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Sound Oil (LON:SOU) has agreed a private placement which will raise GBP 6 million after expenses to fund operations mainly in Indonesia.
Talks for funding the appraisal of the Strombone field onshore Italy have been terminated. Funding is not immediately required as the permitting process is taking a little longer than expected.
The placement has been agreed with Astin Capital Management Ltd
Following the announcement last week of the encouraging results at the Jatayu well in the Citarum PSC in Indonesia, the new funds will be used to fund continuing operations including probable testing and two other wells at Citarum.
It will also be used to provide contingency funds for the Nervesa well in Italy and fund the development of Rapagnano and Casa Tiberi in the country, and for other operations.
“This placement secures Sound Oil well into 2013, well beyond our near term operations,” said chair and chief executive Gerry Orbell.
The planned unsecured loan funding for Strombone, announced last month, has been called off for now as the permitting process has been talking longer than expected and drilling the appraisal well is expected to occur early in 2013.
During the last two months Sound Oil secured the land, signed an agreement with the rig contractor and submitted all required documentation for the Strombone appraisal to the authorities.
The award of all drilling permits in the Basilicata Region, however, requires more time to satisfy any concerns on environmental and regional development issues. It remains confident it will secure the in the near term and discussions with the Region and the local Council continue.
The funding of Strombone is significantly less urgent as no material expenditure is now planned for the project in the near term, the group said.
The abovementioned placement involves the company issuing 774,341,464 new ordinary shares of 0.1 pence each immediately in exchange for 7,143,300 redeemable subscription notes at a par value of GBP 1 per note. It also involves the cancellation of all 217,552,682 existing warrants.
The notes will be redeemed in seven equal instalments between now and February 2013.
Following the end of the settlement period, existing shareholders will be offered the chance to participate in an open offer up to a maximum of GBP 1 million.
CEO Orbell said: “The company will be focusing its efforts on the important Jatayu and Nervesa wells in the coming weeks. At Jatayu we expect to acquire wireline log results over the 390 ft hydrocarbon bearing section imminently. This may be followed by deepening the well to the primary objective and/or testing. The Nervesa gas appraisal well is on schedule for drilling in the autumn 2012. Both these priorities are potentially transformational for the company.
“Access to capital is a critical element of success for a pre-revenue oil/gas explorer and we are pleased to secure this new equity in difficult market conditions. This placement enables Sound to cover the anticipated additional expenditure in Citarum, including the completion of the complex Jatayu well and the forthcoming Geulis and Cataka wells, all of which will be drilled continuously throughout the rest of the year,” he added.
Westhouse Securities commented on the news in its market bulletin, saying Sound Oil’s progress in Indonesia has been frustratingly slow for many investors, but it now looks like the company has turned a significant corner with the Jatayu-1 discovery well. “The immediate priorities of Nervesa and Jatayu implies plentiful newsflow over the following months coupled with the prospect of a material uplift in valuation given commercial flowrates on a Jatayu-1 flow test and a positive result from the Nervesa appraisal well,” according to analyst Andrew Matharu.
http://www.proactiveinvestors.co.uk/companies/news/45574/update-sound-oil-agrees-6 million-financing-45574.html
Category: ResourceAsia
