PetroNeft provides funding and operations update
AIM-listed PetroNeft Resources, owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, has announced a funding and operations update.
$6.7 million fundraising consisting of
$5.2 million new equity issue at 5 pence per share
$1.5 million in debt
Production higher at 2,400 bopd, reflecting improved well performance
Licence 61 farmout confirmatory due diligence and legals progressing well; completion anticipated in coming weeks
PetroNeft has agreed the terms of a conditional placing of 62,325,631 new Ordinary Shares at Stg£0.05 per Ordinary Share, raising gross proceeds of approx. US$5.2 million. The Placing, which was oversubscribed, has been arranged by Davy and is conditional, inter alia, on admission of such Ordinary Shares to trading on the AIM Market of the London Stock Exchange and the ESM Market of the Irish Stock Exchange.
The Company will apply for admission of the Placing Shares to be traded on the AIM and ESM. It is expected that Admission will take place and that trading will commence on or around 19 March 2014.
PetroNeft has also agreed an additional US$1.5 million debt drawdown with Arawak Energy by increasing the existing US$15 million loan to US$16.5 million on the same terms (maturity and interest) as the existing loan. PetroNeft has granted Arawak an additional 2,000,000 warrants over Ordinary Shares at a strike price of US$0.0891 per Ordinary Share.
Use of proceeds
The proceeds of the placing and increase in the Arawak loan will be used for:
Purchase and delivery of the necessary supplies and equipment to the field to enable a full programme of works be undertaken in 2014. This must be completed while winter roads are still available;
Payment of US$ 2.5 million to Macquarie; and
Working Capital purposes.
Under the Macquarie agreement, the bank will have the right from 15 April 2014 to ask for Licence 61 to be put up for sale in its entirety in a competitive process (as well as their other normal rights as lender) if the farmout of Licence 61 is not completed at that date.
PetroNeft continues to make solid progress with the large international oil and gas company referred to in our January update. The proposed deal is structured to enable PetroNeft to repay all of its debts (Macquarie and Arawak), have cash for working capital purposes and significant funds available to invest directly in Licence 61 over the coming years. It will also bring an internationally recognised, financially strong partner with a strong technical team and wide ranging experience around the globe in various hydrocarbon plays. Based on the current progress of confirmatory legal and accounting due diligence and legal documentation, we expect to finalise this transaction in the coming weeks.
Once the farmout is completed, plans are in place to drill additional production wells at Arbuzovskoye and delineation wells at Tungolskoye and Sibkrayevskoye, where significant upside potential and near-term developments are possible. The funds raised will ensure all of the necessary supplies and equipment are moved into place during the winter period and for field operations to commence upon completion of the farmout.
Production is currently around 2,400 bopd following the successful completion of some workovers. Our water injection programme continues to function effectively and overall well performance is in accordance with expectations.
Dennis Francis, Chief Executive Officer of PetroNeft Resources, commented:
‘We are pleased with the fundraising which will allow us to purchase and transport materials to the field this winter to conduct a full scope of work in 2014 following completion of the farmout. We have also made significant progress on the farmout in the past month and anticipate that it will be completed at the end of Q1 or shortly thereafter.’