Pulse Oil Corp (CVE:PUL) has announced plans for a private placing to raise up to C$30.9 million gross to accelerate its key enhanced oil recovery (EOR) project at the flagship Bigoray asset in Alberta.
Each unit of the financing will be priced at C$25.75 and consist of one share of subsidiary Pulse Oil Operating Corp (OpCo), and 25 Pulse Oil shares, the junior oiler said in a statement. It will see the issue of up to 1.2 million preferred shares of OpCo at C$25 a throw and 30 million Pulse shares at $0.03 each.
Pulse said the net proceeds received by Opco from the preferred shares will be used as follows:
- Capital and operational expenditures at its 100% owned Bigoray oil and gas operations in Alberta
- Up to C$500,000 per year of general working capital in respect of Pulse that can be paid to Pulse via intercompany loan or management fee
- The repayment of certain third party debt of Pulse/OpCo related to the Bigoray oil and gas operations.
The Bigoray project includes two established Nisku reef reservoirs that have been producing sweet light crude oil for more than 40 years. Pulse said it aims to inject solvent into the pools, a proven method, to further enhance oil recovery.
"Gaining access to a new investor base in these challenging times where raising capital is extremely difficult would allow Pulse to expedite our EOR project. Bigoray is our main priority at Pulse and being able to access funding will speak to the quality of the project at Bigoray," Pulse CEO Garth Johnson said in a statement.
Drew Cadenhead, the firm’s president and COO added: "This funding will allow us to accelerate our Enhanced Oil Recovery (EOR) project at Bigoray at a time when our largest expense associated with the project, the NGL injection solvent, is at historically low prices.
"With peak EOR sweet light crude oil production rates forecasted 12-18 months after initiation of solvent injection, we believe it makes sense to advance the project in the current low oil price environment. Accelerating the program now improves the economic forecasts of the project with the goal of creating value for all of our shareholders."
The net proceeds, estimated to be up to C$828,000, received by Pulse from the common shares will be used for expenses, including capital and operating expenditures associated with the firm's non-Bigoray assets, it added.
Preferred shareholders will, among others terms, be entitled to receive a dividend equal to 100% of the free cash flow of OpCo, on a pro-rata basis, until the preferred shares have realized an internal rate of return (IRR) of 25%.
Thereafter, holders of preferred shares will be entitled to a dividend equal to 50% of the free cash flow of OpCo, until they have realized an IRR equal to 100%, and a dividend payment equal to 25% of free cash flow of OpCo.
The private placement is scheduled to close in June this year.
Pulse shares ticked up over 16% in Toronto to C$0.035.
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