Amplitude Energy Ltd (ASX: AEL) shares are having a difficult session on Wednesday.
At the time of writing, the ASX energy stock is down 13% to 23.5 cents.
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Why is this ASX energy stock sinking?
The good news for shareholders is that today's decline has nothing to do with a bad update or a broker downgrade.
The catalyst for the selling has been the ASX energy stock's decision to raise funds through an institutional entitlement offer and placement.
On Tuesday, the gas production company revealed that it was launching a $150 million fully underwritten equity raising. These funds were being raised at 24 cents per new share, which represents an 11.1% discount to its last close price.
Today, it advised that it has completed the offer after strong support was received from existing institutional shareholders and new investors. Approximately 93% of entitlements available to eligible institutional shareholders under the offer were taken up.
Commenting on the successful capital raising, Amplitude Energy's managing director and CEO, Jane Norman said:
I am very pleased with the strong support received from our existing institutional shareholders and would like to take this opportunity to welcome our new shareholders to the register.
Why is it raising funds?
The ASX energy stock launched its capital raising to support the potential expansion of the East Coast Supply Project (ECSP) through the addition of a fourth well that targets the Nestor prospect (ECSP+).
It notes that a successfully developed ECSP+ will leverage its infrastructure in the Otway Basin and utilise available gas processing capacity at the Athena Gas Plant.
Furthermore, adding Nestor to the program creates an opportunity to increase gas supply in periods of high demand and high pricing, including for gas powered electricity generation and firming capacity to complement renewable energy sources.
Overall, the company believes the ECSP+ will position Amplitude Energy to help address the forecast gas supply shortfalls across Australia's southern states.
Commenting on the plans, Norman said:
We are excited to be working alongside our joint venture partner, O.G. Energy, who has expressed strong support for accelerating and expanding the existing ECSP via the addition of a fourth well at Nestor. The joint venture intends to order a subsea tree, which upon a successful discovery at Nestor, will enable a capital efficient 'one-touch' drilling and completion approach.
We are also evaluating other accretive growth opportunities, primarily the potential restart of Patricia Baleen. Initial economic analysis shows this is a high value option which restarts production and unlocks storage potential from the Patricia Baleen field.
