Providence looking to sell 32% of Spanish Point asset

Providence Resources’ share price fell by over 9% early yesterday, after the Irish explorer formally launched its plan to sell up to 32% of its second largest asset, but delayed drilling plans.

The Tony O’Reilly Jr-headed exploration firm used yesterday’s Atlantic Ireland conference in Dublin to formally launch a much-anticipated farm-out process relating to its Spanish Point acreage, which it shares with Scottish firm, Cairn Energy.

Providence is a 58% stakeholder in the asset, which includes two frontier exploration licences and contains an estimated 340m barrels of oil equivalent, but is looking to sell off up to 32% of that holding, which would leave it with a minimum 26% interest.

Earlier this year, analysts suggested that Providence would need to conclude a farm-out deal on Spanish Point by the end of this year, in order to facilitate drilling during 2016.

However, drilling which has already been postponed is now unlikely to happen until 2017, with Providence yesterday suggesting Cairn is looking at an appraisal well programme then.

Providence’s share price, was down by over 9% for much of yesterday before paring losses back to just under 6%; closing down 2c to 32c.

“The delay in drilling, to 2017, may disappoint, but the well will benefit from the very large reductions in offshore operating costs that are increasingly available,” said Job Langbroek of Davy Stockbrokers.

Providence is also actively looking for a development partner for its higher profile Barryroe field, in the Celtic Sea, with Mr O’Reilly last month maintaining new momentum exists, with management hopeful of concluding a long-awaited deal “as soon as possible”.

It’s understood that four firms are interested in Barryroe.

Speaking yesterday, the company’s technical director, John O’Sullivan said that in light of the strong interest shown in the recent Irish Atlantic Margin licensing round, the chance to invest in Spanish Point represents “an excellent opportunity” for a third party to acquire “a material, non-operated equity stake in a large Irish offshore project with near-term appraisal drilling, combined with further appraisal and exploration upside”.