Solo Oil provides a commercial and operational update on its investment in Reef Resources Ltd (Reef).

As announced on 29 April 2010, the Company agreed commercial terms of a $1,650,000 CAN participating loan agreement to Reef for financing the development of a proven oil and gas production asset in Ontario. Solo receives 60% of net production revenue post tax until loan repayment and 50% net earnings thereafter from the funded developments.

The Company has now conducted all technical, legal and commercial due diligence to complete the conditions of the loan agreement.

Under terms of the agreement, the Solo Chairman, Mr. David Lenigas, has been nominated to the board of Reef as the Solo representative, subject to approval by the TSX Venture Exchange.

Subsequent to the issue of the stage 1 loan payment of $750,000 CAN by the Company on 14 May, production facilities have been restarted, tested and operating as per standard performance levels.

The local natural gas utility company is in the process of finalizing analysis of the Company natural gas prior to commencing sales production from the facility. Subject to confirmation of acceptable gas analysis by the utility the Company will restart sales production as planned. In the meantime the Company will re-start the facility before end of June 2010, recycle and conserve gas, produce oil from two pumping oil wells and recover natural gas liquids through its gas liquids extraction process.

Reef successfully negotiated purchase of the main processing plant compressor from a lease arrangement and this will have a positive impact on the Company's balance sheet, positive net operating income and lower overall operating costs.

The completion program and scheduling of the first horizontal well to increase production are being finalised, and this program shall be executed as soon as rig services and fracturing equipment are mobilised in July.

The Company anticipates reporting the stage 1 production results by August 2010.

Tags: Solo Oil