Solo Oil – Capital Network: Risked Value Represents Significant Upside

Written by Lionel Therond

Solo Oil Plc (“Solo”) is a London (AIM) listed oil and gas investment company engaged in the acquisition and development of a diverse global portfolio of oil and gas assets. The company has a core portfolio of non-operated assets in Tanzania, including a stake in the prolific Ruvuma Basin, an interest in the producing Kiliwani North gas development on the Songo Songo Island, and a 10% interest Helium One, including the Rukwa project. Other assets include non-operated interests in the Weald and Wessex Basins (Horse Hill and Isle of Wight) onshore UK, a strategic investment in Burj Africa in Nigeria and an enhanced Oil Recovery project in Ontario, Canada. 

In this note, we provide a brief description of the Kiliwani North, Ruvuma and Rukwa helium assets, as well as our estimate of risked value for the company which represents a substantial upside to the current share price. Solo (SOLO.LON) has net 2P producing resources of 2.0BCF and net 2C resources of 32.6BCF with a potential upside to 206BCF of hydrocarbon gas in Tanzania, as well as 10BCF of unrisked prospective resources of helium; whilst we estimate that the Horse Hill and Isle of Wight projects represent 5-6MMbbl of additional oil resources.


The Ruvuma PSA covers 3,447 km2 largely onshore in the south-east of Tanzania and includes two adjoining licence areas, known as Lindi and Mtwara. The PSA was first granted in October 2005 to a subsidiary of Aminex Plc (Aminex), an LSE-listed oil and gas company (Figure 1).

The first exploration well Likonde-1 was drilled in 2010 and intersected two sandstone intervals of over 250m with evidence of residual oil and gas.

A second exploration well Ntorya-1 was drilled in the Mtwara Block in 2011 and encountered about 20 metres of gas bearing sands which tested over the upper 3.5 metres at a maximum rate of 20.1MMscfd with 139bopd of 53o API condensate through a 1” choke. This discovery proved the potential of the Cretaceous play in the onshore Ruvuma basin. 

In April 2012, Solo (SOLO.LON) increased its interest in the Ntorya-1 discovery and the Ruvuma Basin PSA to 25% when Tullow, the licence operator, exited Tanzania and allocated its equity to the remaining participants Aminex and Solo. 

In May 2015, following the acquisition of additional seismic data, a Competent Person's Report (CPR) by Senergy attributed some 70BCF of 2C contingent gas resources to the Ruvuma PSA as well as a potential of 153BCF of gas in place attributed to Ntorya-1 and 4.7TCF within the Ruvuma PSA. Completion of a government-owned, Chinese constructed and financed, 36” gas pipeline from Mtwara to Dar es Salaam, provided an early route to commercialise gas discovered in the Ruvuma PSA. 

In December 2016, the Ntorya-2 appraisal well was spudded, after formal approval from the Tanzania Minister was obtained in July 2016 for a one-year extension of the Mtwara Licence until December 2017. Ntorya-2 was successful and tested at a stable rate of 17MMscfd, though there was clear evidence of drilling-induced formation damage which adversely affected this rate. Updated gross mean resources estimates are now 823BCF for the Ntorya appraisal area and a further well Ntorya-3 is ready to be drilled. Subsequently, a 25-year development licence will be carved out of the Mtwara licence.


Kiliwani North represents Solo’s first commercial gas production, reaching 30MMscfd from the KN-1 well in July 2016. The current participants in the Development Licence are Aminex 54.575% (operator), RAK Gas 23.75%, Solo Oil (SOLO.LON) 7.175%, Bounty Oil & Gas 9.5% and TPDC 5%. 

Gas from the KN-1 well is supplied the newly built Songo Songo gas processing plant which was completed in 2015, where it is commingled with gas from the Songo Songo gas field and connected by the newly constructed 36-inch pipeline from Mtwara to Dar es Salaam. The gas is sold at US$3.00 per million BTU (ca. US$3.07 /mscf) and will increase in line with an agreed United States Consumer Price Index. The first payment was received in August 2016.

A CPR by Senergy (2015) estimated best gross contingent resources of 28BCF for Kiliwani North, which have yet to booked as reserves as a formal declaration of commerciality has yet to occur.


In March 2017, Solo acquired a 10% interest in Helium One Limited (Helium One) for a total consideration of GBP2.55m (GBP1.2m in cash plus shares) and was also granted a 90-day call option for a further 10% interest, for an additional investment of GBP4m (GBP2m in cash plus shares). The most advanced prospect in the Helium One portfolio is the Rukwa project which is located in Western Tanzania (Figure 2).

Solo believes that this investment provides an early entry into the global helium market estimated to be worth US$6bn per annum, with positive macro drivers being simultaneous depleting supply and demand growth which should result in strong pricing dynamics. 

Oxford University’s Department of Earth Sciences confirmed helium migration within the basin through their recent geochemical analysis of surface gas emanations, and Netherland Sewell and Associates Incorporated (NSAI) have estimated Unrisked Prospective Recoverable helium volume (P50) of close to 100BCF in 28 leads, defined by 2D seismic and supported by data from two legacy exploration wells.

Helium One has commenced an extensive work program to convert this resource into reserves and define additional prospects.


We estimate a risked value for the company at $106.4m or GBp1.04 per share, representing a substantial upside to the current stock price. We estimate Core value at $1.2m, based on the value of the production asset of Kiliwani North, adjusted for corporate costs and net cash/debt (Figure 3).

We believe that the non-producing assets in Ruvuma, Rukwa, Horse Hill and Isle of Wight have a defined path to monetisation and we made assumptions regarding the $/boe value and Chance of Success (CoS) for each project. 

We believe that Burj Africa and the Ontario project are more speculative in nature and with no immediate path to monetisation. Hence, we assigned no value to these assets.


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