Small cap hydrocarbons explorer Sound Oil (SOU:AIM) surges 16.7% to 6.12p as it secures a £14 million capital injection from a new institutional investor at a large premium. This investment should fund the group’s work programme for the next 12 months which includes its Nervesa appraisal well and drilling to test its material Badile prospect (both in Italy).
Sound says it continues to make progress on farm-out discussions for these assets. It is estimated that Badile could contain 178 billion cubic feet of natural gas.
Continental Investment Partners – acting on behalf private offices in Switzerland, Italy and the UK – will subscribe for equity at an average price of 9p. This is a 69% premium to last night’s close but some way below the shares' 52-week high of 14.5p. Roughly 60% of the Continental funds are by way of a direct equity investment at 8p per share with the rest as loan capital at a 10% coupon with attached warrants.
Following the investment Continental will be able to appoint two non-executive directors to the Sound Oil board. One will be its managing director Marco Fumagalli who is also a well-known Italian businessman.
Northland Capital analyst Mark Henderson is reviewing his 'add' recommendation on Sound and 7p price target and says today's transaction provides 'funding the company for its forthcoming Nervesa well and providing enough additional funding for Sound Oil to progress toward the drilling of the hugely material Badile well.
'This is very positive news for Sound Oil specifically but also for Italy more widely where Northern Petroleum (NOP:AIM) and Petroceltic (PCI:AIM) have material exploration prospects,' he comments.