Empyrean Energy raises £5.02m to secure drilling rig for Jade

China, Indonesia and United States-focussed oil and gas development company Empyrean Energy has placed 83,698,498 new shares at a price of 6p, it announced on Friday, to raise £5.02m, to secure a drilling rig for the Jade prospect.

The AIM-traded firm said subscribers would also receive one warrant, exercisable at 12p, for every two new shares, with the warrants having a 12-month term from the date of issue.

Additionally, if the placing warrants were exercised within three months, subscribers would receive a replacement incentive warrant expiring 15 months from the placement settlement date, with an exercise price of 12p, as well as a bonus warrant expiring 24 months from the settlement date with an exercise price of 18p.

The placing and the issue of warrants was being completed under the company's existing authorities, and would not need the approval of shareholders.

Empyrean noted that the placing price represented a 29.4% discount to its share price as at close of business on 7 July, a 21.7% discount to the seven-day volume-weighted average price, and a 13.4% discount to the 30-day volume-weighted average price.

The majority of subscribers were institutional and high-net worth investors, including new and existing shareholders, and also clients of First Equity, which acted as UK manager to the placing, and Petra Capital, which acted Australian manager.

Funds raised would primarily be used to secure a suitable drilling rig and order long-lead items, and for general working capital requirements, as it prepared to drill the Jade prospect at its wholly-owned block 29/11 license in China, scheduled for late 2021.

It added that funds raised from the exercise of any warrants would be used for drilling preparation activities, and the drilling of the Jade prospect and working capital.

The company said it had previously been quoted $18.5m to drill the Jade well, with the testing of any oil column to be additional to that amount.

Following well engineering and design work, the company said it had been working towards securing a rig and finalising costs for the well.

The firm said it would now finalise those negotiations, and would make a further announcement in due course.

“We are very pleased to successfully complete this placing which provides the necessary funding to accelerate our preparation activities, including the securing of the rig, for the drilling of the extremely exciting Jade prospect in China, which we are targeting to occur before the end of the 2021 calendar year, as well as providing working capital funding,” said chief executive officer Tom Kelly.

“The placing warrant structure with early exercise incentive substitute and bonus warrants also provides a mechanism by which the shareholders can potentially achieve a situation where the well is completely funded without the need for asset sales, joint venture or further placing.”

Kelly said it put the company's destiny largely into the hands of shareholders.

“Whilst asset sales, joint venture or further placing are all worthwhile alternatives to drill Jade, it is the company's view that the least dilutive solution, given that any asset sale may not settle before drilling starts, is for the remaining funds to come via warrant exercise.

“We look forward to updating shareholders on what is shaping up to be one of the most exciting wells drilled by a junior oil explorer this year.”

At 1527 BST, shares in Empyrean Energy were down 26.18% at 6.28p.