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While a premature release of a financial statement cost one firm billions worth of its market value, one development in an oil and gas company’s interest nearly missed its chance to add value to AIM-listed Solo Oil plc (LSE:SOLO). But our resident analyst at ADVFN has recommended a buy on the stock hours before the company said its interest in Canada has just increased its reserves by 85%.
Two hours after trading resumed in London, Solo Oil noted Canada-based public company Reef Resources Limited’s announcement that its proven and probable reserves from the Ausable Reef now stand at 348,700 million barrels of oil, gas and liquids, 85% more than last year’s estimate of 188,900 barrrels of the same contents.
Based on the Canadian Oil and Gas Evaluation Handbook, the reserve is composed of 5% of gas, 2% of natural gas liquids, and 93% oil.
Solo holds 28.56% ownership of Reef Resources, after investing CDN$2.15 million with a further 9.53% currently under negotiation. Originally, Solo granted a participating loan of CDN$1.65 million to Reef in exchange for 60% of net after tax production revenue until the repayment of the loan and 50% net earnings thereafter back in 2010 but has converted the loan to shares in Reef.
“The Company was not aware that this announcement was going to be released this morning but intends to review its content and comment shortly,” Solo Oil, which has one seat on the Board of Reef, said in an introductory statement to the announcement.
Nonetheless, investors, who are aware of the company’s interest, have been trading heavily on the stock even prior to Solo Oil’s official statement. By 12:30 PM GMT, over 350 million shares were swapped, making it the busiest stock in London today.
The increase in reserve equates to a 98% surge of net present value at 10% discount before tax from CDN$3.963 million to CDN$7.863 million, or a CDN$0.142 per share.
Share price was up 21.4% to 0.624 pence a share.
