Providence agrees deal on oil licence farm out

PROVIDENCE Resources – the Irish oil and gas exploration company headed by Tony O’Reilly Jnr – is understood to have finalised a significant farm-out agreement regarding its newest licence in the Celtic Sea.

The deal seems set to see the London-based oil company, Nautical Petroleum, take a 40% stake in the Baltimore heavy oil discovery, off the Cork coast, in return for investing in and carrying out a focused work programme on the development feasibility of the discovery.

Providence would then retain a 60% holding in the licence, which it was awarded just nine weeks ago. The Irish company is expected to formally announce the deal today.

Nautical is rapidly becoming one of the leading ‘heavy oil’ (basically, crude oil which doesn’t flow as freely as lighter oil due to its density) producers in western Europe and is known to be keen on securing further heavy oil discoveries via acquisitions, licensing rounds and farm-in agreements.

Providence – via its heavy oil producing special purpose vehicle, Exola – was granted a two year licensing option on the Baltimore discovery in February.

Discovered in 1992, the Baltimore well – situated just 30km off the south coast – is estimated to have a resource potential of up to 300 million barrels of oil.

In February, Mr O’Reilly called the option “a very exciting and valuable addition” to Providence’s growing portfolio and said that the area deserves further review.

Nautical is involved in a number of similar heavy oil field developments in the North Sea, including the Kraken discovery, which it operates, and Mariner, which is operated by Statoil.

Providence reported its full-year 2009 results last week, which showed a €40m slashing in pre-tax losses to €10.9m.

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