Boost in oil brings energy companies back to PIPEs; Arena Resources wraps $10 million deal

By Sheri Kasprzak

New York, July 13 - After a surge in oil prices Tuesday, energy issuers returned to the PIPE market on Wednesday, sell-siders said. But with spikes and falls prevalent in the oil sector, the flow of oil offerings may be sporadic.

"Oil is moving on every whim these days," said one market source based in San Francisco. "You've got so many factors going on at once. One minute, you've got news of this incredible demand. And then, like today, you get news that demand isn't as big as expected. It just keeps flip-flopping like this, so I would expect any issuance we get may be really contingent upon whatever whim oil moves to."

Another sell-sider, this one in Canada, agreed.

"It really is going to depend on what market conditions are pushing oil," he said. "And I think it will also depend on what the proceeds are being used for. I think investors are going to be more likely to buy in these market conditions if there is a solid use, like land purchases or development or something like that. Not just capital infusions anymore."

Despite a spike in oil prices on Tuesday, when oil gained $1.70 to close at $60.62 per barrel, prices slid Wednesday, dropping $0.60 to close at $60.01.

Leading the pack of oil companies in the PIPE market Wednesday was a $10 million offering closed by Arena Resources Inc.

The Tulsa-based oil and natural gas exploration company sold 970,874 shares at $10.30 each, a 7.7% discount to the 30-day average closing price of the company's stock immediately before the agreement was signed.

"The receipt of these funds will allow us to increase our capital expenditure budget for the remainder of the year," said Tim Rochford, the company's president and chief executive officer, in a statement.

"Specifically, on our Fuhrman-Mascho property, we will increase the number of development wells to be drilled, from 27 to 33, as well as increase the number of re-fracs from 12 to 20. It also allows us to pay off the remaining debt on our $50 million credit facility, giving us an immediate $35 million to use for future development or acquisition opportunities.

The proceeds will be used to eliminate $5 million in long-term debt and to increase the company's 2005 capital expenditure budget.

As of May 5, Arena had 10,332,179 common shares outstanding.

The company reported net earnings of $1.313 million for the first three months of 2005, up from $309,600 reported over the same period in 2004.

On Wednesday, Arena's stock dropped $0.20 to close at $12.80.

Other oil offerings

Arena wasn't the oil energy company in the market Wednesday.

Jumbo Development Corp. announced its plans to raise C$3 million in a non-brokered offering of convertible debentures.

The debentures bear interest at 10% annually, mature in two years and are convertible into common shares at C$0.50 each.

For each C$0.50 of principal bought, the investors will receive one half-share warrant. The whole warrants are exercisable at C$0.60 each for two years.

On Tuesday, Jumbo reported that it closed the first tranche of a debenture offering for C$2.28 million, under the same terms as the most current offering.

Based in Toronto, Jumbo is an oil and natural gas exploration company. The proceeds will be used for exploration and development expenses related to its Madera Lease prospect in New Mexico. The remainder will be used for general corporate purposes.

The company's stock closed up C$0.06, or 13.64%, on Wednesday at C$0.50.

Texalta Petroleum Ltd., based in Calgary, Alta., also announced its plans to head to the private placement market.

Texalta plans to raise up to C$1 million in a unit offering of up to 6,666,666 units at C$0.15 each.

The units include one flow-through share and one warrant. The warrants provide for an additional share at C$0.35 each for one year.

The proceeds will be used for drilling on properties in Saskatchewan in 2005 and 2006.

The company's stock closed unchanged at C$0.095 Wednesday.

North American raises $5 million

North American Technologies Group, Inc. said it has received $5 million in a convertible debenture offering to satisfy a condition for refinancing a $15 million loan.

The debentures bear interest at 7% annually, mature July 7, 2006 and are convertible into common shares at $0.22 each.

The investors received warrants for up to 5,554,438 shares, exercisable at $0.24 each for three years.

The debentures were issued when TieTek LLC, a subsidiary of North American, failed to make principal and interest payments totaling $757,944 due in April to investor Opus 5949 LLC.

Opus has waived the default and received 4,541,822 shares in payment of the principal owned on the note due in April.

TieTek issued an amended note to Opus for $14 million. The new note bears interest at 7% annually, as long as the debentures are outstanding. On July 7, 2006, when the debentures are due, the new note will begin bearing interest at Prime plus 700 basis points.

Based in Houston, North American is a holding company for subsidiaries that make railroad crossties.

The company's stock closed up $0.025, or 13.16%, to end at $0.215.

Two new gold offerings

As gold prices continue to rise, and on talk that gold may even double on news of a weakening dollar and shaky oil, two new gold offerings made their way into the PIPE market Wednesday.

African Gold Group, Inc. announced its plans to raise C$1.25 million.

The offering is comprised of 1 million shares sold at C$1.25 each.

Toronto-based African Gold plans to use the proceeds for working capital, work programs at its Ghana gold concessions and a drill program in Mali, West Africa.

African Gold's stock closed down C$0.07 at C$1.23 Wednesday.

The second offering came from Vancouver, B.C.'s Bravo Venture Group Inc., for C$1,006,250.

This deal includes 1,725,000 units at C$0.35 each and 1.15 million flow-through shares at C$0.35 each.

The units are comprised of one share and one half-share warrant. The whole warrants provide for the purchase of an additional share at C$0.50 each for two years.

The proceeds from the units will be used on the company's Woewodski Island project, its Nevada projects, new acquisitions and working capital. The proceeds from the flow-through shares will be used for drilling at the Homestake Ridge project in British Columbia.

On Wednesday, Bravo's stock closed up a penny at C$0.34.

"These two, I'm certain, are in response to yesterday's gold prices going up," said one market source. "There's so much news surrounding gold right now that it only makes sense we'll see some of these companies with offerings. There is word now that gold may be going up a significant amount in the coming days or weeks, maybe even double its current level."

Chariot raises C$5.32 million

Chariot Resources Ltd. led PIPE activity in Canada Wednesday, wrapping a C$5,326,080 private placement of units.

The company sold 16,644,000 units at C$0.32 each.

The units include one share and one half-share warrant. The whole warrants allow for an additional share at C$0.35 each through Dec. 22, 2006.

RBC Capital Markets led a syndicate of placement agents in the offering.

Proceeds from the deal will be used for drilling, metallurgical studies, a scoping study and the initiation of a feasibility study on the Marcona copper project.

Based in Toronto, Chariot is a mineral exploration company.

Chariot's stock gained C$0.005 to close at C$0.315 Wednesday.

Brillian's stock makes gains

After wrapping a $7 million debenture offering Tuesday, Brillian Corp.'s stock climbed Wednesday.

The company's stock closed up $0.32, or 10.63%, to end at $3.33 Wednesday after making some after-hours gains on Tuesday.

On Tuesday, the company's stock fell $0.03 to close at $3.01, but gained another $0.69, or 22.92%, in after-hours trading.

Brillian sold debentures convertible into common shares at $2.63 each

Based in Tempe, Ariz., Brillian manufactures rear-projection high-definition televisions for retailers.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.