Nido, which has not turned a profit since the oil price cratered in 2014, is seeking to raise the cash to drill an appraisal well and possible sidetrack, Galoc‐7/7ST, into an untested area of the producing Galoc field.
Success would stave off end-of-life at Galoc and deliver another decade of production.
The Galoc JV, which is dominated by Nido (55.87952%) and Kufpec (26.84473%), has approved the drilling, and Nido now needs to stump up the cash to meet its share of the $24 million well.
The offer, an 11.2 for 1 pro‐rata entitlement, is pitched at $0.065 per share, which is a 22% discount to the one month volume weighted average.
Nido shares have suffered poorly since the takeover by Thailand's Bangchak Petroleum, and have plunged from $0.45 per share in September 2015 to below $0.08/share recently.
Bangchak, which owns 81.25% of Nido already, has agreed to take up all of its entitlement, and will pump in $25.9 million.
While there is no minimum under the raising, if the remaining 18.75% of shareholders in the oiler decided not to throw money into the hat they could be diluted to holding less than 2% of the junior.
If Bangchak increased its stake to above 90% it has flagged compulsory acquisition and delisting.
Nido expects Galoc production will become sub-commercial in 2019.
Its schedule is to drill Galoc-7 in the first quarter of 2017, with the aim of bringing any new volumes on as needed.
If the well is not drilled the floating production storage and offloading facility and associated infrastructure will be decommissioned, and that action would render the Galoc Mid Area uneconomic as the 2C contingent resources of 13.3MMbbl are insufficient to support a standalone project at a later date.
Galoc Mid Area gross 3C resources are 24.5MMbbl.
The clock is ticking and, assuming a drilling success, the Galoc JV would need 12-18 months to execute following post appraisal activity and a FID decision. That would likely see Galoc produce until 2027.
The sidetrack will not be drilled if the initial vertical well reveals a high reservoir quality and hydrocarbon volume.
The company had initially intended to drill the well from cashflow, however the fall in oil prices means that is no longer an option.
A Phase III development would notionally include 1-2 horizontal wells tied-back to the existing Rubicon Intrepid FPSO facility via subsea flowlines and umbilicals.
Nido had $14.1 million at the end of the last quarter, and expected to spend much of that this quarter after posting at $13 million loss for the September quarter.
