REG - 88 Energy Limited - Placement to raise A$32M

88 EnergyAnnouncement

14/02/2022 07:00

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RNS Number : 5578B  88 Energy Limited  14 February 2022

 

This announcement contains inside information

 

88 Energy Limited

PLACEMENT TO RAISE A$32M

 

Highlights

·   Oversubscribed share placement raising A$32 million gross proceeds
(A$30 million net proceeds).

·   Issue price of A$0.035 per share represents a 10.3% discount to the
VWAP on the ASX for the thirty calendar days to 9 February 2022

·   Funds to be directed towards Merlin-2 appraisal well drilling and flow
test program, new ventures opportunities and working capital.

88 Energy Limited (ASX:88E, AIM:88E, OTC:EEENF) (88 Energy or the Company) is
pleased to advise that it has successfully completed an oversubscribed
bookbuild to domestic and international institutional and sophisticated
investors to raise A$32 million before costs (the Placement). This is to be
achieved through the issue of 914,285,714 fully paid ordinary shares in the
Company (the New Ordinary Shares) at an issue price of A$0.035 (equivalent to
£0.018) per New Ordinary Share) (the Placement Price).

The funds raised under the Placement, which have been increased to satisfy
investor demand, together with the Company's existing cash reserves
(A$32.3 million as at 31 December 2021), are to be used to fund the planned
Merlin-2 well drilling and appraisal activities including flow test program,
contingencies, new ventures portfolio expansion opportunities, and working
capital.

With the recent issuance of the Permit to Drill, the Merlin-2 well is now
scheduled to spud in early March 2022, with all major permitting and planning
complete, snow road pioneering construction complete and the mobilisation of
the Arctic Fox rig commencing to the drilling location.

COVID-19 supply chain issues and global commodity price increases have placed
some pressures on budgeted Merlin-2 costs, however lessons learned from the
Merlin-1 program have allowed 88 Energy to mitigate many of these cost
pressures.  The Company is expecting the cost to drill the Merlin-2 well plus
completion of the wireline program to total approximately US$28 million
(approximately A$39 million).

 

88 Energy Managing Director and CEO, Ashley Gilbert, commented:

"Completion of this placement ensures 88 Energy is funded to undertake the
full suite of targeted appraisal activities at the Merlin-2 well, including
flow testing of the well.  While budgeted well costs have increased due to
global supply chain pressures, it is important to note that 88 Energy is still
expected to drill and appraise Merlin-2 at substantially lower cost levels
relative to other operators on the Alaskan North Slope."

"88 Energy has also been actively assessing multiple new venture opportunities
across the asset life cycle to expand our portfolio of assets and opportunity
types.  We are targeting assets that are complementary to the existing
portfolio and provide shareholders with exposure to additional value creation
potential. The Company has signed a non-binding memorandum of understanding to
acquire a conventional producing oil and gas asset in the Permian Basin Texas
USA, with due diligence and documentation nearing completion.  Subject to
entry into a binding agreement, the Company expects that this opportunity will
deliver immediate cash flow and near-term production drilling upside and we
look forward to providing shareholders more details when such agreement is
entered."

 

Euroz Hartleys Limited acted as Sole Lead Manager and Sole Bookrunner to the
Placement. Cenkos Securities Plc is acting as 88 Energy's Nominated Adviser
and Sole Broker to the Placement in the United Kingdom. Inyati Capital Pty Ltd
(Inyati) acted as Co-Manager to the Placement. Commission for the Placement
was 6% (plus GST) of total funds raised across Euroz Harleys Limited, Inyati
Capital Pty Ltd and Cenkos Securities Plc. In addition, the Company will issue
36,000,000 Unlisted Options (exercisable at $0.06 on or before the date which
is 3 years from the date of issue) to the managers of the Placement (Broker
Options).

 

The issue of the 914,285,714 New Ordinary Shares and Broker Options are not
subject to shareholder approval as the issuance will fall within the Company's
placement capacity pursuant to ASX Listing Rule 7.1. The New Ordinary Shares
will rank pari passu with the existing ordinary shares in the Company, with
settlement scheduled for Monday 22 February 2022.

 

Following the issue of the New Ordinary Shares, the Company will have
15,725,361,910 ordinary shares on issue, all of which have voting rights. The
figure of 15,725,361,910 ordinary shares may be used by shareholders as the
denominator for the calculations by which they will determine if they are
required to notify their interest in, or change their interest in, the
Company.

 

The Company notes that several media reports have stated that the Company will
issue shares to a key drilling contractor involved in the Merlin-2 operations
for payment of invoices incurred in relation to services associated with the
Merlin-2 operations. The Company wishes to update the market that it does not
intend to issue such shares.

 

As referenced in the quote from the Managing Director above, the Company notes
that it is continually in discussions with various parties with respect to new
venture opportunities across the asset life cycle to expand its portfolio of
assets and opportunities.  Such potential opportunities are not announced
until such time as the Company has agreed the material commercial and legal
terms with the relevant counterparty or counterparties, and customary due
diligence is completed.  Until the material commercial and legal terms have
been agreed and due diligence completed, there can be no guarantee that such
discussions, whether or not they have been disclosed, will lead to the
announcement or completion of a binding agreement.

 

In particular, the Company notes that it has recently signed a non-binding
Memorandum of Understanding (MoU) relating to a potential acquisition of a
conventional producing oil and gas asset in the Permian Basin, Texas, USA. The
key commercial terms of the potential acquisition as outlined in the
non-binding MoU are for the Company to acquire a non-operating 75% working
interest in the project for consideration of approximately US$9 million as
well as a further US$1.6 million working capital fund, to be paid in cash and
88 Energy shares.  The non-binding MoU contemplates that the vendor, Lonestar
I LLC, will remain as Operator of the project. 2021 gross production at the
project totalled approximately 110,000 BOE, with a planned work program in
2022 expected to increase production.  There are no certified reserves
available for the project at this stage, and the Company would expect to
release certified reserves to the market on announcing a binding agreement to
proceed with the acquisition, should the transaction proceed.  As noted
above, the Company has only entered into a non-binding MoU in relation to this
potential acquisition at this stage, with due diligence advanced and final
documentation nearing completion.  The Company expects that the documentation
will be executed imminently. However, execution and completion of the
potential transaction is not guaranteed and remains subject to all final
documentation being agreed and due diligence completed.  There is no
guarantee that negotiations will lead to a binding agreement or a completed
transaction, or that the final terms will be as set out in the non-binding
MoU.

 

 

 

 

 

This announcement has been authorised by the Board.

 

 

Media and Investor Relations:

 

88 Energy Ltd

Ashley Gilbert, Managing
Director

 

Tel: +61 8 9485 0990

Email:investor-relations@88energy.com

 

 

Finlay Thomson, Investor
Relations
Tel: +44 7976 248471

 

Fivemark Partners, Investor and Media
Relations                      Tel: +61 410 276 744

Andrew Edge / Michael
Vaughan
Tel: +61 422 602 720

 

EurozHartleys Ltd

Dale
Bryan
Tel: + 61 8 9268 2829

 

Cenkos
Securities
Tel: + 44 131 220 6939

Neil McDonald / Derrick Lee

 

 

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