Providence Resources, the hived-off oil and gas arm of Arcon International Resources, is seeking to raise £5 million through a rights issue. Dr Tony O'Reilly, who owns 42.77 per cent of Providence, has given irrevocable undertakings to take up his full entitlement at a cost of £2.1 million. The directors have given similar undertakings in respect of their 0.54 per cent, and the balance has been underwritten by Goodbody Stockbrokers.
Shareholders are being offered seven new ordinary shares for every four held at 1p per share. This puts the shares on an exrights price of 1.5p, compared to the middle market quotation of 2.375p before the announcement.
Providence, which has also announced pre-tax losses of £670,000 in the six months to August 31st 1998, said the proceeds from the rights issue will be used to buy hydrocarbon interests in north west Europe and provide working capital for the Celtic Sea projects.
It noted that it had completed a programme of data acquisition for three existing hydrocarbon discoveries in the Celtic Sea, off the south east Irish coast. Those fields, it added, should result in "significant value" for the group which is now looking for partners to develop the areas.
The group has a 100 per cent interest in a petroleum lease for the Helvick field in Block 49/9 which flowed 9,900 barrels of oil per day when tested in 1983 when Atlantic Resources was involved. The results of a new 3-D seismic survey last May indicated that the "size of the structure is substantially larger than the previous estimate", according to the group. Providence said it expects to add "significantly to the previous estimate of 18 million barrels of oil in place and 7 million barrels of recoverable reserves".
The group obtained a 75 per cent interest in a one year licence option over Block 50/11 which is situated 30 kilometres east of Helvick. A well drilled in 1971 encountered four hydrocarbon bearing reservoirs.
Although this was not tested at the time, Providence suggests there are eight hydrocarbon bearing reserves which could contain "300 million barrels of oil in place or 250 billion cubic feet of gas in place, or a mixture of both oil and gas".
The group is equally optimistic about the Ardmore Gas Field. Here there are 2 projected gas recoveries of "40 billion cubic feet to 60 billion cubic feet of gas". The chief executive, Mr Andris Blankenburgs, said the intention is to link the Helvick and Ardmore fields. The company, he added, is convinced it "can make money" but admitted the potential field would be small. The recent weakness in oil prices is seen as an "excellent opportunity" for the purchase of hydrocarbon producing assets with both oil price upside and technical potential. Noting that rationalisation of the industry has already begun, it will now be able to take advantage of the resultant assets sales.
Initially it will target assets in the UK where it has hydrocarbon interests as well as tax losses which could be utilised.
Providence said it is actively seeking industry partners to participate in the development of the area. The latest losses compare with losses of £707,000 in the previous 14 months. Turnover fell from £1,212,000 (14 months) to £480 (6 months). Borrowings amount to £3.5 million, giving it a gearing of 58 per cent.
