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Solo Oil maybe odd-one-out among the Horse Hill players but analyst sees substantial upside

Last updated: 10:32 25 Jul 2017 EDT, First published: 07:32 25 Jul 2017 EDT

onshore drilling operation
More production testing is slated for Horse Hill later this year

Among the Horse Hill partners Solo Oil PLC (LON:SOLO) is something of an ‘odd man out’ as the stock has not seen a re-rating.

Solo, which also has assets in Tanzania, holds a 6.5% interest in Horse Hill which was the breakthrough in the emerging Kimmeridge oil play in the UK onshore Weald basin.

Success at Broadford Bridge and Brockham – two other Kimmeridge projects – has driven other Horse Hill explorers such as UK Oil & Gas Investments PLC (LON:UKOG), Alba Minerals and Doriemus higher.

UKOG is up some 750% from May’s placing price of 0.8p, while other Kimmeridge players such as Doriemus, Alba Minerals, and Angus Energy have advanced 100%, 170%, and 200% respectively.

Solo, meanwhile, is actually down by around 22% during the past month.

Without stakes in either of the other project’s Solo has not seen those direct catalysts, nonetheless, this summer’s results have no doubt de-risked the proposition for the development of Horse Hill.

Attention will come back around to Horse Hill in due course,  as the partners advance the project through the regulatory system for a planned long term production testing programme which is provisionally slated to get underway in the fourth quarter.

Horse Hill is just one of Solo’s assets, though, with the company also partnered in a potentially significant gas project in Tanzania plus a new venture targeting helium resources, also in Tanzania.

Altogether, the company’s assets could be worth much more than the present level.

Lionel Therond, analyst for Capital Networks, for example, sees the potential for Solo Oil to more than double in value.

READ the full Capital Networks note here

The analyst, in a note, set out a valuation for the stock which sees the group worth 1.04p per share, albeit the valuation relies on the group’s to-be-developed project.

“We believe that the non-producing assets in Ruvuma, Rukwa, Horse Hill and Isle of Wight have a defined path to monetisation,” he said.

In Tanzania, Solo is partnered with Aminex which is presently advancing development plans for the Ntorya project after recent appraisal success.

Aminex last week told investors that it continues to work with the state’s Tanzania Petroleum Development Corporation (TPDC) to bring arrears fully up to date.

Updating on the Ruvuma area, meanwhile, Aminex said it is fully engaged with an updated basin model including a preliminary re-mapping of multiple stratigraphic fairways and updated resource numbers.

At the same time, recently appointed consultant Io oil & gas is working on a gas field development plan for the Ntorya field, located in Ruvuma, and this is expected to be ready in September.

“The Ruvuma basin modelling study is an important step in optimising the development of the Ntorya gas field and Solo continues to work closely with Aminex on this project,” Solo chairman Neil Ritson said at that time.

“We look forward to being able to report the results of the study in the coming quarter."

Capital Network's Lionel Therond on Solo Oil Plc

Capital Network's oil and gas analyst Lionel Therond talks through Solo Oil Plc (LON:SOLO) and looks at the company's valuation and outlook.

on 21/7/17