Oil and gas explorer Providence Resources shares slid on Wednesday after the company unveiled a $74 million (€66 million) share sale to shore up its finances.

As trading resumed following a two-month suspension, shares in the company fell by 5.5 per cent to 13 pence on London’s junior market. However, they were trading at a 1 penny premium to price at which the company plans to sell the new shares. Existing shareholders will own less than a quarter of the company if the equity raise is successful.

The company said yesterday it will use some of the funds to meet the remaining $4.77 million of payments arising from the company's court battle with Transocean, an offshore drilling company which provided services for Providence's key Barryroe exploration site. Trading in the stock was halted in mid-April when the litigation bill became clear, as the company only had $4 million of cash on hand at the time.

A further $20 million will be used to repay most of a debt owed to Melody Capital, a New York-based specialist lender.

Further money will bolster its finances and fund general and administrative costs as well as capital and license expenditure linked its oil and gas project. The remainder is earmarked to fund its share of drilling at an exploration well on its so-called Druid prospect, a couple of hundred kilometres off the west coast of Ireland.

"Afterwards, it will have no debt or litigation-related liabilities and it has also identified a drilling campaign on the Atlantic margin that can be undertaken with the balance of funding raised," said Job Langbroek, an analyst at Davy in Dublin. "All this clearly makes the stock much more attractive."