88 Energy (LON:88E, ASX:88E) told investors it has successfully raised A$12mln though a placing of new shares to institutional and sophisticated investors.
The proceeds are earmarked for the upcoming drill programme at Project Icewine, on Alaska’s North Slope.
A total of 1.2bn new 88 Energy shares will be issued at a price of one Australian cent per share, a discount of around 23% to the most recently traded price in Australia (where trading was suspended on Monday).
It equates roughly to 0.5p per share, which is closer to the market price in London (where trading was not disrupted).
The new shares will be issued in two tranches with an initial issue of 170mln shares followed by a later issue of 1.03bn shares, which is subject to shareholder approval.
88 Energy highlighted that the share placing was strongly oversubscribed.
“The overwhelming support shown by new and existing shareholders for the placement is a testament to both the quality of the project and the hard work by the company, its partners and its advisers,” said managing director Dave Wall.
He added: "Notwithstanding the dilutive impact of the placement, the leverage afforded to our shareholders by the substantial upside potential at Project Icewine remains compelling.”
Drilling is expected to get underway at Icewine in October, and the total cost of the programme is estimated at around US$16.5mln.
88 Energy expects to use around A$8mln of the new funds for the programme, while the balance of the programme’s cost is expected to come from a conditional loan facility from Bank of America.
The Bank of America facility has yet to be finalised, and remains under negotiation.
“With the close of the BOA facility expected within the coming weeks, 88E will be fully funded to test the significant unconventional resource prospectivity of Project Icewine via the drilling of the high impact Icewine #1 exploration well,” Wall added.
Significant nearby exploration successes in Alaska are part of the reason 88 Energy has seen a high level of interest, and has been able to pursue the funding arrangements detailed today.
Mergers and acquisitions in the region have also added to what appears to be a compelling proposition.
"Recent transactional activity on neighbouring acreage also highlights the conventional potential on the North Slope, which also exists on our Project Icewine acreage, and the increased level of industry interest in the region,” Wall highlighted.
“An announced four well drilling campaign on acreage adjacent to the Project Icewine boundary is likely to provide significant catalysts for 88E and its shareholders, commencing from late 2015."
A shareholder vote on the proposed funding is scheduled for August 21, and if approved shares issued in the second tranche of the placing will be admitted to trading in Australia and London by August 27.