Emerging natural gas producer Renergen has had to take a bridging loan to cover expenses, as it reported worsening losses in the year to end-August and its listing in the US was delayed.
Renergen holds onshore exploration and production rights for more than 187,000ha of gas fields across Welkom, Virginia and Theunissen in the Free State.
The group, which sells natural gas to only two clients and is not yet producing helium as promised, reported losses increased for the half year from R24.5m in August 2022 to R43.5m.
As it has to continue operating, the heavily indebted group secured a bridging loan amounting to R303m from Standard Bank. This is at a pricey variable interest rate that was at 14.5% at end-August. It said it expects the loan to be repaid within a year.
As its losses worsen, its finance costs have also increased as some of its longer-term loans are in dollars against which the rand has weakened and interest rates have risen.
It has just more than R1.2bn in long-term debt.
The group also requires finance to finish part of the phase 1 project in which it aims to produce 2,700GJ of liquefied natural gas (LNG) and 350kg of helium.
It needs to drill 15 wells as part of phase 1. The first well was successfully drilled, showing a helium concentration above 3% and a flow rate of 70,000 cubic feet per day, it said.
The emerging gas producer sells natural gas to ceramics manufacturer Italtile, and glass manufacturer Ardagh (formerly Consol). It earned revenue from them of R22.6m, up from R1.2m for the six months to end-August 2022.
Renergen has a high percentage of retail investors but is unlikely to make money in the foreseeable future as it has to continue to invest in producing more natural gas and helium and this could take years and is a high-risk operation.
It announced in 2022 that it would be producing 300kg of helium per day by October, but leaks have prevented it.
The Public Investment Corporation, which invests government employee pensions, bought 5% of Renergen’s shares in 2022.
Renergen also planned to list on the Nasdaq within the required three months of receiving Australian shareholder approval in April, but has yet to do so. It said it hoped to raise R2.6bn from this.
The delay in listing has held up it accessing $750m (R14bn) in funding required for its phase 2 project. It must raise equity before it can access this money.
Renergen’s status as a going concern could be affected
— Auditors BDO
In a paragraph headed “material uncertainty related to going concern” auditors BDO said in the interim results that Renergen’s status could be affected unless it obtains the long-term funding.
Renergen’s share price closed 1.75% lower at R14 on Tuesday. It is down more than 41% so far this year after peaking at R42.50 in March 2022.
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