Solo Oil Signs SPA to Increase Interest at Kiliwani North License

Solo Oil has announced that further to the agreements previously announced with Aminex plc to acquire a further interest in the Kiliwani North Development Licence (KNDL) the company has now executed a Sale and Purchase Agreement (SPA) for the acquisition of a 3.825% interest for a total cash consideration of US$2.16 million.

Under the terms of the SPA Solo’s interest will increase through three payment tranches to Aminex, linked to project milestone, for the total agreed cash consideration:

  • Initial investment of US$566,802 for an additional 1% interest on signature of the SPA, increasing Solo’s total interest from 6.175% to 7.175%
  • A second investment of US$708,502 for a further 1.25% interest within 15 days of the first US dollar payment being received for gas from Kiliwani North-1 (“KN-1”). Solo’s total interest will increase to 8.425%
  • A third investment for the balance of US$892,712 for an additional and final 1.575% interest within 15 days of the commercial operations date being declared, taking Solo’s total and final interest to 10%.

If any payment is missed then that payment option, and only that option, will be automatically cancelled. Payment of the second and third investments will require further funding from cash flow or otherwise to be arranged by Solo.

Following full payment of the consideration, Solo’s interest will increase from its current 6.175% to a 10% interest in KNDL.

The transaction represents the part exercise of its pre-existing option to acquire a further 6.175% interest. The remaining entitlement under the option agreement has now expired.

“Solo is delighted to increase its exposure to the KNDL project with commencement of production imminent. The project offers a revenue stream that will increase through the commissioning process and into commercial production under the GSA which has take-or-pay provisions and is paid in US Dollars guaranteed by a consortium of banks.  By linking the acquisition of our additional interest to project milestones we have been able to further de-risk the investment,” says Solo Chairman Neil Ritson.

The KN-1 well, which is now ready to begin production, has been ascribed gross contingent resources (2C) of gross 28 billion cubic feet by LR Senergy and the Company expects to book reserves from this well by the year-end.

Gas from KN-1 will be sold to the Tanzania Petroleum Development Corporation (TPDC) under a gas sales agreement (GSA) at the wellhead for an agreed price of US$3.00 mmBTU (approximately US$3.07 per mscf), payable in US dollars. The gas price is not linked to any commodity price so is unaffected by current commodity market conditions.

Gas will be processed at the new Songo Songo Island gas plant and will ultimately be transported by pipeline to Dar es Salaam, where it will be sold into the local Tanzanian market.

The Tanzania Petroleum Development Corporation (TPDC) last month provided a revised work schedule in the  Kiliwani North license and informed the operator Aminex that the commissioning of the Songo Songo Island gas plant is expected to commence in early April.

Current participants in the Kiliwani North Development Licence, following TPDC back in, are: Ndovu Resources Ltd (Aminex) 55.575% (operator), RAK Gas LLC 23.75%, Solo Oil plc 6.175%, Bounty Oil & Gas NL 9.5% and TPDC 5%.  On completion of the payments envisaged by the SPA Aminex will hold 51.75% and Solo will hold 10%.

Catch an audio interview with the SPA signing here

Author: OilNews

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