Oil firm Providence in bid to raise €30m

Providence Resources is set to go back to shareholders as part of a bid to raise nearly €30 million in fresh funds to cover drilling, exploration, legal and administrative costs.

After confirming last Friday that it was eyeing a fresh funding round, the Tony O’Reilly Jnr-led explorer yesterday said it plans to raise around $25.75m (€22.7m) through a share placing aimed at institutional investors, as well as raising another almost €5m from existing shareholders via an open offer.

The main element of the raise will see nearly 66.9 million shares sold to institutional and other investors at a price of 25p per share. Existing shareholders will have the chance to buy new shares at a price of 34c per share.

Shareholders will be asked to vote on the matter at a special EGM on March 20. Providence’s Dublin share price was down nearly 13% in afternoon trading, yesterday (although that fall tapered later in the day), hovering around the 34c-35c mark and has sunk in value by almost 90% in the past 12 months.

“Unfortunately, delays to certain planned events, combined with the forward working capital requirements of the business, necessitated raising capital at this time and at this price,” commented Mr O’Reilly.

He added the move will broaden Providence’s strong institutional investor base and allow existing shareholders participate. If approved, the money will go towards general working capital, covering costs associated with its recent acquisition of additional acreage at its Spanish Point field off the west coast and paying its share of legal costs arising from a legal case — which Providence won — last year relating to a rig contract. Mr O’Reilly added that the funds will allow Providence move forward with activities within its asset portfolio.

Certain analysts were concerned with yesterday’s news, however.

“[The] placing arrests the progress that the company has made over the last five years, but doesn’t send it backwards. The management team now need to be clear as to what the forward plan will be and what options are open to it if the first choice isn’t available,” suggested London-based brokerage SP Angel.

“Failure to adequately articulate its forward plan could see the team come under increasing pressure and create an environment where activity shareholders call for changes to be made.”