IGas To Raise Up To $37 Million for U.K. Shale Exploration
IGas Energy Plc (IGAS), a U.K. developer of shale gas fields, said it will raise as much as 23 million pounds ($37 million) in a share placing to help develop its resources before finding an investment partner.
The company will issue as many as 24.3 million new shares, representing about 15 percent of the company, at 95 pence each to both new and existing investors, it said in a statement in London today. The money will be put toward a work program to shore up the value of the company’s assets before selling a stake in them.
Chancellor of the Exchequer George Osborne promised tax breaks to encourage the development of shale reserves after the technology that squeezes fuel from rocks using pressurized water, sand and chemicals allowed the U.S. to become the world’s biggest gas producer. The government lifted a ban on fracking in December and implemented safety controls after the technique triggered minor earthquakes in 2011.
“The developing supportive backdrop to the shale gas industry in the U.K., both politically and geologically, leaves IGas well placed to exploit its significant potential resources,” Chief Executive Officer Andrew Austin said in a statement. “This fundraising allows us to further appraise our shale assets and augment value ahead of a potential farm out.”
IGas fell 8 percent to 106 pence as of 8:06 a.m. in London trading. The shares are up 86 percent in the past year.
IGas will also use part of the funds to complete the purchase of the P.R Singleton assets in southern England that produce about 500 barrels of oil a day. It’s expanding a debt facility with Macquarie Bank Ltd. by $90 million for additional funds. It agreed to buy the conventional fields, which will raise cash while IGas completes shale exploration, in September for $66 million.
Jefferies International Ltd. and Canaccord Genuity Ltd. are joint bookrunners for the placing. The new shares are set to start trading Jan. 18.
The main U.K. shale reserves are in the Bowland basin near Blackpool, northwest England, and IGas said it has identified additional prospects in the East Midlands and Weald basin in the southeast.
IGas last year appointed the investment bank Greenhill & Co. (GHL) to help find an investor in the Bowland prospect and said it hoped to announce a partner by the end of 2012.
To contact the reporter on this story: Brian Swint in London at email@example.com