Warrego raising swamped by investors as WA gas supply forecasts tighten
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SPECIAL REPORT: If proof was needed that there is still strong investor demand for good stories in the oil and gas space, Warrego Energy just provided it.
Warrego (ASX: WGO), which owns 50% of the West Erregulla gas discovery in the Perth Basin, set out to raise $10 million to fund its share of the cost of drilling additional wells at West Erregulla and for working capital.
But the company upsized the placement to $15 million after being swamped with interest from existing and new institutional and sophisticated investors.
Managing director Dennis Donald said the strong demand reflected “growing interest in the potential of the West Erregulla gas field following delays in the timing of some large LNG projects offshore Western Australia”.
Warrego and its partner in West Erregulla, Strike Energy, appear set to benefit from the deferral of Woodside’s Browse and Scarborough LNG projects, with projections around WA’s domestic gas supply over the next decade tightening due to the delays.
Donald added that Warrego was looking forward to continuing the West Erregulla exploration/appraisal program in 2020-21.
“A successful WE-3 well could see the prospective resources in the northern area of the field converted to contingent resources and, possibly, the recognition of additional resources,” he said.
“It would also provide a new and more complete data set that could potentially enhance our independent contingent resource estimate for the central area of the field.”
Warrego announced last week that an independent third-party review conducted by Perth-based RISC Advisory had confirmed 2C contingent resources of 513 Bscf of gas from one well at West Erregulla.
By comparison, the nearby Waitsia field, discovered by AWE and now owned and operated by Japan’s Mitsui, required three wells before similar volumes were booked.
RISC’s 3C estimate of 966 Bscf for the central area indicates additional upside there, while a successful WE-3 well could add another 102 Bscf in contingent resources from the northern area.
Warrego engaged RISC to complete the independent review to provide certainty to potential gas buyers and optimise term and price outcomes in negotiations for gas processing and sales.
“We are making positive progress in negotiations with potential WA domestic gas buyers,” Donald said.
“Our recent independent certification by RISC was particularly well received as it serves to underpin deliverable gas volumes available to us, adding to the momentum of our gas marketing activities.”
The placement is being done at 13c a share, which represents an 18.8% discount on the stock’s closing price on Thursday prior to it entering a trading halt.
Tranche one (94.9 million shares for $12.3 million) is expected to settle on Thursday, while tranche two (20.5 million shares for $2.7 million) is expected to settle in early July following shareholder approval.
Chairman Greg Columbus intends to subscribe for $390,000 worth of shares as part of tranche two.
Cannacord Genuity and Bridge Street Capital were joint lead managers to the placement.