July 3 (Bloomberg) -- Shemen Oil & Gas Resources Ltd. dropped to a record low on share dilution concerns after the Israeli oil and gas explorer said for the second time in two months it would raise funds to continue drilling for oil.
The shares of the company plunged 12 percent to 0.71 shekel, the lowest since December 2011, at the close in Tel Aviv. Investors traded 11 times the three-month average daily volume. The stock has declined 54 percent since the company encountered drilling difficulties in April. The benchmark TA-25 Index lost 0.8 percent.
Shemen plans to raise 28.5 million shekels ($7.8 million) in shares and options to cover higher costs at the Yam 3 site at the off-shore Shemen/387 license, according to a company statement to the bourse. The company raised 49.5 million shekels from a share sale in May after work at the site was temporarily halted in April due to high gas pressures, leading to increased expenses and a longer drilling period. The company said in May that it is short of $27 million for the exploration.
“Shemen is once again raising money to continue exploration efforts, a necessary move to complete the drilling that is in process,” Guil Bashan, an analyst at IBI-Israel Brokerage & Investments Ltd. in Tel Aviv said today by phone. “The expected dilution of the shares along with the limited financial resources of the company are leading to a drop in shares.”
The U.S. Geological Survey estimates the Eastern Mediterranean’s Levant basin, of which Israel covers approximately 45 percent, holds about 1.7 billion barrels of recoverable oil. Shemen’s consultants estimate the crude oil potential at Yam-3 is about 120 million barrels and gas potential of 1.8 trillion cubic feet, the company said in December. The company’s licenses could generate $20 billion to $24 billion, if oil is found, Chief Executive Officer Yossi Levy said that month.
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