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Carnarvon Petroleum down 5% after raising $79 million to progress Dorado

The Carnarvon Petroleum Ltd (ASX: CVN) share price is down more than 5% in today’s trade to $0.40, after announcing a fully underwritten institutional placement to raise $79 million.

Why did Carnarvon announce the placement?

Yesterday Carnarvon announced a fully underwritten $79 million institutional placement as well as a non-underwritten share purchase plan (SPP) intended to raise approximately $5 million.

The Aussie petroleum company said the proceeds from the offers will fund a number of important projects for the group which includes the following:

  1. Ongoing appraisal of the company’s Dorado discovery, including 3D seismic and well costs
  2. Front End Engineering Design (FEED) studies for the initial Dorado development
  3. Contribution towards the equity component of the initial Dorado development
  4. General corporate purposes, working capital requirements and contingencies, including costs to progress the company’s other projects.

What’s happening with the Dorado development?

As per Carnarvon’s release, Dorado is a major oil and gas field located on Australia’s prolific North West Shelf in water depths of 70 to 100 metres.

The resource was discovered through the Dorado-1 exploration well, as announced by the group on 18 July 2018, and was further evaluated through the Dorado-2 appraisal well.

The Dorado-2 appraisal well confirmed the presence of a major oil, gas and condensate resource with high quality and productive reservoirs found across multiple reservoir tests.

Following the appraisal, the company engaged ERC Equipoise to independently review the Dorado-2 resource, which showed a 162 million barrel liquids resource, which is substantial in Australian resource terms and a valuable boost for the Aussie group.

How has the Carnarvon share price performed this year?

The significance of the Dorado-2 discovery in the past year or so has not been lost on investors, with the Carnarvon share price surging more than 200% higher since last July.

The company continues to deliver for its investors but remains cash flow negative for the time being.

The key to Carnarvon’s future returns will be its ability to access capital easily and efficiently and successfully monetise the Dorado-2 resource while keeping its costs and timelines under control.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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