Horizon Oil (HZN) is one of the worst performers on the Uncapped 100 this morning following its surprise capital raising.
The emerging oil & gas producer tumbled 1.5 cents, or 4.1%, to 35 cents as management goes cap in hand to shareholders looking for $53.5 million in additional funding though a 33 cent new share offer.
The fact that the share price is comfortably above the offer price (at least for now) is not the only positive sign for the fully underwritten raising. Support from institutional shareholders has been strong with a 90% take up rate.
Macquarie notes that the raising “appears more about filling a temporary funding gap” as Horizon is still waiting for the proceeds for the sale of a 40% stake in its Papua New Guinea assets to Osaka Gas for $US204 million.
Horizon is looking to use the cash to pursue its aggressive near-term exploration and development program.
The broker is sticking to its “outperform” recommendation and 60 cent price target as it believes cash flow will grow over the next 12-months as the Beibu Gulf field ramps up to peak production.
While it is very difficult to raise capital in the current market, oil & gas is still one sector that can draw interest from investors as oil prices have been more buoyant than metals in the face of the macro economic uncertainties.
Horizon has only emerged from a trading halt that was in place since yesterday, the same day another small cap energy play, Liquefied Natural Gas (LNG), announced a $10 million capital raising.
Horizon is part of the Uncapped 100 but Liquefied Natural Gas is not.