OIL and gas company Otto Energy will rely further on its directors for support after it reduced its capital raising efforts amid uncertainty from a lapsed BHP Billiton deal.
Otto this week announced its intention to raise $31.5 million through a placement and rights issue, $3.5 million less than the planned amount revealed last month.
Investors did not take too kindly to the lower capital raising and drove Otto's share price to an all-time low of 6.2 cents at close of trade last Monday.
The lower raising amount was a result of Otto lowering its share price issue under the pro-rata non-renounceable entitlement issue from seven cents to five cents to raise a maximum of around $21.2 million, down from $29.7 million.
An Otto spokesperson told WA Business News the lower share price was a result of the lapsed heads of agreement with BHP, which was looking to earn a 60 per cent interest in an exploration project in the Philippines.
The expired agreement prompted a change in conditions to the underwriting deal with Euroz Securities, which has now agreed to underwrite $15.7 million of the rights issue.
Euroz had originally agreed to underwrite the entire rights issue.
Meantime, shares issued under the placement component remain at seven cents. Otto's board of directors, including prolific chairman Rick Crabb, have agreed to subscribe to $800,000 worth of shares, subject to shareholder approval.
Fat Prophets resource analyst Gavin Wendt said the move should give confidence to Otto's shareholders.
"If directors are putting their hard-earned money into the company, that's designed to show confidence," he said. "I think shareholders will sit up and notice."
It's not the first time Otto directors have financially supported the company.
Last month, Otto revealed four of its directors, including Mr Crabb, had agreed to provide a $1.53 million short-term unsecured loan facility to the company.
The news coincides with two major share transactions undertaken by Mr Crabb, who sold around $3 million worth of Paladin Energy stock on market.
Mr Crabb is the chairman of Paladin.
This week, Mr Crabb showed his support for another chaired company, Ashburton Minerals, subscribing to $100,000 worth of stock that were not taken up with the company's rights issue.
The Otto spokesperson said talks between the company and BHP over the Philippines exploration project is continuing. Otto has already raised $5.2 million from an initial placement completed late last month.
Otto's major shareholders, Santo Holding AG and Molton Holdings, have agreed to subscribe to $4.3 million worth of shares.
Funds raised will be used to advance Otto's Erdine gas project in Turkey, fund upcoming exploration wells in Italy and Argentina and repay director and shareholder loans.
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