ELAND Oil & Gas has announced plans to raise up to $19.5 million (£15.1m) from investors a day after the Nigeria-focused firm disclosed that losses tripled last year amid security challenges in the country.
Aberdeen-based Eland said it planned to raise the money by selling shares to institutional investors at around 55p each, a discount of 10 per cent to yesterday’s opening price.
The Aim-listed company said it would use the proceeds to fund work that it expects to result in a big increase in production in Nigeria.
It would expect to retain some for working capital and contingencies.
On Tuesday Eland noted that its working capital would require careful management in coming months, following what it described as a very difficult year in 2016.
The company lost $31.4million before tax in the year to 31 December compared with $9.6m in the preceding year.
Revenues fell to $2.4m from $18.1m.
The slump in sales was largely due to the fact the Forcados terminal that Eland used to handle production was shut down temporarily in February last year following sabotage linked to militant activity in the Niger Delta.
The terminal was reopened last month.
Eland has suffered other disruptions in Nigeria since it restarted production from a well on the Opuama field on the OML 40 licence in the Niger Delta in 2014.
The field had been shut in by Royal Dutch Shell in 2006 amid security concerns.
However, chief executive George Maxwell said Eland had made significant progress in Nigeria, where it has two wells onstream.
The company developed a system for ferrying crude to market when it was unable to send output to Forcados, which involves using a pipeline.
Specialists recently increased estimates of the amount of oil Eland could recover from OML 40 without having to drill new wells.
Mr Maxwell said: “Over the last 18 months we have significantly grown our production base, made substantial progress de-risking our highly attractive development projects, diversified our export routes and materially increased our recoverable reserves from our current well inventory, identifying further meaningful upside.”
He said the proceeds of the placing would help Eland speed up work on the revamping of two more wells on OML 40. One is on the Gbetiokun field.
The additional wells could allow Eland to produce an extra 13,900 barrels oil per day.
It is producing 11,500 bod currently, from the Opuama 1 and 3 wells.
The company could use the additional cash generated to help fund the development of what Mr Maxwell described as its valuable asset base.
Eland also noted: “As set out in the Company’s accounts … the transition back to exporting through the Company’s pre-existing export facility will require careful working capital management and the proceeds of the Placing can be applied to help in this process.”
The company set out to raise $14.5m to $19.5m.
If the total raised is at the low end of the range the start of work on the Gbetiokun-1 well will likely be delayed until late 2017.
The placing was expected to close by seven am today. It was made available to new and existing eligible institutional investors.
“Certain of the Company’s major shareholders as well as certain directors have indicated a willingness to participate,” said Eland, without elaborating.
Helios Natural Resources owned 29.5 per cent of the Eland shares in issue before the placing. Eland shares closed down 6p at 55.5p.
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