American Energy Group Ltd (OTCMKTS:AEGG) Issues Shares To Raise Capital

American Energy Group Ltd (OTCMKTS:AEGG), an energy resource royalty company, recently turned to equity offering to fundraise for its working capital needs. The company sold common shares to unnamed investors at a price of $0.11 a share. The fundraiser came at a time when energy companies and those exposed to the oil and gas industry are facing tough times because of falling prices of the commodities.

Working capital

American Energy Group Ltd (OTCMKTS:AEGG) offered 813,637 shares to six individual investors who have not been identified. However, the company was able to raise $89,500 in proceeds through the equity offering. American expects to channel the funds to raise projects, especially financing of its general and administrative expenses.

American Energy Group Ltd (OTCMKTS:AEGG) is a non-operating oil and gas company that owns interests in various oil and gas properties in Southeast Texas and Pakistan. The company disclosed ownership of an interest in two leases in Southeast Texas. It also holds 18% in royalty interest in Yasin Concession, Pakistan.

By being a non-operating oil and gas company, American Energy Group Ltd (OTCMKTS:AEGG) is able to avoid the risks of exploration and production.

Oil crash

Drillers are facing a hard time as crude oil prices continue to drop. Many oil companies have either cut capital spending this year or laying off staff to preserve cash. The oil market is suffering from oversupply, given that players ambitiously added capacity in the past years in anticipation of robust demand. However, with OPEC unwilling to reduce production, oil and gas prices have been in an almost free fall.

Analysts have cited that prices of oil could rise again as drillers cut capacity and demand stabilizes. However, it is unclear when a desirable correction would eventually happen.

Avoiding cash shortage

Although American Energy Group Ltd (OTCMKTS:AEGG) is not directly exposed to the prices challenges in the oil market, problems of payment delays could hit the company, leading to cash shortage. Perhaps that explains why the company has turned to diluting its stock to raise funds.

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