One of the worst performers on the Australian share market on Wednesday has been the Galilee Energy Ltd (ASX: GLL) share price.
In afternoon trade the oil and gas exploration and production company's shares are down 10% to 55 cents after it announced a $13 million placement to a new cornerstone investor and new and existing institutional and sophisticated investors at a price of 60 cents per share.
Management advised that the proceeds of the placement will be used on its forward exploration programme, specifically "to commence securing a rig and ordering long lead items in what is becoming a very tight market for both rigs and services, in addition to bolstering working capital."
Ultimately the major objective of the programme is to expand its knowledge of the Glenaras Project and progress its goal of converting a large portion of the project's Contingent Resource into Reserves as quickly as possible.
While a 10% decline today is disappointing for short term shareholders, those that have been holding Galilee Energy's shares since the start of the year won't mind so much.
Even after today's decline, since the start of 2018 the Galilee Energy share price has gained a remarkable 323%.
Why has the Galilee Energy share price more than quadrupled this year?
The catalyst for this gain is the enormous promise of its Glenaras Project in the Galilee Basin in Queensland.
According to the AFR, the basin is estimated to hold more than 8000 petajoules of gas resources, which is approximately 15x the annual east coast domestic gas consumption.
And while at this point the gas remains commercially unproven and stranded from the east coast gas grid network, management believes the Jemena pipeline option provides it with a clear path to market.
The company's managing director certainly knows what he's talking about. He was formerly in charge of Eastern Star Gas which was sold to Santos Ltd (ASX: STO) for $900 million after booking 1520 PJ 2P reserve.
Should you invest?
Given the potential of this project and the growing demand for supply on the east coast, Galilee Energy is one to watch in my opinion.
However, unless you have a high tolerance for risk, I would suggest you stick with the bigger players such as Beach Energy Ltd (ASX: BPT) and Oil Search Limited (ASX: OSH) if you want exposure to oil and gas.
