Providence aims to be debt free in three years

PROVIDENCE Resources chief executive Tony O’Reilly Jnr has told shareholders that the company has the capability to become debt free within the next three years.

Mr O’Reilly was speaking at the oil and gas exploration firm’s annual general meeting in Dublin yesterday, where Providence announced a new share placing aimed at raising around £14.8 million (€16.8m) to strengthen its balance sheet and reduce its debt levels that are currently hovering around the €70m mark.

The placing – via Cenkos Securities in London – will see just over 431.9 million new ordinary shares, priced at 3.9c each, admitted to trading on Dublin’s IEX market and London’s AIM next Tuesday.

Shareholders were told Providence is targeting annual production rates of 5,000 barrels of oil equivalent per day (boepd) by 2012 and 10,000 within a further two years.

By the end of last year, the Dublin-based company had production levels of 2,000 boepd and it has a target of 3,000 by the end of the current year. Four years ago, Providence had an annual production rate of 200 boepd.

Last week, Providence announced its plan to enter the lucrative gas storage and trading market, through its subsidiary Eirgas, gaining two options to buy into the former Marathon Oil-owned assets at Kinsale Head and Seven Heads, currently owned by Petronas.

Providence is talking to a number of banks with regard to raising debt financing for the transaction – the deal will cost an estimated combined $40m (€28.3m) – but if that isn’t forthcoming within the three-month option deadline, there apparently is a ‘Plan B’.

That consists of Providence having retained the services of an unnamed investment bank to help it in finding interested partners to come on board and help raise the money and take a share of the assets.

Mr O’Reilly reiterated that the company would not be looking to sell its interest in the AJE oil field off the coast of Nigeria, as it has turned into “a very valuable asset“, which is nearing production point.

The ExxonMobil-operated Dunquin exploration licence off the west coast of Ireland, meanwhile, could potentially be drilled within the next 12 months. Providence holds a 16% share of this asset.

Regarding Dunquin, Mr O’Reilly said: “To have one prospect like this is every little exploration company’s dream and we have three.”