Eland seeks £100m from Aim flotation

By PERRY GOURLEY
Published on 17/06/2012 00:00

SCOTLAND is set for its first flotation this year on the Alternative Investment Market (Aim) as an oil and gas group looks to raise more than £100 million to fund a major acquisition in west Africa.

Eland Oil and Gas, headquartered in Aberdeen and run by a group of industry veterans, is conducting a roadshow to garner support among investors for the move which would provide it with funds to complete the purchase of a stake in a licence in Nigeria’s Niger Delta.

A flotation, which could take place as early as the end of this month, would be a welcome boost for corporate Scotland which has seen a continued shrinking in the number of quoted companies in recent years.

Although the final decision on Eland’s flotation will depend on the level of support indicated by investors, it is understood Eland’s pitch has been well received by institutions.

Although a number of smaller oil and gas companies have struggled to raise cash in recent months, it is thought the fact that the Oil Mining Lease (OML) 40 licence includes a field which has produced oil in the past makes it an attractive proposition.

Infrastructure is already in place, including an export pipeline, and it is thought production could be restarted relatively quickly, generating early cash flow.

The licence is also in an under-exploited block with the potential for significant exploration upside. Last April, Eland and its partner Starcrest Nigeria Energy successfully bid for a 45 per cent stake in the licence following an auction by sellers Shell, Total E&P Nigeria and the Nigerian Agip Oil Company.

On completion of the deal, the stake will be held by a joint venture company owned by Eland and Starcrest with the Nigerian National Petroleum Corporation owning the remaining interest.

The acquisition price of OML 40 is set at about £100m, of which a deposit of about £10m has already been paid.

A flotation would aim to raise enough funds to add to existing debt facilities to complete the acquisition of the licence, settle loan note interest payments and provide working capital for the continued development of the group.

Eland’s chief executive is Les Blair, an accountant and University of Aberdeen graduate who previously worked for Addax Petroleum in Nigeria. He has also held a variety of executive positions in the UK.

Chief financial officer George Maxwell, a graduate of Robert Gordon University in Aberdeen, was previously business development manager for Addax Petroleum.

Chairman Harry Wilson, who began his career with BP more than 35 years ago, is a former chief executive of Aim-quoted Sterling Energy. Technical director Pieter van der Groen, another graduate of the University of Aberdeen, has recently spent four years in Nigeria as general manager of an independent oil company.

Eland, which is backed by a number of institutional investors in the UK and USA, was able to raise significant funding last year through the issue of loan notes.

In January it raised £9.5m, mainly to fund the deposit on the acquisition, and in December raised £800,000 for working capital to complete its proposed admission to Aim.

Canaccord Genuity has been appointed as the nominated adviser to Eland, which reported a net loss of around £11m in its accounts for 2011.

Although there have not been any Scottish Aim flotations so far this year, the last two companies to join – Edinburgh-based internet dating specialist Cupid and Glasgow-based gas monitoring technology group Smart Metering Systems – have both seen significant rises in their market value.