It’s been a bad day for the 88 Energy (LSE: 88E) share price. The UK oil share is down around 17% in Wednesday business. It has now erased all of its recent heady gains and, at 0.47p per share, the company is trading at its cheapest since late January.
88 Energy in fresh fundraising
88 Energy’s plunged today after announcing plans to raise capital via a placing of ordinary shares. The oilie said it aims to raise up to A$12m at a price per placing share of A$0.008. This is equivalent to 0.45p.
This represents a 27% discount to what 88 Energy’s shares were trading at on the Australian Securities Exchange (ASX) yesterday. It is also a 20% discount to the company’s volume weighted average price on the ASX during the 30 days to February 9, 2021.
88 Energy’s shares have also ceased trading on the ASX “pending the release of an announcement in relation to the completion of the placing”. The fossil fuel giant said that it expects the placing shares to begin trading on AIM on February 22.
Reasons for the placing
88 Energy said that the proceeds of the capital raise, blended with the company’s existing cash reserves, will be used “to fund the ongoing evaluation of the conventional and unconventional prospectivity of the company’s existing assets.” The funds will enable it “to identify and exploit new opportunities on the North Slope of Alaska,” it added.
In particular, 88 Energy said the funds would help it cover its share of any cost overruns concerning the drilling of the Merlin-1 well at Project Peregrine in Alaska, along with expenses related to flow testing operations pending successful drilling and logging.
88 Energy said that spudding at the Merlin-1 well is expected to begin in late February or early March. This follows delays due to issues over new drilling permits raised by the US Department of the Interior. Spudding at the site will target 645m barrels of gross mean prospective resource, the UK share said.
Also, the share placing will allow it to finance the drilling of its Harrier-1 well at Project Peregrine. It will also help cover the cost of plug and abandonment (P&A) costs related to its recent acquisition of the Umiat oilfield in Alaska.
88 Energy had cash resources of A$14.8m as of December 31, it said. This includes cash balances held in Joint Venture bank accounts worth $5.2m.
In other news…
In its packed market update 88 Energy also advised of some imminent boardroom reshuffling. It said that managing director David Wall will leave the company in May having tendered his resignation.
He will be replaced by current chief financial officer and company secretary Ashley Gilbert. He will assume the role prior to Wall’s departure to ensure that an appropriate handover occurs, the business added. And it has plans to install Gilbert to the role of executive director as well.