ON Energy Inc's US$8.5M rights issue has been approved by the Guyana Securities Council and is set to close on Friday, October 29.
The funds will go towards the CGX Energy Inc subsidiary's search for oil in Berbice which is now on the verge of exploratory drilling.
ON Energy had held an Annual General Meeting on September 24 where it announced a rights offering for its shareholders. These include local investors, including Trust Company which has already taken an 11.1% stake in the company since it was established in September 2003.
ON Energy's exploration programme comes at a time when crude oil hovers around $52 a barrel, and with demand from China and India expected to continue for years to come, new reserves are at a premium.
A press release from CGX had said the terms of the Rights Offering are that each shareholder shall be given two rights for each ON share held, each right entitling the shareholder to purchase one ON common share for US$ 0.06 per share. 141,800,000 rights will be issued for a total offering of US$8.5 million. A official close to the company had indicated that investors who are not eligible for the rights issue, could also invest in CGX shares on the Toronto exchange. He predicted that if the company does in fact find commercial quantities of oil then ON Energy's shares would likely be traded on the local exchange.
On Energy's Annual Report cautions that, "In Guyana we are pursuing a pure exploration programme that is extremely risky and there is no assurance that hydrocarbon reserves will be discovered and economically produced." CGX trades on the Toronto exchange under the sticker symbol OYL.U. Its share price stood at 63 cents as of yesterday.