Deutsche approached Providence over the deal; the funds from which the explorer will use to further develop its Singleton oil field in the south of England. Providence is also using part of the money to fully repay its existing lending facility with BNP Paribas. That €80m facility — not all of which was drawn down by Providence — had been due to mature in 2014.
This new six and a half year debt facility with Deutsche sees Providence sell a percentage of oil found at Singleton for a fixed price, as of current market prices. Commodity swap deals are more common in the North American exploration market and this is one of the first known instances in the European market.
Providence’s chief executive Tony O’Reilly Jnr said that the deal was extremely pleasing to the company’s board.
“This innovative facility allows us to avail of today’s higher pricing environment for the term of the facility. Importantly, it provides the operational and financial flexibility that will allow us to focus on increasing Singleton production rates,” Mr O’Reilly added.
“Our platform prides itself on its ability to offer unique financing solutions for clients. We were delighted to structure a pre-paid swap with Providence, that not only allows them to capture very attractive commodity prices but also allows them to better match the term of the debt to the increasing life of the Singleton oil field,” Deutsche Bank’s global head of oil sales and structuring, Brian Cumming explained further.
The Singleton field is Providence’s only real “cash cow”, but the company is set to drill across six basins off the Irish and British coasts over this year and the entirety of next and it is still interested in selling further equity stakes in some of those assets.