Oil and gas producer Strike Energy has raised $9.2 million through the sale of new shares to fund the next phase of drilling at its gas project in the Cooper Basin and received its first pre-payment from gas purchaser Orica.
Orica will pay up to $52.5 million in partial pre-payments for the gas.
Strike Energy is a 66.67 per cent owner and operator of the gas project with power station developer and operator Energy World Corporation owning the remaining 33.3 per cent.
Settlement for the first tranche of 90 million shares will occur on August 7. Shareholder approval for the second tranche of 2 million shares will be sought at a general meeting in September.
Strike managing director David Wrench said existing shareholders had bought many of the new shares, sold at 10 cents each, a 20 per cent discount to Strike's closing share price on 29 July and a 2.7 per cent discount to the 30 day volume weighted average price.
"We are delighted that this capital raising has received strong support from existing shareholders and has attracted new institutional investors," Mr Wrench said.
"It demonstrates confidence in Strike's strategy and in the potential of the current and planned drilling activity across all our key assets to achieve a substantial re-rating of the company in the near term," he said.
The capital raising will pay for the drilling of three wells at Strike's Cooper Basin gas project.
"This capital raising provides funding certainty for completion of the next phase of drilling and appraisal work in our southern Cooper Basin gas project. Importantly, completion of this work leads directly to the first of Orica's gas prepayment milestones," Mr Wrench said.
Contracts for drilling and other services will be announced in the next few weeks and drilling is expected to start in November.
Mr Wrench said Strike was in discussions with other gas users to sign agreements for gas from the project, which is estimated to have a prospective resource of 2.7 to 6.3 tera cubic feet of gas.