There is intense excitement this morning around shares in Canadian Overseas Petroleum [LON:COPL] as it raises £700,000 in new share capital. The raising centres around £500,000 from a single investor with further commitments from Riverfort and Yorkville Advisors. Canadian Overseas Petroleum CEO Arthur Millholland said that the timing of the capital raise was based on much higher volumes in the company’s stock in London coupled with a commensurate rise in the share price.
The COPL share price picked up from 0.05 at the start of the month, and is now trading at GBX 0.361 at the time of writing, a spectacular increase. The interest from investors comes as Canadian Overseas Petroleum has settled a dispute with joint venture partners in Nigeria.
Canadian Overseas Petroleum settlement with Essar Nigeria
The settlement in principal relates to an ongoing dispute the company had with Essar over a prospect in West Africa. The deal saw COPL’s 50%-owned affiliate ShoreCan switch 70% of its in Essar Nigeria to Essar Mauritius. Essar Nigeria is 100% focused on a single oil field play, OPL 26, which is situated 50 km offshore from the Niger Delta region, one of Africa’s richest oil producing regions.
The field consists of an area of 1532 square kilometres situated in water depths of between 40 and 180 metres. COPL is planning to drill its appraisal well later this year to test an oil discovery made in 2001.
As part of the deal, ShoreCan receives a 10% carried interest on all the costs of the drilling for a first appraisal well at OPL 226. Essar Nigeria is understood to be seeking an extension of the product sharing contract for OPL 226 beyond the current term agreed between the parties, which concludes in September. ShoreCan has the option to increase its share of Essar Nigeria by paying historical expenditures through the initial appraisal well.
Millholland’s vote of confidence in OPL 226
At the end of last year, COPL had a C$1.3m deficit and entered talks with Riverfort and Yorkville Advisors in an effort to secure a £2m equity placing. It had already taken a loan from Millholland. Employees had been taking shares in the company in lieu of salary and directors had agreed to a write off of fees for 2019 and 2020. At the time COPL was also known to be in talks with unsecured creditors about converting debts into shares. The strategy seems to be paying off.
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COPL had borrowed from Millholland in the form of a promissory note to the tune of C$200,000 with the note repayable by the company in six months from the issue date. The note was paying 10% a year, according to a statement from COPL.
COPL said it would be using the cash for general working capital and the progression of development and financing plans for the OPL 226 project. The loan is being seen by investors as a major vote of confidence by the CEO in the quality of the field that COPL is going to be drilling in.
In October 2018 Nigeria’s national oil company, NNPC, granted conditional approval for a 24 month extension of a Phase 1 exploration in the block until 1 October 2020. The plan is to place an initial well at OP 226 into extended well testing, using an early production system. This is intended to be followed by drilling of two or three similar wells on the prolific NOA oil structure.
