Zephyr Energy Plc is raising £13.1mln of new equity and arranging US$28mln of debt financing as it advances its portfolio of assets in the United States.
Some 240mln new shares are being issued at a price of 5p per share to raise £12mln and a further £1.2mln of new equity will be made available to qualifying existing shareholders on the same terms.
Together the new equity and debt will fund the acquisition of non-operated working interests in producing assets in the Williston Basin, North Dakota.
The acquisition will cost US$36mln and will add some 1,105 barrels of oil equivalent production per day from a reserves base of 2.764mln barrels (proven).
Placing proceeds will also support the company as it invests in near-term production growth, meanwhile, the cashflows from production are intended to help fund high impact well drilling in the Paradox basin.
Chief executive Colin Harrington described the deal and financing as “further huge steps forward for the company”.
“After closing this highly accretive acquisition, Zephyr will have nearly tripled its existing non-operated production - and pro forma forecast cash flow per fully-diluted share will have more than doubled through the addition of this high-quality, high-margin production base with significant near-term growth potential,” Harrington said.
"Most importantly, the acquisition's resultant cashflows have the potential to power growth across our broader portfolio.”
He added: "The fundraise and the completion of the Acquisition represent a fantastic start for 2022, and we look forward to maintaining our momentum and delivering on our key objective by unlocking significant further upside value from the Paradox project.”
Harrington noted that the board considered multiple funding options for the acquisition and opted for the debt and equity package as it was “by far the optimal way forward”. He said that the funding arrangement maximises Zephyr’s ability to fast-track the Paradox project.
To fully fund through debt would’ve cost significantly more and would’ve limited the free cash flow available from production over the next twelve months.
Harrington told investors that the company will provide regular updates as it progresses through its transformational period – with a new competent persons report for Paradox due in “the coming weeks”.