Providence Resources Plc says going solo at Barryroe will be very beneficial for shareholders
Providence will no longer wait on partners as it plans to push forward one of Europe’s largest untapped oil projects.
After starting the day falling over 15% the share closed at 3.4p, marking only a 6.8% decline for the session.
Alan Linn, who joined as chief executive in January 2020, believes the new plan for the project will be “very beneficial” for shareholders.
Indeed, forward looking investors will be hoping that with full control of the project, Providence will no longer be left waiting on the cusp of development.
Well successes back in 2012 saw the Irish oil company soar before frustrations at the deal-making table saw the project stall in subsequent years.
Barryroe contains more than 700mln barrels of oil in place and nine years ago test production rates in excess of 3,500 barrels per day beat expectations.
It remains one of Europe’s largest untapped oil projects.
Latest development plans value the project at some US$560mln to Providence, meaning it remains a very high impact venture not least as a current market price of 3.4p values the exploration company at just £26mln.
Moreover, the development scenario presently laid out only addresses some 48mln barrels – or in other words 16% of the recoverable resource.
For most of the past nine years Providence has either been negotiating, closing or waiting for payment for ‘farm-out’ partnership deals.
Amidst a variety reasons, challenges and market conditions none of the prior deals were fully realised. And, today, the most recent tie-up was terminated.
Providence now intends to take all the work it has been doing in the background and go it alone with the project.
The latest farm-out deal was with a Norwegian company called SpotOn Energy which was a vehicle with ties to a number of service providers including Schlumberger and Maersk Drilling.
Drawing inspiration from SpotOn’s approach and financing model, the company will move the Barryroe project forward.
In a statement, Providence chief executive Alan Linn said work to achieve a funding solution is “well advanced”.
The Irish company hopes to conclude a financing by the third quarter to allow a crucial drill programme in 2022.
“We are looking forward and actively building a revised development partnership with key service providers and a financing package designed to meet the needs of the project,” Linn said.
“We have been encouraged by the support we are receiving from service providers and banks and the commitments being offered to work with us in progressing the project.
“We are currently working with key service providers to structure direct long-term partnerships on a risk / reward basis and we are also in discussions with brokers to raise a Nordic bond.”
In the meantime, major shareholder Pageant Holdings has offered to underwrite a US$2.5mln placing, priced at 3p per share.
An issue of warrants could, if exercised, add a further US$2.5mln to Providence’s coffers.
Linn described the interim funding as “very welcome” and noted that it confirms the continuing support for the project.
“The Barryroe early development scheme is an attractive investment which offers excellent returns, even in a low oil price environment,” Linn added.
“We look forward to completing the funding process and appreciate the support and patience of shareholders.
“The early development scheme will be of considerable benefit to the local economy and contribute to Ireland’s energy security as we move towards a low carbon economy.”
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