Can Metgasco’s $750K Raise Unlock New Gas Production at Odin and Vali?

Metgasco’s Capital Raise to Fund Production Uplift

Metgasco Ltd (ASX: MEL) has announced a partially underwritten non-renounceable entitlement offer to raise up to $750,000 before costs. The capital raising is designed to fund a production uplift program targeting increased gas flow rates and cash generation from its Odin and Vali gas fields, located in the Cooper Eromanga Basin along the South Australia-Queensland border.

The offer allows eligible shareholders to subscribe for one new share for every 3.89 shares held as at the record date, priced at a modest $0.002 per share. This pricing reflects the company’s current market conditions and the strategic focus on operational improvements rather than expansion.

Operational Focus on Scale Removal and Production Optimization

The funds raised will predominantly be used to execute a production uplift program that builds on initial success at the Odin-1 well. In September 2024, scale removal operations at Odin-1 nearly doubled raw gas production from 1.4 million standard cubic feet per day (MMscfd) to over 3.0 MMscfd. Metgasco plans to replicate these scale removal measures across other Odin wells and explore similar interventions at the Vali gas field.

Additionally, the company intends to initiate production from the Toolachee Formation in all three Vali wells, expanding beyond the previously restricted Patchawarra Formation. These operational enhancements aim to boost near-term gas output and improve cash flow, critical for Metgasco’s ongoing development strategy.

Underwriting and Shareholder Participation

The entitlement offer is partially underwritten by PAC Partners, covering up to $375,000 or 50% of the new shares. PAC Partners has also arranged a sub-underwriting agreement with Glennon Small Companies Ltd, a substantial shareholder associated with director Michael Glennon. Should shareholder participation be limited, Glennon’s stake could increase from approximately 14.9% to a maximum of 24.56%, a notable shift in ownership concentration.

Shareholders who fully subscribe to their entitlement can also apply for additional shares under a Top Up Offer, with the company reserving the right to scale back excess applications. The new shares will rank equally with existing shares and are expected to commence trading on the ASX shortly after allotment.

Timetable and Strategic Outlook

The offer opens on May 16, 2025, and closes on May 27, with results announced and shares allotted by early June. This capital raise marks a tactical move by Metgasco to enhance production efficiency and cash generation without diluting shareholder value excessively.

As Metgasco continues to transition from exploration to production, this focused investment in operational improvements at key assets could position the company to better meet East Coast Australia’s undersupplied gas market. However, the success of the uplift program hinges on effective scale management and timely execution.