Xtract Energy resumes AIM trading with new fundraising for Elko acquisition

Shares in Xtract Energy (LON:XTR) resumed trading on the Alternative Investment Market this morning as the company announced that its was raising £3 million in a share placing priced at 1.25p per share. The cash has been raised to cover the costs of Xtract’s acquisition of Elko Energy Inc and fund the ongoing working capital requirements of the enlarged group. Trading in Xtract was suspended in June while it worked on a deal to buy the balance of Elko – approximately 50% – that it did not already own. Xtract said the acquisition and placing, which are both contingent on shareholder approval, would also involve the addition of a new equity line of credit of up to £12.5 million. That funding has been conditionally agreed with YA Global Master SPV to meet future working capital requirements.

Xtract’s decision to buy out Elko in an all-share deal will transform it from a company previously only interested in oil and gas investing to one focused on operations. Elko has interests in exploration and production licences in the Danish and Dutch North Sea. Its major asset in the Danish North Sea is a 33% working interest in an exploration and production licence 02/05 and a 33% working interest in adjoining exploration and production license 01/11, which includes the soon-to-be-drilled Luna prospect.. Technical work has indicated the potential for significant resources on these combined licenses. Elko also holds a royalty interest in gas-bearing license blocks P1 and P2 in the Dutch North Sea.

Apart from Elko, Xtract also holds interests in Zhibek Resources in the Kyrgyz Republic, an oil subsidiary in Australia and an oil shale joint venture in Morocco. Earlier this week it sold its 50% stake in Turkish business Extrem Energy for £100,000. Last year the Xtract board was substantially restructured, with Peter Moir, the president and chief executive of Elko, appointed CEO in July and in October, Alan Hume, the CFO of Elko, joining as group finance director.

Commenting today, Mr Moir said: “We are very pleased to have successfully raised £3 million, the net proceeds of which will be used to fund the costs associated with acquiring Elko Energy Inc and the ongoing working capital requirements of the company. Since the new management team have come in, we have strengthened the balance sheet, appointed a new chairman and focused on core projects, while negotiating royalty arrangements for our non-core assets, with significant upside potential. The acquisition of Elko and re-listing of the company as an operating business completes the turnaround and we anticipate drilling the high impact Luna exploration well in Denmark during Q4 2011.We look forward to updating our shareholders on progress in due course.”