Wellington-headquartered Austral said it had agreed with an accredited investor to privately place almost 7.7 million in preferred shares with two managed investment funds at a price of $US1.30 per share, for total financing proceeds of $US10 million.

The preferred shares are convertible one-for-one into Austral's common shares for a three-year period and have a fixed dividend of 8% a year.

The preferred shares and any underlying common shares are not being offered in the United States and will have a four-month resale restriction in Canada.

"We are pleased to have secured this financing. The funds will be used to accelerate an ambitious development and appraisal program for the remainder of this year,” said Austral chief executive Thompson Jewell.

He said Cheal facilities were now about 40% through the final pre-commissioning and commissioning phases, with the high weather-risk components now complete.

Detailed planning and scheduling was also under way for additional Cheal development and step-out wells, he said.

Jewell told PetroleumNews.net this morning that the Cheal- A3, A4, B2 and B3 wells were already on long-term production tests to determine optimum flow rates to effectively drain the reservoir.

“The wells will not be flowed at their maximum rates as this could potentially damage the reservoir and reduce the ultimate recovery.”

The Cheal-A5 and A6 would be drilled after facilities on the A wellsite were completed in early August.

The company was carrying out rigorous risk analysis on further step-out well locations to determine the most effective drilling order, Jewell told PNN.

Austral operates the Cheal field, in mining licence PMP 38156, with a 69.5% interest, while Canadian-listed junior explorer TAG Oil holds 30.5%.

The companies are spending about $NZ30 million ($A27 million) developing the fields, with initial total production expected to be about 1900 barrels of oil per day.