow in building a sustainable business;
-- The Board continues to assess opportunities for future growth
and has identified the dynamics of the European import gas market
as being particularly attractive;
-- In parallel with its portfolio rationalisation strategy, the
Board is actively screening acquisition opportunities and has set a
net production target of at least 5,000 boepd within 3 years;
-- Initial screening focus is on European gas assets and also
North African countries with benign jurisdictions and attractive
pricing dynamics
-- The Board is seeking to develop a 'low-cost' investment model
that maximises risk adjusted value returns to shareholders and
minimises equity dilution; and
-- The inorganic growth model is not dependant on the
rationalisation of the Company's existing assets due to the focus
on capital efficient transaction structures.
The Board is actively reviewing acquisition opportunities and is
involved in a number of ongoing processes. Further updates will be
provided if, and when, appropriate. Any acquisition would be
consistent with the strategy, set out above to create a scalable
oil and gas business with a focus on capital efficiency and one
that can deliver shareholder returns in all oil price
environments.
The Board has made good progress against the key objectives
outlined at the AGM in August 2018, with the focus on the
monetisation of the Company's position in key assets, and notably
the divestment of its interest in the Horse Hill development and of
PEDL331 on the Isle of Wight both to UK Oil and Gas plc. This work
has been conducted in parallel with the Board's ongoing efforts to
achieve returns from our core projects: the Ruvuma and Kiliwani
North assets.
The Board continues to progress with its intention to divest or
relinquish the balance of the non-core investments within the
portfolio, as well as some historical early-stage seed investments
that fall below disclosable thresholds. As part of the portfolio
rationalisation, the Company has signed Heads of Terms ("HoT") with
Levant Exploration and Production Corp. ("Levant") on 21 March 2019
for the divestment of Solo's 28.56% in Reef Resources Limited
("Reef") to Levant. The divestment of the Company's shareholding in
Reef is subject to definitive documentation being agreed and
further demonstrates the Company's commitment to rationalise its
existing portfolio as it delivers its growth strategy. Further
updates will be provided as and when appropriate. The Board is
actively reviewing exit strategies with regards to these various
investments and will seek to either extract value or relinquish in
order to limit any future costs, depending on which options are
viable and in the interest of the Company.
Commenting on the strategy update, Executive Chairman Alastair
Ferguson, said:
"This strategic update sets out the ambitious growth vision for
the Company and reflects the significant efforts of the Board
through H2 2018 and beyond. We believe that the market dynamics
have created compelling and realistic opportunities that will
enable the Board to transform the operational and financial profile
of the business in the near-medium term. The strategies that we
intend to implement mean that this transformative growth can be
delivered in parallel with our existing focus and structured in
ways that ensure transactions are value accretive for existing
shareholders. We believe that pursuit of this growth strategy will
enhance our ability to maximise value from our existing portfolio
of assets.
"With the price of Brent back around US$65 and security of
European energy supply back in the headlines, the relevance of a
sustainable business model focused on value returns to investors in
a market with supportive economic indicators is an attractive model
for investors. The Solo team is working hard to secure
value-creating acquisition opportunities and has conducted a major
technical, economic and commercial screening exercise to high-grade
potential acquisition targets.
"We see improving liquidity in the market for assets but there
is often a lack of realism when it comes to value and few
transactions are actually closing. Solo is excellently positioned
to capitalise on this dynamic by leveraging a strong Board with an
excellent track record in the execution of M&A deals and,
following recent divestments, the funding to support our efforts.
The Company is involved in a number of processes which, if
successful, would be expected to derive significant value for our
shareholders and be the platform for long-term sustainable growth.
We look forward to updating the market on these various processes
as and when there are material developments."
For further information:
Solo Oil plc
Alastair Ferguson +44 (0) 20 7440 0642
Strand Hanson
Nominated & Financial Adviser
Rory Murphy / James Spinney / Ritchie
Balmer +44 (0) 20 7409 3494
Shore Capital
Broker
Jerry Keen
Buchanan
Financial PR
Ben Romney / Chris Judd / James +44 (0) 20 7408 4090
Husband +44 (0) 20 7466 5000
This announcement contains inside information as stipulated
under the Market Abuse Regulations (EU) no. 596/2014.
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END
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