A Look Through Recent Capital Raising And Growth Plans of Sun Resources

  • September 27, 2019 08:29 PM AEST
  • Team Kalkine
A Look Through Recent Capital Raising And Growth Plans of Sun Resources

Oil & gas (O&G) exploration and development company, Sun Resources NL (ASX: SUR) focuses on identifying O&G development asset opportunities that deliver oil production in the near term. The company, based in Perth, Western Australia, has its key asset – Bowsprit Oil Project – in Breton Sound Area, Louisiana, United States.

Bowsprit Oil Project – A Quick Look

The conventional oil project is located on lease areas spread over 1,154 acres and contain several historical fields, including an undeveloped conventional Miocene aged oil sand. The field is a redevelopment project with oil that is proven, conventional, light sweet and of good quality.

According to the company, Bowsprit structure could be advanced with up to 5 horizontal wells, while using a simple unmanned production platform. Additionally, based on its conceptual development plan, the company has assumed a gross oil production of 2.5 million barrels from five wells.

In order to prove the potential of the field, the company is targeting to drill an appraisal well. As of now, Sun Resources has selected a primary well location with the objectives of proving the field reserves, collating data for quantitative seismic interpretation, and unveiling detailed reservoir parameters and oil properties with the aim of full field development planning and implementation.

Capital Raising

To support drilling at the project, the company in the month of August 2019 unveiled a capital raising program with specialist corporate advisory firm, GTT Ventures Pty Ltd.

The company entered into a mandate with GTT for undertaking the placement to raise $ 615,000 before costs.

As part of the capital raising program, Sun Resources announced to have secured firm commitments for 307,500,000 shares, priced at 0.2 cents each share. The capital raising program exempted investors (under section 708 of the Corporations Act (2001).

For the capital raising, the company would issue

  • 300 million shares under its placement capacity, for which it secured approval during the EGM on 6 August 2019.
  • 5 million shares in line with Listing Rule 7.1A.
  • 50 million unlisted options in accordance with Listing rule 7.1.
  • 153,750,000 free attaching unlisted options on a one for every two placement shares, with a strike price of 0.4 cents and expiry date of 31 December 2020. However, issue of the free attaching unlisted options is subject to shareholder approval.

GTT Ventures Pty Ltd (“GTT”), serving as a lead manager, has an extensive contact network in sectors including mining, resources and O&G. Additionally, GTT has access to some of the leading brokers, institutions and high net worth investors in Australia.

The advisory firm would be entitled to

  • A capital raising fee of 6% for its services
  • 50,000,000 unlisted options, with a strike price of 0.4 cents and expiry date of 31 December 2020

GTT would also support the company with its promotion, pursuant to the terms of the mandate.

Proceeds raised from the program would be used by SUR to make payments towards the annual lease rental. Additionally, with this funding, the company would move ahead with the project and finish the permitting for the first well. The company’s plan is to drill the first well in the first quarter of 2020, that is subject to the arrangement of financing and/or farm out.

Growth Plans

Growth plan of SUR is centred around i) foundation asset - Bowsprit Lease and ii) expansion.

  1. Foundation Asset - Bowsprit Lease

SUR owns the project wholly and is currently seeking farm-in partner(s) or other source of financing to support drilling at the project. The primary field is located on known accumulation holding redevelopment potential.

As part of its primary focus on progressing the project towards production as soon as possible, the company is hoping to secure permission for carrying out drilling activities at the project in December 2019, with the pilot hole expected to test Middle Miocene and horizontal well to flow test Upper Miocene in the first quarter of 2020.

The first test well would be aimed at proving commercial rates as well as proving that the complete structure contains moveable oil.

First commercial oil production at the project is anticipated in the third quarter of 2020. After which, the company plans for two-four further development wells. The company considers Bowsprit as a low capex, high margin, oil appraisal/ development project.


2. Expansion

Additionally, Sun Resources intends to identify and obtain follow up projects 2/3/4 in area. The company plans to purchase data and figure out opportunities with development and appraisal concepts. SUR would nominate and obtain acreage, conduct detailed planning and perform activities including desk top work and FEED, fund development planning from Bowsprit and farm out to fund drilling / development.

Growth plans of the company for long term are identifying new exploration and using new, cable less 3D seismic for deeper field identification, coupled with using quantitative seismic interpretation on regions that were not part of high-resolution 3D seismic carried out.

Stock Performance

Listed on the Australian Stock Exchange in 1992, the stock of Sun Resources has delivered an outstanding return of 100 per cent in the last three months. With a market cap of $ 2.64 million, the SUR stock last traded at $ 0.002 on 27 September 2019.


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