San Leon Energy (LON:SLE) has raised £59.6 million to fund an extensive seismic and drilling programme in Morocco and Poland.
It will issue 331.3 million new shares - around 43 percent of the enlarged group - at 18 pence each.
“Over the last two years the company has built a highly attractive portfolio of assets across a number of exciting hydrocarbon regions,” chairman Oisín Fanning said.
“Our focus now turns to commercialising and developing these assets,
“The funds raised will support this stage of our growth strategy as we fast-track the drilling of up to 17 wells in the next 18 months in Poland and Morocco.”
The proceeds will fund San Leon’s high impact shale gas and conventional plays.
It will also target low cost, early production Polish oil prospects that have the potential to provide cash flow for future exploration and appraisal programmes.
In Poland there are three key projects.
San Leon will fund its share of the seismic programme over the Baltic Basin acreage, alongside its partner Talisman Energy. This shale gas acreage will then be the subject of a 3 - 6 well drilling programme.
Separately it will drill six lower-risk exploration wells in the Permian basin and the Nida Trough. Here it is targeting short-term oil production.
Thirdly it will drill three exploration wells on the Wschowa and Gora licences, with an aim to prove the presence of shale gas and prospectivity.
In Morocco, San Leon will drill two exploration wells, targeting conventional oil and gas plays on the Zag and Tarfaya licences.
Also at Tarfaya, the company will try to test and prove an oil shale project.
Elsewhere San Leon plans to acquire 3D seismic in off-shore Albania, to prepare for a potential farm-out.
“This will be the busiest and most significant growth stage for the company to date; one that will provide meaningful and high impact news flow over the next 18 months," Fanning added.
Fox-Davies oil analyst Lionel Therond believes that the dilution from the placing is balanced by the positive impact of the accelerated exploration programme.
“This is a sizeable placing that provides funding through the next 18 months of exploration activities,” Therond said in a note to clients.
He adds: Poland is clearly a beneficiary with progress on several fronts and in particular the carboniferous shale gas play, as well as conventional oil and gas.
“Albania is also being brought forward, highlighting the attractiveness of the assets,
“We are less convinced about the rationale to spend exploration dollars in some of the acreage in Morocco given that part lies in disputed territories ... although we understand that the prospects to be tested in Tarfaya are clearly to the north of the disputed zone.”
The analyst rates San Leon as a ‘buy’ with a 65 pence target.