Exploration company Circle Oil has raised a $30 million (€22.4 million) convertible loan with Kuwaiti group KGL Petroleum, money which will be used to part-fund its drilling programme in Tunisia and Morocco.
The KGL loan has an attached option under which the group can subscribe for an additional 15 million Circle Oil shares at a price of 50p per shares exercisable during the first three years of the loan. Such a mechanism would enable Circle to raise a further $15 million from KGL, whose upfront loan is for five years and convertible into ordinary shares at an exercise price of 25p per share. The loan carries a 6 per cent coupon.
KGL has gas and oil investments in upstream, midstream and downstream sectors. The group, whose parent Kuwait & Gulf Link Transport Co is involved in the transportation sector, aims to be a leader in the energy sector both locally and globally.
Among other activities, the parent has operations in port management, real estate, passenger transport services, stevedoring, waste management and shipping agency rental. The KGL agreement forms part of a three-year funding programme at Circle to cover the development cost of its commercial discoveries.
Circle and KGL are jointly examining the possibility of working together on a number of other projects. In addition, Circle is finalising the participation of a number of additional institutional investors and banks in a financing round in which it could raise a further $45 million.
The company has cash of some $10 million and the KGL facilities together with the financing under negotiation would bring to some $100 million the money at the company's disposal.
Circle is drilling a minimum of nine wells on its Moroccan and Tunisian licences to the middle of 2009, together with all ancillary seismic and technical studies.
The company is seeking gas at its Moroccan prospects, which are in the Rharb basin inland from Rabat.
The company also has projects in Namibia, Oman and Panama. Listed on the Alternative Investment Market since October 2004, the company's strategy is to locate and secure licences in new hydrocarbon provinces and through targeted investment programmes. It is believed that Circle's contract with KGL was signed yesterday with a Luxembourg-registered subsidiary of the Kuwaiti group.
