Oil issuers respond to higher oil prices; CanArgo Energy raises $25 million in PIPE offering

By Sheri Kasprzak

Atlanta, June 9 - As oil prices surged Thursday, energy companies headed to the private placement market in a big way.

Energy companies flocked to the PIPE market Thursday because many are searching for capital to buy solid oil properties, according to some sell-siders.

"Issuers are just responding to market conditions, good news on the commodity front," said one Canadian sell-sider. "Oil market will follow oil prices but also the property sale market. If good properties come on the market, people will finance."

"Commodities in general are very appealing right now to investors, so that's why you're seeing more of these deals," said another sell-sider. "A lot of this is just good timing. There's the demand for capital mixed with higher oil prices."

Oil rose $1.74 to close at $54.28 per barrel and several energy companies took the opportunity to raise money through PIPEs.

Leading oil deals on Thursday was a $25 million offering from CanArgo Energy Corp.

CanArgo, a New York-based oil exploration company, said it has received an agreement from existing shareholder Ingalls & Snyder LLC for secured loan notes due June 30, 2009. The notes bear interest at 3% through Dec. 31, 10% throughout 2006 and 15% after that. They convert into common shares at $0.90 each.

"Couple of things about this deal," said one market source familiar with the company. "They managed to price at a premium because the investor is already a shareholder. Oil in the broader sense does help, but more generally, I feel like it's because they're dealing with an investor they already have a relationship with."

After the offering was announced Thursday morning, CanArgo's stock climbed $0.08, or 10.81%, to close at $0.82.

A portion of the proceeds from the deal will be used to redeem a short-term loan note from Cornell Capital Partners LP. The remainder will fund the development of a new gas project in the country of Georgia, the development of a gas field in Kazakhstan and working capital for development and appraisal activities in Georgia.

Based in New York, CanArgo is an oil and natural gas exploration and production company.

Elsewhere in oil, Vancouver, B.C.-based Exxel Energy Corp. announced its plans to sell $10 million in units to Gemini Energy Corp. The offering includes 2 million units at $5 each.

The units include one share and one warrant. The warrants allow for an additional share at $5 each if Exxel signs agreements to raise an additional $10 million in an equity financing before July 29. If that agreement is not signed, the warrants are exercisable at $6 each for two years.

Oil certainly wasn't the oil commodity present in the PIPE market Thursday as mineral, gold and diamond companies all heralded in a slate of new deals.

Exploration companies like SYMC Resources Ltd., Cash Minerals Ltd., Augusta Resource Corp. and Wesdome Gold Mines Inc. were among the many diamond, mineral and gold exploration companies with new deals Thursday.

Looking ahead, one sell-sider said biotech issuance may get a boost from better stocks, which have in turn been pushed by Wednesday's news that troubled ImClone Systems Inc. may see solid earnings from its anti-tumor drug Erbitux.

"It will probably indirectly impact PIPEs," said one sell-sider focused on biotechs. "There may be a slight surge in deals because investors have a renewed interest in them from the ImClone news."

The source said biotechnology and biopharmaceutical companies were performing relatively well before the ImClone news broke on Wednesday.

Wesdome's C$8 million offering

Moving back to mineral deals, Wesdome Gold Inc. priced a C$8 million flow-through share offering Thursday.

The company plans to sell up to 5 million flow-through shares at C$1.60 each.

Westwind Partners Inc. is leading a syndicate of placement agents for the offering.

The agents have an over-allotment option for up to C$1 million in additional proceeds.

"Gold was weaker today, but the deals we're seeing today are really coming from higher gold earlier this week," said one market source.

Based in Toronto, Wesdome is a gold exploration and development company. The proceeds will be used for exploration and drilling on the company's Quebec properties.

The company's stock didn't budge Thursday to end at C$1.45.

Augusta plans C$5 million deal

A diamond and mineral exploration company, Augusta Resource Corp., announced its plans Thursday to raise C$5 million in a unit offering.

The offering includes 2 million units sold at C$2.50 each.

The units consist of one share and one warrant. The warrants allow for an additional share at C$3 each for two years.

The company's stock slid C$0.06, or 2.11%, to close at C$2.78 after the offering was announced Thursday morning.

Salman Partners Inc. is the placement agent.

Augusta is based in Vancouver, B.C. The proceeds will be used for exploration on the Rosemont and Mount Hamilton properties and for working capital.

Whittier Energy's stock closes up

Houston-based energy company Whittier Energy Corp.'s stock climbed Thursday after it announced a $50 million private placement on Wednesday.

The company's stock gained $0.12, or 4.29%, to close at $2.92 on Thursday.

When the offering was announced Wednesday, its stock lost $0.20 to close at $2.80.

The company plans to sell preferred shares at $60 each.

"Since the initial [stock] response was negative, I'd say it probably has more to do with oil prices than with the deal," said one market source familiar with oil.

Critical Therapeutics' stock continues to climb

Two days after wrapping a $54,252,000 private placement of stock, Critical Therapeutics Inc.'s stock continued making gains Thursday.

The company's stock edged up $0.04 to close at $5.64 Thursday after gaining $0.02 to close at $5.60 Wednesday.

On Tuesday, when the offering was first announced, the company's stock gained $0.152 to close at $5.582.

Critical Therapeutics sold shares at $5.48 each.

Based in Lexington, Mass., Critical Therapeutics is a biopharmaceutical company focused on treatments for respiratory diseases.

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