Golden Gate Petroleum (ASX: GGP) has secured the A$7.5 million in funding to progress development of its Permian Project in Texas from The Australian Special Opportunity Fund that is managed by The Lind Partners.
Under the agreement with Lind, the company will receive $600,000 on execution consisting of a $500,000 convertible security and $100,000 as prepayment for its ordinary shares.
Lind will further invest between $100,000 and $300,000 per month in monthly share subscriptions, over the next two years.
This provides the company with a base level of funding during this period as it starts to drill up the reserves and maintain the leases where those reserves are located at the project.
The Permian Project in Reagan and Irion Counties has proved and probable reserves of 5 million barrels of oil equivalent.
On commencement, Golden Gate will issue Lind with an unsecured convertible security with a face value of $550,000 and a term of 24 months at a 0% interest rate.
This may be converted at any time after 120 days from issue at the lower price of either $0.006 or 90% of the average value weighted average price (VWAP) of the company's shares during a specified time period prior to the conversion.
It will also pay Lind a commencement fee of $175,000 worth of shares at an issue price equal to the average daily VWAP's for the 5 trading days prior to the execution date as well as 45 million options exercisable at $0.02 that expire three years from the execution date.
Over the 24 months, a minimum tranche of $100,000 of shares will be purchased by Lind from Golden Gate, monthly. This may be increased to as much as AU$300,000 by mutual consent.
The company will also offer issue options totalling 20% of the number of shares issued from each tranche.
These will have an exercise price of 120% of the tranche Purchase or Conversion price, and an expiry date of three years from issuance.
Golden Gate noted the facility will minimise dilution to shareholders by linking the shares issued to the price prevailing at the time.
The agreement also allows the company to carry out additional private placements of equity, rights issues and shareholder purchase plans as well as allowing it to enter into strategic industry partnerships.
Proceeds from the funding will be used specifically for the fracture stimulation of its first Permian Project horizontal well SRH-5H, the frac completions in the Spraberry Dean intervals for the SRH-1 and SRH-2 wells along with preparation work for the next round of drilling.
Fracture stimulation of SRH-5H will be carried out in the Upper Wolfcamp interval (A Bench).
SRH-5H could have estimated ultimate resource potential of about 400,000 barrels of oil equivalent consisting primarily of oil and gas liquids.
Golden Gate is also preparing to set capillaries on both the SRH-1 and SRH-2 wells so the isolated
Cline interval can be put on production and comingled with the Wolfcamp intervals which have already been fracced.
The addition of chemicals to the bottom hole Cline interval is designed to avoid paraffin falling out of the oil while being produced.
Preparations are also underway for drilling of the SRH-6H well, which has been surveyed and is now going thru the approval process with the mineral holder before going to the Texas Railroad Commission.
The SRH-7 and SRH-8 wells are also being surveyed and drilling permit applications prepared for filing.
The onshore Permian Basin has a long history of oil exploration and development and has received renewed interest from both capital providers and industry participants.
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