A North Sea-focused oil and gas firm has won backing from City investors as it works on plans for a $1 billion (£0.7bn) field development.

Orcadian Energy raised £3m from investors ahead of completing a flotation which valued the business at £25m.

The response was not as enthusiastic as directors hoped. The company set out to raise £5m.

The combination of the fallout from the coronavirus crisis and the growth in investor interest in renewables has left oil and gas firms facing challenges in raising funding.

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However, a spokesman for the company said Orcadian had raised enough money to be able to complete the work directors planned and had listed successfully.

The company will use the £3m to help progress plans to develop the Pilot heavy oil field about 85 miles east of Aberdeen.

This was discovered by Fina in 1989.

Pilot is estimated to contain about 80 million barrels but the challenges associated with producing heavy oil have deterred other firms from developing the find.

Orcadian expects to be able to use modern techniques to achieve high enough recovery rates to make the field viable.

It also hopes to use renewable energy to minimise emissions associated with production operations.

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The company announced yesterday that it modified the plans submitted to the regulator for approval to include a floating wind turbine in the development concept.

Chief executive Steve Brown said the admission of the company’s shares to trading on the Aim market yesterday was an important next step in the company’s development.

Being listed could make it easier for Orcadian to raise the big sums that would be needed to develop Pilot, even if the response to the fund-raise was relatively disappointing.

When the company announced its intention to float on Aim, in June, it said it was also seeking to raise gross proceeds of around £5 million to progress its assets.

A spokesman said directors decided to limit the size of the exercise after finding they faced competition in a fund-raising market that is quite “crowded”. The valuation placed on the firm by some potential investors was lower than they felt was fair.

The company said it has completed a work programme that included tests using the polymer flood technology that it thinks could help make Pilot a commercial success.

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Last month Mr Brown said Orcadian had created a “technically mature, feasible development plan for Pilot, based upon the injection of polymerised water right from the start of production”.

He noted that polymer flooding could be used to significantly reduce emissions from viscous oilfields.

Polymerised water contains chemicals that help release oil from rocks. It has been used by Ithaca Energy to increase recovery rates on the giant Captain field.

When it announced its intention to float, Orcadian directors said they were confident that the timing could not be better for developing the Pilot field.

After falling to an 18-year low of less than $20 per barrel in April last year the price of Brent Crude has risen to above pre-pandemic levels on hopes that coronavirus vaccines will power a strong global economic recovery. It sold for $74.18 per barrel yesterday afternoon.

Orcadian has estimated the cost to achieve first production from the Pilot development at US$1bn.

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It said last month that the main potential sources of funding included farm-outs, which would involve the sale of stakes in the company’s acreage, and further share issues.

Mr Brown has spent seven years working on a plan to bring Pilot into production.

Orcadian changed its name from Pharis Energy in April. Its acreage lies south-east of Orkney.

The company raised the £3m at 40p per share.

Shares in the firm closed at 40.5p on the Aim market yesterday.