Solo Oil (LON:SOLO) has now finished the first part of its purchase of a 38.1 percent direct working interest in the Ausable oil and gas field and surrounding properties in Canada from Reef Resources (CVE:REE).
In May this year, the company announced the deal for the properties in south west Ontario.
The purchase of the first 23.8 percent stake in the properties has now been concluded, said Solo today, by the conversion of its existing C$1.65 million participating loan, the payment of C$200,000 on signature of the Heads of Agreement and a further payment of C$650,000 at completion.
Reef must now secure an additional C$1.5 million of funding from a third-party for Solo to provide a further C$1.5 million to acquire a further 14.3 percent interest.
It is hoped that this part of the deal will be concluded shortly and Solo will increase its stake to the planned 38.1 percent level.
Solo will have paid a total of C$4.0 million to acquire 38.1 percent interest at an aggregate rate of C$105,000 percent.
The Ausable field includes the Ausable, Airport North and Airport South reefs as well as surface equipment, a 23,000 acre 3D seismic survey and other associated gas storage rights.
The field is currently on production and is generating revenue from the initial Enhanced Oil Recovery (EOR) program which commenced in the fourth quarter of last year using the Ausable No.1 and No.4 wells.
Previously, the firm announced that acid stimulation operations have begun on the Ausable No.5 well on the field to test the production potential of the reservoir zone identified earlier in 2011.
Previous analysis of the well has shown 72 metres net pay of oil and natural gas liquids (NGLs) in the Guelph and A2 formations.
Executive director of Solo Neil Ritson said today: "The process we outlined in the Heads of Agreement in May is being completed smoothly and we hope to announce the results of the testing of the Ausable No.5 well shortly."