Sydney-based U.S. oil producer Shale Energy Ltd has ditched a backdoor listing and has set its sights on floating on the Australian Securities Exchange (ASX). The company on Nov. 26 declared its prospectus open for subscription for the raising of $3.5 million through the issue of 17.5 million shares at 20 cents each.

Shale Energy, established in 2007, has been active in the U.S. shale space for some time. It entered the market in 2012. Shale Energy holds interests in four oil and gas leases in North Dakota’s Bakken/Three Forks region, which lies within the Williston Basin.

The company is a minor partner to three U.S. oil producers, including NYSE-listed EOG Resources. The partnership is in line with its strategy to acquire relatively small interests in leases operated by major oil industry participants.

Shale Energy is currently participating in the drilling of the Horovitz production well scheduled for completion in mid-December. In addition, between 16 and 27 wells are to be drilled within the core of the Bakken production area, with Shale Energy’s s share of production expected to rise to 300 barrels per day, subject to the usual technical risks. Shale Energy will put the capital raised towards meeting its contribution to the additional well development program where the necessary approvals, permitting and infrastructure are largely in place.

The company’s bid to take the company public comes after a proposed transaction, which would have involved Ardent Resources Inc acquiring Shale Energy’s assets, fell through. The deal, announced in August, would have required Pittsburgh, Pennsylvania-based Ardent to raise between $2.5 million and $3.5 million. Ardent said in a market announcement that it would not proceed with the transaction as it was no longer in the best interest of shareholders. The company noted the recent dramatic fall in the oil price.

Shale Energy founder and Chief Executive Richard Pritchard told Oil and Gas Investor Australia that the process with Ardent was simply taking too long.

“We felt it was dragging on and we thought we could much more quickly get to market by doing the process ourselves,” he said. “We worked really hard on it and we gave it every opportunity for both parties to complete it but we felt at the end of the day it wasn’t really working.”

With market sentiment not as strong as it was a few months ago due to the steep fall in oil prices, Pritchard admitted the timing of the company’s attempt to list on the ASX wasn’t the best. However, he remains confident of a successful outcome.

“We’re very confident because we have had a great deal of interest and we retain that interest from a number of small to medium size brokers as well as some high net worth individuals,” he said.

He added that unlike many early-stage small microcaps that listed on the market, Shale Energy was an earnings-positive company with strong margins.

While Pritchard is upbeat on the prospects of a rebound in market sentiment, he sees this market as a buying opportunity.

“On the positive side of negativity, lower oil prices do bring down the cost of assets and we would probably look to acquire one or two assets,” he said.

Shale Energy’s initial public offering will close on 15 December with the company’s shares anticipated to start trading on the ASX on 22 December.

Lauren Barrett can be reached at lbarrett@hartenergy.com.

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