Solo Oil has entered into a binding Heads of Agreement with Reef to earn a 38.1% direct working interest in the Ausable Field and surrounding properties in South Western Ontario.
- Production testing will soon commence on Ausable #5
- Ausable #5 contains 72 meters of net hydrocarbon bearing pay
- Further wells are planned along with expansion of the production facility during 2011
- To gain a 38.1% working interest Solo will:
- Convert its existing Participating Loan of CDN $1.65 million into a direct working interest in the Properties, and
- Invest up to an additional CDN $2.35 million in the Properties
Neil Ritson, Solo Executive Director, commented, "The initial facilities upgrade and drilling of Ausable #5 has provided proof of concept at Ausable in the last 6 months and Solo now has sufficient confidence to convert its existing loan to a direct participation in the Reef properties and to commit to co-invest with Reef in the further development of the field and the surrounding opportunities. This is an important watershed in the project and we look forward to reporting on it further as the year progresses."
Terms of the Working Interest Acquisition
- Solo will convert its existing Participating Loan to a direct working interest in the Properties at a rate of 1% interest per CDN $105,000.
- Solo will advance a further CDN $200,000 following execution of the Heads of Agreement on the same terms.
- These additional funds will be used for the testing and completion of the Ausable #5 well, the tie-in of the South Airport gas well to the Ausable Field production facilities and the return to production of the Ausable #2 well.
- Solo and Reef will, within 30 days, agree and sign a First General Conveyance Agreement totaling 23.8% direct working interest in the Properties. On signature of this agreement Solo will advance a further CDN $650,000 to the project.
- Upon execution of the conversion of the Participating Loan as envisaged in the Heads of Agreement, Solo has additionally agreed to pay CDN $2.5 million to purchase an additional 14.3% direct working interest in the Properties.
- This additional payment will be released against agreed work programs and budgets following execution of a Second General Conveyance Agreement and Joint Operating Agreement, and when Reef raises equivalent equity funding of CDN $1.5 million.