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IGas raises £20.625 mln in share placing

Last updated: 01:47 12 Feb 2011 AEDT, First published: 02:47 12 Feb 2011 AEDT

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British coal bed methane developer IGas (LON:IGAS) has now completed the placing it announced this morning, raising £20.625 million.

It will now issue 27.5 million shares, which represents 29.5 percent of the existing share capital, priced at 75 pence per share. The placing price represents a 7.4 percent discount to yesterday’s close.

The shares eased a little over 3 percent lower from 81 to 78 pence, as investors digested the details of the placing.

Last month IGas announced the £26.6 million deal to buy Nexen Petroleum’s (TSX:NXY) UK assets. It will be issuing 39.7 million new shares to Nexen as part of the ‘all paper’ deal. 

The acquisition takes the firms contingent recoverable resource of IGas by 115 per cent to 1.74 trillion cubic feet of gas, or 260 million barrels of oil equivalent. Enough to supply 15 percent of UK homes for 15 years, the company said in January.The company believes that the acquisition will be a major turning point in its history. 

Crucially it will gain full control of all the licence acreage, and as such it will be able to accelerate the delivery of its production plans.

This new funding will support this accelerated approach. The new capital is being earmarked for an accelerated drilling programme across its acreage from 2011 onwards. IGas already has around £12 million which will help the company bring its first commercial production site online, as well as supporting its progress with gaining land access the Point of Ayr project.

"Following the Nexen transaction, IGas is now in a position to accelerate its forward drilling plans,” Andrew Austin said. 

“With the completion of the Nexen transaction and with the proceeds of the proposed placing, 2011 is set to be a transformational year for IGas as the company heads for commercial production and drilling at a number of new sites.

“In closing this acquisition and the placing we will have both the resources and the control to deliver production and reserves from our assets."

IGas intends to drill at least two additional production wells at Doe Green – the first commercial production site - as well as a pilot well at the Point of Ayr site, assuming land and planning consents are obtained. 

It also hopes to start work on at least one other production site by early 2012. The new capital will help fund site construction and it will provide sufficient flexibility to fully utilise rig equipment. There will also be ongoing investment in the production facilities to coincide with the production drilling.  

With established commercial production and ongoing drilling, IDas expects that it will be able to start converting its resources into reserves.

It may also hire an additional rig next year, with which it will drill up to three boreholes. This would fulfil its outstanding licence commitments on three licences (PEDL 190, 184 and 193). Each well would potentially be retained as a future production well. 

 

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