courtesy of carswellBlackbird Energy Inc. (BBI: $0.16, halted) is planning to raise over $20-million to help finance its dreams of becoming a producer in the liquids-rich Elmworth Montney. It had originally hoped to achieve this dream in the first half of this year, but is running several months to a year behind schedule. Though it has three wells already drilled at Elmworth, along with agreements to process and transport the gas produced, it does not have all the infrastructure necessary to bring its wells on production. The financing is expected to change that. As announced yesterday afternoon (shortly after trading was halted at the company's request), Blackbird plans to issue 120 million 15-cent units, each comprising a share and a warrant, as well as issue a further 13.4 million 15-cent flow-through shares, for total proceeds of $20.01-million. This will take the company's share count to at least 491 million from the current level of about 358 million. That represents significant dilution, but it was not entirely unexpected. Blackbird's SEDAR filings warned in late March that, in order to become a producer from its Elmworth project, the company would need to build some infrastructure, the cost of which could be "significant" and could require debt or equity financing or both. The little company was likely loath to take on debt, as it has no cash flow to repay it. It has thus chosen the equity route. In its preliminary prospectus, it says it will use $16.31-million of the proceeds to pay for a battery, a pipeline gathering system and water disposal facilities at Elmworth. Most of the rest of the proceeds, $2.39-million, will go toward drilling and completing a fourth well at Elmworth.
With the financing proceeds in hand, Blackbird will be "moving to cash flow within approximately one year," it trills in a new presentation on its website. Insiders seem confident. The presentation says they already own approximately 25 per cent of the company's shares (the actual percentage is 22.5, according to SEDI) and will be participating in the proposed financing. The financing is expected to close on or around May 19.
Update: A few hours after the close, Blackbird boosted the financing to $25.02-million. Its amended prospectus says $16.31-million will still go the Elmworth infrastructure, while the fourth well will now get $7.03-million of the proceeds. Closing is still expected on May 19.