Brookside Energy Ltd (ASX:BRK) traded higher on news that it will accelerate a drill campaign at its Flames oil and gas well in Oklahoma after picking up the same drill rig used to complete its Rangers asset in just 31 days.
Flames is the third well BRK will drill in the SWISH Area of Interest (AOI), which forms part of the company’s core exploration portfolio in Oklahoma’s prolific Anadarko basin.
The asset is also the final well targeted under the company’s held-by-production (HBP) program, which re-evaluated three drill spacing units within Brookside’s Anadarko landholding.
Now, the energy stock is fully funded to complete the drill program after inking a short-term funding and options underwriting agreement with CPS Capital Group.
The A$7.5 million funding runway will help Brookside keep up operational momentum as it works to unlock value in its large inventory of high-impact, low-risk development wells.
Highest prices in a decade
Speaking to the accelerated program at Flames, Brookside managing director David Prentice said he was delighted to announce what he considered a major milestone.
“The opportunity to move quickly to secure the Kenai Rig, fresh from its success drilling at our Rangers Well, means that we will now be in the enviable position of having completed our HBP drilling obligations prior to the end of the first half of 2022, effectively bringing forward cash flow from the Flames Well and delivering this significant production (together with production from the Rangers and Jewell Wells) into the highest oil and gas prices we have seen in almost a decade,” he stated.
“The production and revenue coming from these high impact wells will not only accelerate our future development plans but more importantly their success provides the catalyst for the revaluation of our core-of-the-core acreage position in southern SCOOP.”
Shares higher
Shares were as much as 29.45% higher intraday to A$0.022 with almost 133 million changing hands during the day.
Drilling at Flames will target the Woodford Formation, a prolific producer in the SWISH AOI.
Brookside will once again employ the Kenai 18 drill rig to complete the program, hoping to replicate the success it found during its Rangers drill campaign.
Notably, Brookside’s working interest in the Flames well is expected to double that in the Jewell Well at more than 80%, with the associated doubling in production share and revenue.
Free cashflow generated from the wells in the HBP program will also enable Brookside to accelerate future development plans, with additional wells planned for the second half of 2022.
Funding will help Brookside achieve goals
CPS Capital has agreed to underwrite some of Brookside’s listed options — exercisable at A$0.011 before June 30, 2022 — to place loan notes for a A$7.5 million short-term financing facility.
Each loan note carries a face value of A$250,000 and will be worth A$275,000 once they mature in July this year.
Under the underwriting agreement, CPS has committed to underwrite any shortfall in the options exercise up to A$9.25 million.
Commenting on today’s funding announcement, CPS Capital managing director Jason Peterson said: “We are excited about the short-term outlook for Brookside, and this structured loan facility and underwriting agreement ensure that the company can move quickly to achieve its goals in a very favourable pricing environment.
“The funds provided are non-dilutive, cheaper than an equity raise and provide certainty around the capital structure in the coming months in order to attract potential new investors.
“We have listened to investors and believe this funding structure is what they are looking for.
“Being the largest shareholder group in Brookside (including myself personally) we look forward to a long supportive association with the company, a company we have proudly funded since the commencement of the Jewell Well development by closely working with and advising management along the path.”