Providence Resources reduces losses after amending Barryroe deal

Oil and gas exploration company Providence Resources reduced its losses in the first half of the year when it completed an amended agreement to sell a stake in its flagship Barryroe prospect.

Loss before tax fell from €3.44 million to €2.37 million in the six months to the end of June 2018 compared to the same period last year. While the company held no debt in the period, its cash and cash equivalents dropped by 66 per cent to €12.3 million.

The Dublin- and London-listed explorer announced on Thursday it had finalised an agreement with Chinese explorer Apec in respect of a farm-out agreement for the Barryroe prospect. The deal has also received approval from the Department of Communications, Climate Action and the Environment.

The deal means Apec is responsible for paying 50 per cent of the costs associated with the Barryroe drilling programme, while it will also finance the remaining 50 per cent by way of a loan to a Providence subsidiary. Additionally, Apec will advance $19.5 million to the Providence subsidiary Exola to cover operational costs.

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Providence chief executive Tony O'Reilly Jnr said he expected mobilisation of the site, located around 50km off the south coast of Ireland, to begin in the second quarter of 2019. "In this regard we are also pleased to confirm that we have contracted Gardline's Ocean Observer vessel to carry out the requisite site surveys during the fourth quarter of 2018."

“Importantly, the structure of the farm-out transaction means that Providence has no upfront risk or capital exposure for the drilling programme, whilst also providing a roadmap to take this project, subject to the results of the drilling and subsequent regulatory consents, to project sanction and then on to production.”

Four wells

The revised deal will also see four wells drilled to evaluate the Wealden reservoir. Following completion of the drilling programme, Apec will have the right to become the prospect’s operator for the development or production phase, subject to ministerial consent.

While Barryroe is the company’s flagship asset, Providence said it also developed other operations, primarily along the west of Ireland in the Atlantic, during the first half of the year.

“With the enhanced multi-well drilling programme at Barryroe we continue to be by far the most active player offshore Ireland in terms of drilling activity, commercial deals and collaborations with world-class partners.

“Looking ahead, we have the portfolio, partners, people and financial resources in place to advance our portfolio through exploration and appraisal drilling for the benefit of all our shareholders,” Mr O’Reilly said.

Davy analysts said the updated agreement was a better one for Providence. “We think the revised deal is a strong endorsement of Providence’s efforts to advance the Irish offshore, and it also secures a solid financial arrangement for the group,” the stockbroker said in a note to clients.