Shares in Cluff Natural Resources (CNR) slumped dramatically last night as it confirmed it raised £1.8million in a discounted share issue to fund its North Sea plans next year.
CNR shares dropped more than 26% when it revealed the shares, sold in two tranches, were issued at a 31.5% discount to Wednesday’s closing price of 3.65p.
Founder Algy Cluff, who retains a 4.5% stake in the AIM-listed firm, also participated in the round to the tune of £25,000.
The first tranche of shares worth £740,000 are expected to be admitted to its listing on 21 November as they were raised under existing share allotment authorities.
But a further placing worth £1million will be added later in the month subsequent to shareholder approval at a vote to be held at a general meeting on 24 November.
The London-based firm said it plans to use the funds to farm out a stake in its licenses in the South North Sea.
Earlier this year Mr Cluff, known as a North Sea pioneer for his work on the Buchan field in the 1970s, said the company was undervalued by almost £40million, according to a report by a broker.
But Peter Dupont, an equity researcher at Allenby Capital said financing would be the main challenge for CNR, estimating it will need to raise up to £10million in the next two years to pay for drilling.
Recently a “competent persons report” estimated CNR-owned licenses in the South North Sea held prospective resources to 4.8 trillion cubic feet of gas.
Mr Cluff said: “We are now focussed on creating further value for shareholders from our 100% equity stakes in what we know to be highly valuable and strategic assets in the Southern North Sea.
“Over the coming months, the company anticipates running a competitive farm-out process to ensure the best possible outcome for shareholders.”
The company also said it was in “advanced discussions” with a potential non-executive director with over 30 years’ of industry experience in exploration and production, “primarily with oil and gas majors and with particular expertise in Southern North Sea gas”.
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