AJL will place shares with a new institutional investor and existing institutional shareholders at 32cps to raise about A$22 million, plus an entitlement offer later this month so existing investors can participate.
That money will fund partner Cuadrilla Resources' looming horizontal drilling and hydraulic fracturing phase at the Preston New Road site, and the company also incurred unexpected additional costs in drilling the first vertical well due to delays from unforeseen weather and technical issues.
That well has reached about 2700m and extensive cores have been recovered from both the Upper and Lower Bowland shales.
Those cores will be tested in coming weeks to see where to put the two horizontal wells which will be 1km long using 46 frac stages, each up to about 30m long to stimulate the shale in the second quarter of this year, with initial flow tests to start mid-2018.
The gas flow will be tested for up to six months before connecting the wells to the national grid and drilling the third and fourth wells, and that will become the milestone for the contingent second carry of the to-be-amended Centica carry agreement - about £46.7 million (A$59.4 million).
AJC also wants to amend provisions of its US$45 million senior loan notes facility, reducing the principal to $20 million by September 30, with the rest to be repaid by July 22, 2019.
AJC will cut its debt by about A$31 million to about $82 million, thereby reducing its annual interest commitments by roughly $5 million.
This will be done by using cash previously restricted to service the senior loan notes, applying the net cash proceeds from the entitlement offer set to raise about A$7.5 million, part of the proceeds from any sale of the engineering and construction business and other initiatives if needs be.
AJL chairman Phil Arnall said the review of a number of incomplete proposals to sell the engineering and construction division comes at a time of increasing awareness of the shale gas industry in the UK and the "real prospect" that it may provide a solution to the country's sovereign energy needs.
The engineering and construction division has focused on smaller projects within its capacity as well as larger projects awarded alongside partners like the Port of Tauranga project in New Zealand and Indonesia's Tangguh expansion project.
"As a significant investor in the UK shale gas industry via its direct investments in Bowland acreage and its shareholding in the operator Cuadrilla Resources, AJ Lucas is well placed to benefit from the successful commercialisation of the UK shale gas industry," he said.
He believes the aforementioned actions will combine to give AJL a stronger platform as it moves into the next phase of the UK asset development program.
Wider implications
The British Geological Survey estimates there is at least 822 trillion cubic feet - 2281Tcf at most - of shale gas resources between Wrexham and Blackpool in the west, and Nottingham and Scarborough in the east.
However, its central estimate for the resource is 1329Tcf - and that's gas-in-place, not recoverable.
The BGS said that while shale gas "clearly has potential" in Britain, it will need geological and engineering expertise, investment and protection of the environment.
Yet Heriot-Watt University chief scientist Professor John Underhill said last year that industry's efforts could all be in vain.
"Both sides of the hydraulic fracturing debate assume that the geology is a ‘slam dunk' and it will work if exploration drilling goes ahead … but the science shows that our country's geology is simply unsuitable for shale oil and gas production," he said.
"The implication that because fraccing works in the US, it must also work here is wrong."
This hasn't stopped the activists from continuing their agitation, with a Cuadrilla drilling rig "seriously vandalised" last year.
Just yesterday, three people were charged after a roadside assistance vehicle and two tankers were delayed by a protest at the gates of Third Energy's Kirby Misperton frac site.
The UK Secretary of State for Communities and Local Government reportedly wants to let Cuadrilla drill and frac a further four wells at Roseacre Wood, subject to the oiler addressing traffic control issues.
While a hearing for that has been set down for April, a judgement is expected in early 2018 regarding appeal against the High Court's dismissal of earlier judicial challenges against the planning condsent for the Preston New Road site.
