Buru Energy Ltd (ASX:BRU) will look to raise $10.2 million in a 1:5 non-renounceable rights issue priced at $0.15, a 22% discount to the 15-day volume-weighted average price (VWAP).
Funds are to be used to accelerate the development of Buru’s 100% owned Ungani Oilfield including the drilling of two oil wells in 2017, with the aim of increasing production capacity and recoverable oil resources.
Two of Buru’s largest shareholders have each confirmed their support for this capital raising and have confirmed to the company that they intend to take up their full entitlements.
This intended support would account for a total subscription of circa $1.7 million.
Eric Streitberg, chairman, commented: “The company requires additional capital to undertake this development program in a timely manner.
“Whilst there are several possible ways to access additional funding, the board considers an attractively priced rights issue as the fairest way to allow all shareholders to participate in the forward program.”
Indicative timetable
The proposed indicative timetable for the offer is set out below.
August 1 (Today): Lodgement of prospectus;
August 7: Record date for determining entitlements;
August 10: Prospectus despatched to eligible shareholders;
September 1: Closing date; and
September 8: Shares issued.
Hartleys Limited has been appointed as lead manager and will be managing the placement of any shortfall shares not taken up by Buru shareholders.
Ungani is a multiphase development
Funds raised by the rights issue are proposed to be used as part of the funding for the multiphase development program being undertaken at the company’s 100% owned Ungani Oilfield.
This program is aimed at increasing the field’s production capacity and recoverable oil resources.
The program has already started with the recent recommencement of oil production from Ungani, with production from the existing two wells being progressively increased towards the initial target of 1,250 barrels of oil per day.
Funds to be used on Phase 3
Substantial progress has also been made on the next phase (Phase 2) of the development program.
This work is planned for completion later this year and is aimed at enhancing the production capacity of the existing wells.
This phase of the program will be funded from the company’s existing cash reserves.
The funds raised from the rights issue will be used to accelerate Phase 3 of this program which consists of the drilling of two additional wells planned for the fourth quarter of this year.
The two planned wells are the Ungani 4 vertical development well, and a side-track of the existing Ungani 3 well.
The aim of these two wells is to increase the field’s production capacity to a target of 3,000 barrels of oil per day, as well as confirming and potentially increasing the field’s recoverable oil resource base.
The estimated cost of drilling these two wells is some $9.5 million.