Interactive Investor

Solo slips on discounted placing

5th March 2013 09:59

Darshini Shah from interactive investor

Shares in Solo Oil slipped 6% on Tuesday morning after the AIM-listed firm announced it had raised £1 million gross proceeds through the issue of 200 million new ordinary shares at a price of 0.5p per share to institutional investors. This was a 20% discount to the closing price on Monday.

"The funds will be used to strengthen the company's balance sheet and negotiating position ahead of receiving proposals for a potential farm-out of up to 50% of our interest in the Ruvuma production sharing agreement in Tanzania, and will allow the company to continue with its strategy of making investments in the oil and gas sector," commented chief executive Neil Ritson.

Users of Interactive Investor's discussion boards were dissatisfied with the news.

"0.5p is a heck of a discount to the current share price," stated 'PC Fox', questioning: "If the future is so bright then why are 'institutional investors' demanding such a discount?"

However, 'swooped' argued: "With only raising £1 million which isn't going to see them far, they must know that a very nice deal is in the pipeline and the million is just to give them a bit of breathing space."

Shares in both Solo Oil and Aminex have been buoyed by rumours that an announcement on a farm-out in the Ruvuma Basin is imminent.

'Flandy25' stressed: "My opinion is that Solo is going to get taken out as a pre condition to a farm-out deal with Aminex as Solo's equitable share is too small to worry about going forward and will only add an extra layer of approvals in getting things done!!

"Once Solo is out of the picture, then I believe the production sharing agreement will be split either 75/25 in favour of the incoming partner or 50/50 with the incoming party as operator. I also think the incoming party is likely to be an existing major - either Anadarko Petroleum or Ophir Energy."

He added: "Regarding the placement, given that it's for such a small amount (in the grand scheme of things), I see it as a good thing as it stops Solo from being bent over a barrel and hopefully means they have the flexibility to get the best deal possible."