Australis Secures $75mn for Drilling at US TMS

Australis Oil & Gas has secured a credit agreement with Australia’s Macquarie Bank for $75mn which will be used towards the initial drilling program at the Tuscaloosa Marine Shale (TMS) acreage position in Mississippi and Louisiana in the US, the company said June 5.

The agreement between the two, as well as certain of Australis’ subsidiaries, is a three-year senior secured term facility and it together with available cash funds in excess of $40mn will be used to help get drilling started in the second half of this year, the company said.

“We are very pleased that the Macquarie Facility together with the recently completed equity raising provides Australis with substantial funding for the commencement of our TMS drilling campaign,” Australis chairman Jon Stewart said.

“We expect this program to further demonstrate the significant value of the large oil resource that we hold within the TMS, which is presently independently estimated at 145mn barrels,” he said.

RBC Capital Markets analyst Ben Wilson said the funding package is a “significant forward step” towards its first new TMS wells.

“With its funding package secured, Australis can now move to contracting rigs and spreads ahead of its first new TMS wells starting later in 2H18,” he said.

As part of the facility, Australis has an additional $25mn available if requested, subject to further credit approval by Macquarie.

“We think the headline rate of LIBOR +6% is attractive and consistent with out modelling. The facility has additional conditions around hedging [40% of Proved Developed Producing Reserves] and 30mn of options issued to the facility provider at strike prices 49-51c with June 2021 expiry dates,” Wilson said.

“The hedging condition is not atypical or onerous given the competitive headline rate and the options only result in minor dilution to our [net asset value],” he added.

Australis is listed on the Australian Stock Exchange.