Ophir Energy Plc (OPHR), a U.K. explorer in East and West Africa, climbed the most in nine months in London after announcing plans to raise about $833 million in a share sale, easing concern that funds will run out.
Ophir advanced 11 percent to 513 pence, the biggest gain since May 16. Trading volumes were five times higher than the three-month daily average.
The company plans to sell 168 million shares, offering two for five existing shares at 275 pence apiece, a 40 percent discount to yesterday’s closing price, it said yesterday. The London-based explorer also sold about 19.9 million new shares at 460 pence, it said today in a separate statement.
The share sale “has the potential to remove the main limiting constraint on the explorer, its balance sheet, leaving it free to negotiate fair farmdown” agreements, Brian Gallagher, an analyst at Investec Securities Ltd. in London, said today, raising his rating on the stock to buy from hold.
The company has fallen 21 percent from its September high after indicating it will be short of money for drilling projects this year. Mittal Investments Sarl, Och-Ziff Capital Management Group and BlackRock Inc. (BLK) sold shares last month, while SVM Asset Management Ltd. and Guinness Atkinson Asset Management Inc. said Ophir was becoming a takeover target.
Ophir’s sale of new shares will equate to about 47 percent of the current outstanding equity, according to estimates from Laura Loppacher, an analyst at Jefferies Group Inc. in London. “We had previously anticipated a close to $300 million equity fundraise, requiring about 10 percent equity dilution.”
Ophir said in October it would spend $650 million on its drilling program, which exceeded its cash available for investments by about $450 million, according to Morgan Stanley. The explorer has been seeking partners to share project costs and opened its books to interested parties.
“Potential buyers were using Ophir’s balance sheet as an opportunity to pitch low-ball bids during farmdown negotiations,” said Tom Robinson, a London-based analyst at Nomura Holdings Inc. “Funding now allows Ophir management the opportunity to test the boundaries of the upside case -- something we believe remains significant.”
The company plans to drill more than 10 wells targeting about 1.3 billion barrels of oil equivalent resources in the next 12 months, it said today in a separate statement.
In West Africa, Ophir together with Vitol Group and Rialto Energy Ltd. (RIA) plans to drill a well at the Starfish prospect in the Accra Block off Ghana. It will start three wells in Gabon, of which two will be shared with Petroleo Brasileiro SA. (PETR4)
“A further exploration and appraisal drilling program is also envisaged in Equatorial Guinea, after the introduction of new partners into the license,” Ophir said.
In East Africa, it plans to drill at least three wells in Tanzanian and one in Kenyan deep waters.
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