UK junior Madagascar Oil has announced a near-term refinancing to fund rising costs at its Tsimiroro steam-flood project onshore Madagascar and has named a new chief executive in a boardroom reshuffle.
The AIM-listed outfit said that that two of its shareholders, BMK Resources and Persistency Private Equity, had agreed to provide a $15 million bridge loan.
BMK Resources and Persistency Private Equity will also buy $30 million and $15 million worth respectively of redeemable convertible preference shares at $0.32 each.
Mirabaud Securities is to buy up to US$15 million worth of the same shares at the same rate.
The Bermuda-registered company says it will net between $45 million and $60 million after paying off the bridge loan from the re-financing, which is subject to shareholder approval.
Chairman and chief executive Laurie Hunter and chief operating officer Mark Weller are both stepping down with immediate effect, and are being retained as consultants for six months.
Former Serica Energy boss Paul Ellis is to be the explorer’s new chief executive and Andrew Morris, a representative of Persistence Private Equity, is to be non-executive chairman, with further board changes eyed over the course of the re-financing.
Madagascar Oil said it would use the majority of the net proceeds from the equity issue to fund complete construction at its Tsimiroro steam-flood pilot project and to commence continuous steam flooding operations.
The cost of the Block 3014 heavy-oil development has been further raised to $65 million, having been hiked to $53 million in September from its original forecasted cost of $36 million.
Production start-up, previously envisaged for the end of this year, has also been put back by two months.
Madagascar Oil put the rising costs down to a number of factors, including extended overheads caused by the period of force majeure on the block in 2011 after the government tried to buy out the block in late 2010 in row that was not settled until July 2011.
The explorer also cited a prolonged rainy season, lower than expected construction productivity, and extra costs from hiring expatriate staff earlier than planned.
The explorer also plans a fresh independent resource evaluation of the 6670-square kilometre Morondava basin block next year using seismic analysis and pilot well data from the last two years.
In September 2011, Netherland, Sewell & Associates revised upwards by 75% its best estimate of contingent oil in place at the block to 1.7 billion barrels.
The field is thought to have the potential to produce 150,000 barrels per day when it reaches full production capacity in a decade’s time.
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