Providence silent on asset sales talk

PROVIDENCE Resources, the Tony O’Reilly Jnr-led oil and gas exploration company, is being tipped to sell some of its assets this year, although the company is remaining reticent on the issue.

The speculative line was included in a detailed research note on Providence, published by Davy Stockbrokers, yesterday.

While much of the update surrounded the positives and importance surrounding Providence’s recent move into thegas storage market (via its subsidiary Eirgas buying a 40% stake in the Kinsale Head gas field from Malysian oil company, Petronas), Davy suggested debt lowering would loom large on the company’s agenda this year and asset sales could be the way to drive that.

“At the end of 2009, Providence had net debt of around $125 million (just over €87m), including its initial investment in gas storage. When the gas storage is completed, net debt will be around $160m.

“While debt stress measures remain comfortable, we think management will try to reduce the overall level of indebtedness as a matter of policy.

“In addition to internally-generated cash flow, we see asset sales as the most likely way for this to proceed,” the Davy note said.

While Providence refused to comment on the line, yesterday, it has touched on the debt issue in the recent past. At the company’s last annual general meeting, Mr O’Reilly told shareholders that Providence could reach the 5,000 barrels of oil equivalent (boepd) mark – in terms of production levels – by 2012 and push onwards to 10,000 boepd by 2014, and added that the company has the capability to become debt free within three years.

While the disposal of its operations off the coast of Nigeria have been speculated upon for some time, Providence has been keen to talk up its entire asset portfolio over the past year.

It said recently this year will see a focus on assets situated off the west coast of Ireland – the Spanish Point and Burren oil/gas discoveries off the south-west coast being referred to as being “of particular note” in a recent trading update.