Tlou Energy, the Coalbed Methane (CBM) natural gas company with interests in southern Africa has commenced trading its shares on the London Stock Exchange’s AIM as a move to provide access to a broader pool of capital required to support further development of its assets.
A note by Brandon Hill Capital Limited, the corporate advisor to the company, said this follows the previously announced £1.2m equity offering at a placing price of 6.5p/sh.
“The shares offer exposure to the leading CBM operator in Botswana, led by a proven management team, and a very large potential resource estimated at more than 3Tcf,” Brandon Hill said.
Tlou’s principle assets are in Botswana, where it has one of the most advanced CBM projects in southern Africa. Its 100 percent owned Lesedi CBM project has an independently certified contingent resource of up to 2.3 trillion cubic feet (TCF) (3C) with a further prospective resource totalling 8.6 TCF (High Estimate). Tlou is aiming to have certified gas reserves in the near future.
A number of stakeholders will be looking at several material milestones which are anticipated in the next 12 months as the company moves towards first commercial gas sales and the believe is that the progress will lead to a material re-rating in the share price and a closing in the discount to its peer group
The new shareholders will await a number of catalysts including the outcome of production testing from the Selemo pilot pod. De-watering activities commenced in September and gas testing is due to begin in December, with testing operations expected to conclude in Q1 2016.
“Data from these tests will allow the company to book reserves and progress downstream discussions, including a GSA. Depending on the scale of the initial development, first gas sales is forecast from H2 2016. Prior to this, the company is targeting approval of an EIA and the award of a mining licence by mid-2016,” Brandon Hill said.
The company is now entering a critical pre-development pilot phase, testing a multi-horizontal well configuration designed to demonstrate higher sustainable gas flow rates.
Data from this work programme, together with progress on downstream discussions, is likely to be sufficient to allow Tlou to book maiden reserves.
“These reserves will underpin an initial fast-track development with commercial gas sales expected to commence as early as H2 2016. As a result, 2016 offers a number of material milestones that will significantly de-risk the investment opportunity and in our opinion justify a re-rating in the Tlou share price.”
Botswana and other southern African countries are currently experiencing electricity supply deficits. Tlou believes the electricity market represents an attractive commercialisation path for the company’s CBM.
With the AIM dual listing the company will be looking to tap into a larger fund in Europe to develop the gas project in Botswana.
Prior to AIM listing, the company Chairman and Managing Director were material equity holders in the business and have provided significant financial support, including partially underwriting a rights issue in June 2015.and with the dual-listing on AIM, it will provide them with access to a broader pool of capital required to support further development of its assets.
