Energy exploration partnership Zerah seeks more cash

The partnership has asked the court to extend the exercise of its Series 2 warrant, which is out of the money.

Zerah Oil And Gas Explorations LP (TASE: ZRAH) is not satisfied with the NIS 108 million that it has already raised in the past few months, and wants to double the amount by converting its Series 2 warrant, issued in late 2006. The general partner today announced that it will ask the courts to extend the exercise period of the warrants from February 15 to March 25, or later.

Both the partnership's partnership unit holders and the warrant-holders will have to approve the extension of the warrants' exercise period. The partnership will convene an urgent meeting of the warrant-holders in a few days for this purpose. In the past few years, Zerah has several times extended the expiry date of its warrants.

If all the warrants are exercised, Zerah's share capital could increase by 53%, and its cash reserves will get an injection of NIS 110.5 million. The Series 2 warrant's strike price is NIS 0.15, and since they are now out of the money (Zerah's share price opened at NIS 0.139 today, after rising 1,049% since the beginning of 2009), it is not worthwhile converting the warrants into partnership units. This is why Zerah wants to extend the warrants' expiry until after the results of the production tests at its Tamrur Cliff (Tzuk Tamrur) 4 oil well north of the Dead Sea are known. Zerah owns 50% of the well, and Delek Group Ltd. (TASE: DLEKG) subsidiaries Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L) own the other half.

Zerah has raised NIS 108 million in the past few months: NIS 40 million in a rights issue, and NIS 68 million through the conversion of its Series 1 warrant into participation units. The company raised NIS 23 million in its IPO in 2006.

Earlier this week, Zerah announced that it would carry out exploratory drilling at its Zurim license, five kilometers west of the Dead Sea Work's potash production plant next to the potash conveyor belt. Zerah owns 85% of the Zurim license, and Modiin Energy LP (TASE:MDIN.L) owns the other 15%. The exploration well will cost $6.5 million and production tests will cost $2.5 million.

Zerah's partnership unit price rose 0.7% today to NIS 0.14, giving a market cap of NIS 254 million.

Published by Globes [online], Israel business news - www.globes-online.com - on February 3, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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