Reabold Resources has increased its stake in oil and gas exploration at West Newton in East Yorkshire to more than 50%.
The company announced this morning it had acquired the 16.665% interest in the project held by Humber Oil & Gas Ltd.
The deal, which must be approved by the Oil & Gas Authority, takes Reabold’s economic interest in the West Newton licence (PEDL183) up from 39% to 56%.
It gives Reabold a direct interest in the licence, as well as its 39.66% stake via a shareholding in the operator, Rathlin Energy.
Under the deal, Humber Oil & Gas receives £1.4m in cash and 350 million Reabold shares at 0.1p each.
A statement from Reabold said Humber has agreed to lock up more than 66% of the shares for three months, followed by a further three months of “orderly market restriction”.
Work began last month at the West Newton B site, near Burton Constable. Rathlin announced last week that had applied for a mains electricity connection to the site and confirmed that the highway access had been installed.
The co-CEO of Reabold, Stephen Williams, said:
“We are delighted to have agreed to significantly increase our exposure to West Newton, which we believe could be a key driver of value for Reabold, at a highly attractive price.
“Our increased investment should facilitate the unlocking of the large potential value we see at West Newton and we look forward to the upcoming activity, including the drilling of the B-1 well where site construction is currently underway.
“Whilst current macro conditions are throwing up substantial challenges for the industry as a whole, the ability to act opportunistically to enhance shareholder value during low points in the cycle is a key aspect of the Reabold strategy.”
Reabold also announced it had secured a £5m discretionary cash facility for two years with Acuitas Capital. The statement said this was “a prudent measure to provide increased liquidity without the need to dilute shareholders unduly by way of an equity fundraise”.
Mr Williams said the facility was intended to “provide an added layer of contingency to the company’s financial position”.
“Given the current challenges to the operating environment, as well as volatile market conditions, we deemed it prudent to have additional headroom whilst we progress the activity at West Newton.”