Real Energy’s Share Price Tumbles 22.22% on Project Funding

Real Energy Corporation Ltd [ASX:RLE] has seen its share price rally end this morning after the 22.22% nosedive at the beginning of trade today. The share price fell three cents to trade at 10.5 cents per share.

The oil and gas exploration and development company has seen solid growth in its share price over the past 12 months, returning 40% since March 2018.

What’s gone wrong for Real Energy’s share price?

Real Energy entered a trading halt on Wednesday pending a potential capital raising, according to an announcement released by the company.

This morning, RLE confirmed it had completed a $5 million placement to advance its Windorah Gas Project.

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The new placement will see capital raised via approximately 47.6 million new fully paid ordinary shares at an issue price of 10.5 cents per share and approximately 15.8 million 1-for-3 options.

RLE said the placement was well supported by new and existing sophisticated and professional investors, together with a number of Australian and international institutional investors.

The company said the funds raised will be used for ongoing testing on several gas wells, progress pre-construction works for a gas pipeline, and updating resource assessment for the Windorah Gas Field.

Real Energy’s managing director Scott Brown said he was pleased by the support for the new placement and was confident the new funds will advance the project to production.

Despite the fall in today’s share price to the placement price, investors will likely be buying up shares at the discounted price. Meaning we might see losses reduced throughout the day.

What now for Real Energy?

This new placement of shares marks at least the third capital raising by Real Energy to fund their Windorah Gas Project since October 2017.

In total the company has raised at least $11.04 million from investors to fund its project. While funds have largely been collected from professional and institutional investors, support for each placement has seemed strong.

Mr Brown said the company is of the view that the asset has the potential to be a large gas field that could make a significant contribution to the eastern states gas markets.

We now have the financial flexibility and the balance sheet to add considerable value in the near term and it provides us with greater optionality in securing the best path going forward for the Company. It assists us with potentially securing funding on favourable terms for the pipeline build and/or securing a potential farm out.



Ryan Clarkson-Ledward,
For Money Morning

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