Alliance Oil Co. (AOIL), an energy explorer operating in Russia, fell to a four-year low in Stockholm trading after announcing plans to sell more shares.
Alliance dropped as much as 9.1 percent to 41.74 kronor, the lowest price since March 2009. The shares traded at 42.10 kronor as of 2:33 p.m. local time, extending their decline this year to 21 percent.
The company said today it will issue preferred stock to raise cash as it studies acquisitions. The offering follows an earlier share sale in December and a bond placement in April as Alliance sought funds to boost oil and natural-gas output and upgrade a refinery at Khabarovsk in Russia’s Far East.
“It’s a negative development for the preferred shares because there is dilution,” said Alexander Kornilov, an oil and gas analyst at Alfa Bank, meaning the new issue will reduce the ownership per share for investors.
Alliance plans to issue 2.2 million to 2.4 million preferred shares at a price of 280 to 310 kronor apiece, it said in a statement. The preferred stock, which traded down 5.3 percent at 293.90 kronor in Stockholm, will pay a fixed annual dividend of 30 kronor, the same as the shares sold last year.
“We did a first issue in December and that was very successful,” Chairman Eric Forss said today by telephone. “We are taking the opportunity in the market to raise cash, looking at various acquisitions and adding financial flexibility.”
Alliance may target oil and gas assets in the regions where it already operates, such as Timan Pechora, Tomsk and Siberia, as well as distribution assets in the Far East, Forss said. The Moscow-based company sold more than $200 million of preferred shares in December and issued $500 million of bonds in April.
The new share sale is a way to avoid increasing the company’s debt burden, which is already high, Kornilov said by telephone from Moscow.
Alliance had net debt of $1.66 billion at the end of 2012 and earnings before interest, tax, depreciation and amortization of $734.1 million, according to a presentation on its website.
The company plans to complete the work at the Khabarovsk refinery in the third quarter and will conduct tests for several months before starting full output, Forss said. The plant will then be linked up to Russia’s East Siberian Pacific Ocean pipeline early next year, he said.
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