88 Energy Ltd (AIM:88E, ASX:88E, OTC:EEENF) has initiated a capital raising effort, securing A$9.9 million (approximately £5.3 million). This funding is intended to further the company’s ventures in both Alaska and Namibia.
The company plans to issue new shares at a price of 0.45 Australian cents each, representing an 18.20% discount compared to the previous day’s closing price on the Australian Securities Exchange.
The share placement is being coordinated through a bookbuild process, overseen by Cavendish Capital Markets in the UK, and EurozHartleys and Inyati Capital in Australia. The deal also includes the provision of warrants and options for investors.
In its recent financial statement, 88 Energy highlighted its strong cash position, reporting A$10.2 million in funds as of September 30.
Rationale for the Placing and Use of Proceeds
The net proceeds of the Placing, together with the Company’s existing cash reserves, will strengthen the Company’s balance sheet and will provide the Company with sufficient capital to fund flow testing of multiple zones in the Hickory-1 well at Project Phoenix, payment for initial farm-in exploration activities at the Company’s recently acquired Owambo Basin acreage in Namibia (including 2D seismic acquisition), and also additional working capital. Following completion of the proposed Placing, the Company will have sufficient cash to fund its ongoing working capital requirements and general and administrative overheads for at least 12 months.
The Placing enables 88 Energy to undertake the Hickory-1 flow test despite its Project Phoenix JV partner, Burgundy Xploration, LLC (Burgundy), potential failure to meet ongoing obligations and not curing its payment defaults with the requisite deadline of 30 November 2023 (refer 88 Energy ASX release dated 31 October 2023). 88 Energy has made the decision to complete the Placing to secure funding arrangements for the flow test in the absence of certainty of Burgundy’s ability to finance its share of the Hickory-1 activities.
Hickory-1 flow test planning and permitting remains on track for program operations during Q1 2024. Following declaration of a maiden Contingent Resource estimate for the BFF reservoir (refer 88 Energy ASX release dated 6 November 2023), the program is set to focus on flow testing of the shallower reservoirs, being the SMD-B and SFS.
