Providence shares up over 8% in early trade after new agreement

Oil and gas exploration company Providence Resources was trading up 8.33 per cent in early trade on Ireland's benchmark Iseq index after it announced it has entered into an exclusive option with the Irish subsidiary of French oil multinational, Total, regarding a licence in operation off the Irish coast.

Under the terms of the option, Total will get a 35 per cent working interest from Providence, which has a 56 per cent interest in the licence, in the Druid Drombeg well which is 220 kilometres off the south west coast of Ireland. The option is subject to payment of $21.6 million to Providence.

Separately, Providence has signed an agreement in relation to the ‘Avalon’ licence, a licence for an operation in the porcupine basin. There, total has signed for a 50 per cent interest in return for payment of some licence option costs up to a maximum of $1.33 million as well as 60 per cent of drilling costs up to a cap of $42 million.

Additionally, Providence has signed another option agreement with Capricorn Ireland, a subsidiary of Cairn Energy. Under the terms of that agreement, Capricorn has the right to farm-in to a 20 per cent working interest in the licensing option in the porcupine basin. The agreement with Capricorn is similar to the Total agreement but it will only pay 24 per cent of drilling costs in the event that a decision is taken to drill the well.