Petroceltic will raise €21m to develop Italian oil well

EXPLORATION GROUP Petroceltic will raise €21 million from two new investors to develop its oil interests off the Italian coast.

The Irish company said yesterday that Canadian player Orca and equity investor Gemini Oil and Gas will pay a total of $26 million (€21.2 million) for a share of Petroceltic’s planned Elsa-2 well off Italy’s Adriatic coast.

Petroceltic is selling 15 per cent of Elsa-2 to Orca, which has agreed to pay 30 per cent of the development costs, up to a maximum of $11.52 million.

The Canadian company has also agreed to pay 15 per cent of the money that Petroceltic has already spent on its interest up to a maximum of $520,000. Orca will be entitled to take part in all of Petroceltic’s applications for licences to explore in the Adriatic.

Gemini has agreed to contribute $14 million towards the development costs of Elsa-2, with the final $4 million payable on testing of oil flows from the well. In return, Gemini will receive a share of revenues from oil and gas from the Elsa field.

Petroceltic said yesterday that the entire cost of drilling the well, which will help to establish the amount and quality of oil that could potentially be recovered from the well, will run to $37 million, including testing.

The Irish company will keep a 55 per cent interest in the well, with Orca and the existing project partner, Vega Oil, holding the balance. Petroceltic is on schedule to begin drilling in the fourth quarter of this year.

Elsa has proven oil reserves and estimates of the amount that could be recovered from the field are in the region of 100 million barrels.

Petroceltic held its annual general meeting in Dublin yesterday. Shareholders shot down a motion that would have allowed its directors to issue shares up to a limit of 20 per cent of its existing capital without seeking the company’s approval in a general meeting.

Executives played down the vote and suggested that the motion’s defeat was down to the fact that some of its institutional shareholders are taking a more proactive stance on various issues.

The directors have always sought shareholders’ permission to issue up to 20 per cent of its existing capital in new shares. This is the first year they have failed to secure it.

Directors of companies with a full stock exchange listing can normally only seek permission to issue up to 5 per cent of their capital in new shares.

Petroceltic is listed on the Alternative Investment Market (AIM), and the 5 per cent limit does not apply, hence it has always sought the right to issue up to 20 per cent.