Three more firms show interest in Barryroe

Three more companies within the past month have shown interest in investing in Providence Resources’ highly-rated Barryroe oil and gas field in the Celtic Sea.

The exploration firm has been trying to get a farm-out deal, for Barryroe, over the line for some time and, earlier this year, announced it had tentatively reached a deal with a party. However, while due diligence has been completed and contracts signed, the deal is reliant on that party raising the finance to cover its investment; something numerous analysts have suggested will pose a challenge.

Speaking yesterday, after an EGM which saw shareholders unanimously approve Providence’s latest €30m+ capital raise via a share placing and open offer, the company’s technical director, John O’Sullivan, noted that there is no exclusivity agreement in place and a number of other parties are still pursuing Barryroe’s technical data.

He added three companies have entered the ‘data room’ since Providence announced its latest capital raising plan, at the end of last month. He also said some of these could have financing in place already.

Providence’s farm-out deal is likely to hand an investor a significant stake in Barryroe, in return for funds to cover a further two appraisal wells in order to take the project to final investment decision (FID) level. Any further capital needs are likely to come from new bank lending facilities.

Earlier, chief executive Tony O’Reilly Jnr apologised to shareholders for the need to raise extra cash, through equity, during an all-time low for the company’s share price.

He said the company had come close to agreeing a Barryroe deal with a number of US firms, but the need to inject fresh working capital into the company (to cover drilling, exploration and legal costs) this way was management’s only choice, given that a farm-out still hadn’t been completed.

However, he added that the investor community has shown it is happy to stand by Providence and its portfolio at a time when market values of exploration firms have plummeted, deals have dried up, and nearly a third of such companies quoted in the UK are expected to either go bust or be bought out over the next 12 months.

Calling a Barryoe deal a “long and complicated” process, Mr O’Reilly told shareholders a deal is there in principle.

“We’re not just relying on one player; others are still in the data room, and it will be first past the post,” he added.

Mr O’Reilly said the length of time to do a deal is more a reflection of the “stark reality” of the market, rather than the quality of the Barryroe asset.

Following yesterday’s shareholders’ meeting, Providence’s senior management decamped to Edinburgh to meet with Scottish explorer Cairn Energy; its chief partner at Spanish Point, off the west coast of Ireland.

Drilling there has been postponed twice in the past year and it is hoped that work will commence next year.

Providence is also talking to prospective farm-out partners on that asset, in which it currently has a 58% stakeholding.

The company will also actively look at new asset possibilities in this year’s Atlantic Margin licensing round, but is unlikely to play any role in the expected consolidation round in the North Sea.