First Calgary has signed a deal with two investment companies, Canaccord Adams and JP Morgan Securities, under which they will purchase bonds worth $267m and resell them to the public.
“We anticipate this financing, along with the project debt financing being worked on, will complete First Calgary's need for funding to move our Algerian project finance to first production,” says Richard Anderson, president and chief executive officer of First Calgary.
The company had previously considered bringing in a partner to help fund the project, which involves the development of the gas-rich Menzel Ledjet Est discovery, in the east of block 405b in the Berkine basin.
In February, Algeria's oil and gas regulator Alnaft approved First Calgary's $1.3bn plans to develop the discovery (MEED 2:3:07).
The field has proven reserves of 1.1 trillion cubic feet of gas and probable reserves of a further 2.8 trillion cubic feet.
First Calgary will fund 75 per cent of the planned development costs, with the balance to be covered by its partner, state energy company Sonatrach.
First Calgary will pay interest on the bonds, fixed at 9 per cent of the total debt, until they mature in 2012, at which point it will repay the $267 million. The bond is convertible into shares in First Calgary. The debt is not secured against a specific First Calgary asset in the case of default.
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