Carnarvon Energy’s equity raising, announced on Monday, is being treated by many in the market as a sign of things to come.
The oil and gas explorer announced it would raise $70m through an institutional placement, and experts believe similar raisings will follow in the coming weeks in the resources sector as commodity prices soar.
Small energy players and miners have experienced astronomical gains in their stock prices and the feeling is that most will look to capitalise on the latest upswing.
The trend will no doubt come as welcome relief for equity capital market bankers who have been treading water on a number of initial public offerings due to market uncertainty linked to Russia’s attack on Ukraine.
A number of resource stocks that most would not have heard of a few months ago are now $1bn-plus companies.
Take cobalt and nickel producer Jervois Global – its market value is $1.33bn and its share price has almost doubled in the past year to 88c. Piedmont Lithium’s market value is $1.6bn, with its share price also doubling since the start of last year.
Market experts believe equity raisings in the resource space will not necessarily be among the largest players, given that there are few development projects in need of large amounts of money.
Yet there was still a steady stream of lithium explorers that would probably look for up to $50m even before they definitely have a project.
Uranium and rare earth miners will likely make similar moves to keep their operations humming along.
The consensus is the time is right for such raisings given that the market is trading well in Australia despite the uncertain Ukraine backdrop, with still plenty of institutional investor money to spend.
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Carnarvon Energy announced on Monday that its raise was to fund development opportunities and its Dorado development of which it is a 20 per cent stake holder, with Santos owning the remainder.
Chief executive Adrian Cook said the proceeds would be used to bring the Dorado liquids development to a Final Investment Decision this year.
Shares were being offered at 30c each, a 9.1 per cent discount to the closing price on March 25, through advisers Euroz Hartleys and Barrenjoey.
Carnarvon is capitalising on an announcement last week that sent its share price soaring, of a significant oil discovery at the Pavo 1 exploration well 46km east of the Dorado field in the Bedout Sub-basin off the coast of Western Australia.
That could add further material value to the Dorado project through a potential low-cost tie back to the proposed Dorado facility.
Carnarvon Energy had earlier hired Auzre Capital for a sell down of the business as it looks for funds to proceed with the Dorado project, although most anticipate the most likely outcome will be an on market buyout proposal for Carnarvon from an industry player such as Beach Energy.
DATAROOM EDITOR
BRIDGET CARTER HAS WORKED AS A WRITER AND EDITOR FOR THE AUSTRALIAN’S DATAROOM COLUMN SINCE IT WAS LAUNCHED IN 2013, FOCUSING ON CAPITAL MARKETS,
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