Providence Resources, the hived-off oil and gas arm of Arcon International, incurred a pre-tax loss of £1.9 million (€2.4 million) in the eighteen months to December 31st, 1998. This included an exceptional depreciation charge of £1.3 million (€1.65 million) and Providence noted if this charge is excluded, the loss would come down to £0.6 million (€0.76 million). The exceptional charge includes £874,000 for the sustained drop in oil prices during the second half of 1998 in respect of the Claymore and Singleton oil fields. The balance relates mainly to the relinquishment of licence ppl155 in Papuea New Guinea and licence EXL 222, onshore UK.
Asked if he was worried that the group is not producing sufficient sales to cover the cost of sales, the chief executive, Mr Andris Blankenburgs, said the object of the company is to generate an operating profit from its producing assets and that, in the second half of last year, it was hit by the drop in oil prices. However, since then the price has recovered sharply and, if it remains at the present level, Providence should generate an operating profit this year. The group raised £5 million in a rights issue last November, the proceeds of which were to be used to buy hydrocarbon interests in north west Europe and provide working capital for the Celtic Sea projects. With the rise in oil prices, he said, it might now be more difficult to buy cheap producing assets.
Asked if the group had missed the boat, he said: "I don't think so." However, Mr Blankenburgs stressed that Providence is still pursuing a number of projects "which have not dropped away". The group, he added, is also going to continue to invest in exploration.
Providence is well positioned to benefit whichever way oil prices move, he said. "If prices stay low, then we intend to take advantage of reduced drilling and construction costs and use the opportunity to purchase sustaining cash generative assets from a buyers market. If prices rise, then shareholders will benefit from the increase in the value of our current development and appraisal projects." Mr Blankenburgs said the group made "significant progress with its development and appraisal projects in a difficult year for the oil industry". He noted that the start of the tendering process for the Celtic Sea projects "is an important milestone for Providence".
Providence noted it had been awarded the first petroleum lease for an offshore oil field for the Helvick field located in block 49/ 9a. A new 3-D seismic survey in mid-1998 increased the expected recoverable reserves of the field from 6 million barrels to 11 million.
It was also awarded a 75 per cent interest in a one year licensing option over block 50/11 in the North Celtic Sea Basin. Advanced petrophysical analysis of the results of the original discovery well confirmed the likelihood of producible hydrocarbons in the structure.
Providence said this could contain up to 300 million barrels of oil in place. It is arranging a farm-out for an appraisal well to "confirm the potential of the discovery", the group said.
