Oil firm cleared of $19m debt

Irish explorer Providence Resources has won a judgment in London’s Commercial Court against having to pay around $19m (€15.5m) in drilling-related costs relating to its headline Barryroe oil and gas field in the Celtic Sea.

The Dublin-based firm— which had provided for the claim in its accounts — is now likely to be able to unwind a significant amount of the provision.

The case refers to a claim by Swiss-based drilling contractor Transocean that it was owed $19m by Providence for the provision of a drilling unit for the 2011 drill at Barryroe.

However, the Dublin-based exploration firm claimed that as parts of the rig weren’t fit for purpose, extra costs were incurred.

The court ruled, on Friday, that the Swiss firm was in breach of contract and was not entitled to the amounts sought.

The court also found that Providence was entitled to set-off certain costs against the Transocean claim.

While Providence is likely to still have to pay some of the amount due, it will be considerably less than originally feared. Furthermore, it is likely that Transocean will have to pay Providence’s legal costs — unless it successfully appeals — which are estimated at around $6m.

“While the ultimate financial outcome is still to be decided, the ruling in favour of the position held by Providence provides a nice fillip to its financial position... The actual position looks to have improved significantly,” said Job Langbroek of Davy Stockbrokers.

Providence chief executive Tony O’Reilly said that while the company never wanted to go to court, the ruling “clearly vindicates” its decision to mount a defence to Transocean’s claims.

“Following the handing down of this judgment, we will look to settle the final account and will update the market when these details are confirmed,” Mr O’Reilly said.

He said the company soon hoped to be in a position to update shareholders on its progress in nailing down a farm-in partner for Barryroe. It was speculated upon, last week, that Providence had all but signed off on a deal with London-based petroleum firm Sequa for a sizeable stake in the Celtic Sea project.

“Once details are confirmed by the operator, we will also update the market on the next well in our programme (Spanish Point), where drilling is scheduled to commence in 2015.”

Providence’s share price jumped by almost 9% yesterday, on the back of the news, to 95c.