Northern Petroleum (LON:NOP) has struck a deal to acquire producing assets in Northern Alberta, and it is launching a share placing to help fund the new venture.
The assets the company plans to acquire currently produce around 211 barrels oil equivalent per day - of which 80% is oil – and have 1.185mln barrels of oil equivalent proved and probable reserves.
A new work programme is envisaged with the aim of doubled the rate of production over the next 12 months.
NOP predicts that net cashflow from the acquired assets will “broadly cover” all of the company’s general and admin costs, based on the assumption of a US$47 per barrel oil price in 2016.
Keith Bush, Northern Petroleum chief executive, said: "The acquisition of these assets provides the Company with material additional production and reserves and is a good example of the growth opportunities available in the current oil price environment.
“Due to the location of the assets and their associated facilities, there is also the opportunity to increase the Company's existing production base with reduced operating expense.”
The transaction is conditional upon NOP raising funds, and the company intends to raise £1.2mln gross via a share placing. It is proposed that 40mln new shares will be issued to two existing shareholders at a price of 3p per share.
And the company will also give other existing shareholders the opportunity to participate in the funding round, with 40mln more shares being made available in an open-offer.
Bush added: “Additional funding from the open offer will provide useful working capital support with the potential to unlock further opportunities for production and exploration growth and accelerate production development in Canada."