Oil firm agrees farm-in deal

Providence Resources has confirmed it has reached agreement over a farm-in deal at its headline Barryroe asset and has raised its stake in the highly-rated Spanish Point gas field off the west coast.

The Dublin-based exploration firm, headed by Tony O’Reilly Jnr, said that the long-awaited deal on Barryroe is reliant on the proposed partner raising the required level of financing.

The deal will likely see Providence sell around half of its 80% stake in the asset.

It was reported before Christmas that Dutch-listed oil finance company Sequa Petroleum was Providence’s partner of choice at Barryroe with it also reportedly having launched a $300m fundraising drive via the bond markets.

Mr O’Reilly said agreement regarding commercial terms for the Celtic Sea-based Barryroe field marks “a positive step forward”.

Meanwhile, Providence has also regained majority ownership of the Spanish Point field off the south-west coast of Ireland.

The purchase of the Irish division of international explorer Chrysaor will boost Providence’s shareholding of the much-tipped asset by 26% to 58%.

The deal will be for an estimated initial $1m, but an additional $5m depending on development results.

The firm will also pay 43% of the cost of the appraisal well set to be drilled at the site this year.

However, Providence is also likely to negotiate a partial sale of its enlarged stake at Spanish Point saying yesterday that it has received a number of third party expressions of interest in the area and that it will continue to evaluate them in the context of maximising shareholder value.

Scottish explorer Cairn Energy will maintain a 38% stake in the asset, while London-based Sosina Exploration will hold a 4% share.

While still at appraisal stage, recent technical studies have hinted at the Spanish Point field being a big hydrocarbon-rich area.

“The news that Chrysaor has left the Spanish Point project says a lot about the stress companies are under at present in maintaining their interest in frontier projects, given the current oil price and focus on balance sheets and expenditures.

“However, it does not say anything about the quality or otherwise of the project and the remaining licence holders are firmly committed to drilling in the current year,” said Job Langbroek of Davy Stockbrokers.