Blue Energy (ASX: BLU) has raised $10 million through a strongly supported share placement to fund a drilling program aimed at building gas reserves at its North Bowen Basin project in Queensland.
The explorer emerged from a trading halt on Wednesday to announce the capital raise, which will result in the issue of more than 199 million new shares at $0.05 per share to institutional and sophisticated investors.
Proceeds from the placement are expected to help advance Blue’s 2P reserve build program at its 100% owned ATP 814 permit, which will underpin the non-binding gas supply deals it signed in the last two years with Origin Energy (ASX: ORG), Energy Australia and Queensland Pacific Metals (ASX: QPM).
Combined, these agreements secure a total of 512 petajoules of gas over 10 to 15 years.
Funds to be used for drilling programs
Blue’s 2P reserve build program will also support the economics of the Bowen gas pipeline needed to be constructed between Moranbah and the Wallumbilla interconnect.
Specifically, the funds and existing cash reserves will be used to drill vertical and associated lateral production style wells in the Sapphire Block of ATP 814P, as well as vertical wells in two production licence application areas in the North Bowen Basin.
Funds will also be used to progress the approval process for the acquisition of 2D seismic survey data in three exploration permits in the Northern Territory’s Greater McArthur Basin, in addition to general permit portfolio activities and for working capital purposes.
Developing new domestic gas supply
Blue managing director John Phillips said the company is pleased with the strong level of support it has received as demonstrated by the capital raise’s success.
“Clearly, the critical importance of developing new domestic gas supply is apparent to investors and comes as disruption to gas supply is resulting in significant industrial and power generating chaos in the UK and elsewhere,” he said.
“Additionally, strong International liquefied natural gas (LNG) spot prices will continue to impact Australian east coast supply to domestic gas users and therefore price through the Wallumbilla LNG netback price, which is currently $26.44/GJ.”
Blue’s ATP 814 permit has been certified to hold a 2C (best estimate) contingent gas resource of 1,119PJ and 3,248PJ of recoverable gas on a 3C (high estimate) basis.