SAPEX is offering 75 million new ordinary shares at an issue price of 20c each.

It reserves the right to accept over-subscriptions up to an additional $3 million ($18 million in total if fully oversubscribed).

The offer, which opens on November 6, is scheduled to close on December 1, followed by listing on December 15.

The SAPEX IPO also includes the issue of free options. The company currently has 50.6 million existing options and for every two shares subscribed for under the prospectus, each successful applicant will be entitled to one option for no extra cost.

The options will be exercisable at 30c on or before the first of the following dates to occur – the third anniversary of official quotation of SAPEX shares by the ASX, and June 26, 2010.

The areas under exploration by SAPEX have more than doubled the total prospective area of South Australia now held under petroleum exploration licence to 140,225 square kilometres.

SAPEX holds seven exploration leases covering some 65,000sq.km – essentially the entire prospective area of the Arckaringa Basin in north-central South Australia.

“This region has the potential for significant discoveries of oil and gas and also is expected to have coal seam gas potential from known sub-bituminous coal deposits,” SAPEX chairman Roger Wilson said in the prospectus.

“An exciting drilling program is proposed, with priority directed to the company’s major holding in the Arckaringa Basin. Following seismic definition, the drilling program provides for between two and four exploration wells in the first two years.”

Cooper Basin similarities

SAPEX managing director Andrew Andrejewskis said today that the company was aiming to bring forward plans for an extensive seismic program to start early in the new year.

“The geology of this Arckaringa Basin area is analogous to the Cooper Basin, Australia’s most prolific onshore oil and gas province,” he said.

“The area has been assessed by previous explorers to have oil potential of more than 900 million barrels before considering the associated risk factors.”

SAPEX also holds two mining exploration licences within the Arckaringa licence areas and also holds PEL 120 near Adelaide, which also is expected to have coal seam methane potential.

Andrejewskis said SAPEX looked forward to unlocking “considerable unrealised oil and gas resources in a virtually unexplored area of onshore Australia”.

He said the company’s key priority was to begin exploration for conventional oil and gas deposits and to undertake a thorough appraisal of CSM potential in the Arckaringa Basin. SAPEX would spend about 75% of funds raised through the IPO on seismic surveys and drill-related activities in the first two years.

Secondary priorities included appraisal of the CSM potential of PEL 120 near Adelaide, and investigation of coal commercialisation and coal-to-liquids feasibility in the two Arckaringa mining licences.

Andrejewskis is a geologist who has headed government resource sector departments in SA and the Northern Territory. He is joined on the SAPEX board by Wilson, Dr David King, Paul Young and Patrick Elliott.