Solo Cancels Dutch Takeover Citing Low Gas Prices

London-listed Solo Oil announced on March 2 it had scrapped a deal to buy stakes in 14 offshore Dutch gas fields from the Netherlands' One-Dyas, causing its share price to plummet.

The junior revealed in October it had signed a sales and purchase agreement to pay €30.1mn ($32mn) upfront for the assets, plus a further €2.0mn once first production at one of the fields was achieved. But the company later said it wanted to renegotiate the purchase citing "changes of circumstance."

"The company has unfortunately been unable to agree revised commercial terms with One-Dyas that would deliver appropriate value for Solo's shareholders," Solo said in a statement. The sales and purchase agreement expired on February 28 and discussions with One-Dyas have ended, it said.

Elaborating on why it sought to alter the deal, Solo pointed to a sharp decline in European gas prices, with the 2020 futures contract falling from €17.2/MWh in October last year to €10.2/MWh at present. Forecasts for operational and capital expenditure at the assets have also risen since the agreement was reached, the company explained.

Furthermore, political uncertainty, including the UK general election and Brexit, as well as uncertain macro-economic conditions, had negatively affected equity market sentiment, it said.

Despite the deal falling through, Solo said it was committed to its European gas strategy and would continue seeking opportunities to acquire assets with producing reserves and future development potential. Cyclical low gas prices make it a good time to buy, the company said, adding it was in talks with several separate vendors on acquisition deals. 

Shares in Solo in London were down to £0.00929 after morning trading on March 2, from £0.0242 at the previous market close.