Enegi Oil (LON:ENEG) is taking back control of its PL2002-01 lease in Newfoundland, Canada, because of the encouraging results from a work-over programme. The move means that Enegi will need to raise C$2.2 million from Canadian investors.
Shares in the firm were trading higher by 7.6 percent at 15.875 pence each at 11:33am.
The licence hosts the Garden South field and the Garden Hill Central and Garden Hill North as well as other leads. Enegi’s partner, Fire Horse Energy, has fallen behind the schedule it agreed with Enegi, so the AIM-quoted firm has terminated its farm-out deal with Fire Horse.
Enegi now plans to fund the next phase of activity on the licence by raising finance from Canadian investors.
Chief executive Alan Minty said: "We have been pleased by the pressure recovery rates and production data that has been observed during the work programme to date.
“This has encouraged us to take decisive and positive action so that we can control all the activities and move forward in a more timely manner, with the work programme we had planned.”
Enegi said that the work-over on the PAP#1-ST3 well has shown improved connectivity and the well is in contact with more oil than previously thought. Importantly it believes that the wells deliverability as the latter stages of the work-over.
The company wants to move on to next stages of its work-over plan on the PAP#1-ST3 well. This will involve acid stimulation, followed by a chemical injection soak and then a well test. A new resource report will be commission for the licence.
The work programme is expected to take about six weeks to complete and it will get underway once Energi has raised new funds.
It plans to raise this money in Canadian markets, with a C$2.2 million placing (about £1.4 million). Canadian law allows companies to issue ‘flow-through’ shares up to an amount no larger than 10 percent of the company’s total equity.
Enegi will issue tax-efficient ‘flow-through’ shares, which will be sold in units priced at 18 pence – each unit includes half a warrant, each whole warrant can be exercised at 30p for an 18 month period.
Enegi’s shares are not quoted in Canada so any new Canadian investor who wants to trade them will have to do so via London’s Alternative Investment Market or PLUS.
Minty emphasised the benefits of the plan : “We believe that our actions are creating significant value for shareholders because by terminating the farm-in agreements and raising funds via 'flow-through' shares we are recovering a 40% interest in our near term production asset for a dilution to shareholders of approximately 12% if all warrants are exercised."
Enegi originally farmed out the PL2002-01 lease to Dragon Lance Management Corporation. Then, last November, DLMC assigned the farm-in to Fire Horse Energy, which was set up as a separate investment vehicle.