Carnarvon Petroleum Limited (ASX:CVN) has raised $16 million in a placement to facilitate redevelopment of the Buffalo oil field on the North West Shelf.
The placement was primarily to new investors at a price of 13 cents per share and existing shareholders have the chance to participate in a share purchase offer at the same price to raise up to $4 million.
This represents a 14.5% discount to the average share price over the last 30 days and 18.69% to the last 10 days.
READ: Carnarvon Petroleum moves closer to oil production at Buffalo with preparations for first well
Chief executive officer Adrian Cook said: “The Buffalo project has the potential to generate significant value that’s ideally suited to Carnarvon in terms of scale, time to first production and overall risk profile.
"This capital raise demonstrates our expeditious approach to make this production opportunity a reality for shareholders, particularly as we see oil prices strengthening from the recent lows of previous years.”
Investors have shown strong support for the company’s oil and gas strategy.
As well as the successful placement, Carnarvon’s shares reached a 12-month high of 17.5 cents this month.
This comes on the back of strong news flow from the Phoenix project where partner Quadrant Energy is drilling and from the Buffalo project where Carnarvon is preparing a program.
Placement funds will enable the company to develop Buffalo-10 well, the first of three production wells to be drilled in this oil redevelopment project.
Plans to drill in 2019
Expected timing for drilling to start on the first well is between March and September 2019, after the end of the cyclone season.
The wells are expected to produce an estimated 31 million barrels of oil over five years and revenue has been estimated at around US$2.2 billion.
Buffalo-10 will be positioned to test new oil in the attic accumulation as well as drill deeper into the oil pool in the field’s previously developed portion.
With a depth to reservoir of around 3,250 metres, it is expected to take around 30 days to drill.
Buffalo covered by Timor-Leste treaty
The Buffalo oil field is covered by the recently signed Maritime Boundary Treaty between Australia and Timor-Leste and the field will be completely within Timor-Leste’s jurisdiction.
Carnarvon is engaging with suppliers for redevelopment of the field, including preparing the basis of well design, starting the environmental approvals process and identification of rigs.
The company has also started discussions with floating production, storage and offloading (FPSO) providers, and is resourcing staff and contractors.
Drilling at Phoenix
Further to the southwest, Carnarvon is participating in drilling the Phoenix South-3 well and will soon begin drilling the Dorado-1 well in its Phoenix project.
Cook said: "Carnarvon now offers investors two high-quality, organically derived projects progressing to commercialisation phases in the near term.”