Oilex (ASX:OEX, LON:OEX) has unveiled plans to raise US$23mln (A$30mln) through the sale of new shares, the majority of which will be bought by Australian group Zeta Resources.
It represents a major recapitalisation for the company, which at a price of 2.12p has a current market value of just under £14.5mln.
Proceeds of the share sale will be used to fund a 'transformational' work program over the course of 2015 and 2016, Oilex told investors.
Not only will the funding support the expansion of gas producing operations at the Cambay field in India, including two new wells, it will also allow Oilex to complete its minimum work commitments in the Canning basin, in Western Australia.
Ron Miller, Oilex chief executive, in a statement said: “Successful delivery of the Cambay Field 2015/16 work program will be a transformational event for Oilex and India.
“These wells will continue to demonstrate the potential of the Cambay Basin to deliver indigenous natural gas and oil to India's fast growing economy by using horizontal wells and multistage fracture stimulation technology.
“For Oilex, it means increased production and cash flow to build a strong foundation for future growth in shareholder value and returns."
There will be an initial US$1.4mln (A$1.8mln) share placing to sophisticated investors will provide a quick injection of capital.
A subsequent US$16.3mln (A$21.2mln) transaction will see Zeta take a 19.6% stake in AIM and ASX listed Oilex, meanwhile, existing investors also have the opportunity to subscribe for new shares via an underwritten US$5.3mln (A$7mln) rights issue.
Shares created though the major recapitalisation will represent around two thirds of the enlarged company.
New shares sold via the share placings will be priced at 2p (or 4.1 cents), whereas the rights issues works out at 2.04p per share.
Shareholders will be able to buy one new Oilex share for every four existing shares they own.
The Zeta share placing will be subject to approval from existing shareholders, and it is anticipated that a vote will take place at an EGM pm August 12.
