Speaking after the company’s recent set of annual results, chief executive Tony O’Reilly Jr said Providence still hoped to drill at Spanish Point, located off the south-west coast and shared with UK firm Cairn Energy during 2016. Providence hopes to lower its 58% stake in the asset to around 32% and Mr O’Reilly suggested that talks surrounding this farm-out proposal — much like the process at its Barryroe field in the Celtic Sea — remained ongoing.
One industry source yesterday suggested that if Providence remained serious about 2016 drilling prospects at Spanish Point, it needed to have a farm-out deal in place within the next three to six months.
Separately, in a detailed research note on the company, published yesterday, Davy Stockbrokers also suggested a Spanish Point deal is likely to be announced sooner rather than later.
“A farm-out of Providence’s 58% stake looks to be on the cards shortly, and both the Barryroe and Spanish Point projects look candidates for drilling in 2016,” said Davy’s exploration analyst, Job Langbroek.
“Progress on either would be positive for the stock, especially Barryroe, which — for better or worse — has become synonymous with the group’s fortunes. In fact, the absence of a farm-out has had a material knock-on effect on the market’s valuation of Providence.
“In reality, there is no evidence that a farm-out is not being achieved because of the results achieved so far; rather, there seems to be reluctance on the part of industry to commit more capital, reinforced by the collapse in the oil price from September 2014 onwards.”
Providence recently said that five companies were in the Barryroe data room, with Mr O’Reilly saying the company has been pleased with the level of interest in the prospect and that the board remains hopeful of a deal being concluded, as Barryroe remains “a real asset, with real potential”.
Mr O’Reilly, who has just had his contract renewed for another two years, called 2014 a year of “significant progress” for the company, “despite a very challenging backdrop” for the industry.
He added that improved debt facilities and recent additional financing would allow the company to continue executing its strategy.