Portfolio

Solo Oil talks up new acquisitive growth strategy

By Josh White

Date: Friday 22 Mar 2019

Solo Oil talks up new acquisitive growth strategy

(Sharecast News) - Solo Oil updated the market on its strategy on Friday, reporting that under the stewardship of its recently appointed and experienced board, it was seeking to assemble a "balanced, full lifecycle" portfolio comprised of production, development and exploration assets that provided a sustainable path for growth.
The AIM-traded firm said that, by leveraging the requisite technical, corporate and operating expertise of the board, it intended to achieve scale through organic and acquisition-led growth, and had set a net production target of at least 5,000 barrels of oil equivalent per day (boepd) within the next three years.

In order to achieve that strategic vision, the board said it had identified a number of "key strategic drivers", which included a transition to an operating company, to provide Solo with greater control over the outcome of its investment decisions.

It also said it would pursue a "disciplined" investment strategy, to be delivered by capital efficient transactions, alongside a targeted acquisition strategy based on well-defined screening criteria in place to deliver shareholder value.

Solo Oil said it would target acquisitions that could attract a "wide audience" of potential non-equity funding partners through transaction structures that limited or negated the company's requirement to raise equity, and said that would be delivered in parallel with a continued focus on value realisation on its existing assets.

It said it would also have a future focus on cash flow to build a self-sustaining business.

The company said it was also looking to maintain a strong flow in its deal pipeline, reporting that it had recently evaluated more than 15 target acquisitions across a number of geographies.

It apparently remained active in a number of ongoing processes there.

The board said that both itself and the company's senior management had the necessary operating expertise, merger and acquisition capabilities, and industry relationships to deliver on the strategy.

"This strategic update sets out the ambitious growth vision for the company and reflects the significant efforts of the board through the second half of 2018 and beyond," said executive chairman Alastair Ferguson.

"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."

Ferguson said the board believed that pursuit of the growth strategy would enhance Solo's ability to maximise value from its existing portfolio of assets.

He explained that, with the price of Brent back around $65 per barrel, and security of European energy supply back in the headlines, the relevance of a sustainable business model focused on value returns in a market with supportive economic indicators was 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 merger and acquisition deals and, following recent divestments, the funding to support our efforts."

Ferguson said the company was involved in a number of processes which, if successful, would be expected to derive "significant value" for 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."

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