Providence Resources set to be saved through €66m share sale

Providence Resources — the Tony O’Reilly Jr-led exploration firm — has announced plans to raise nearly $74m (€66m) in fresh funds via what is, essentially, a company saving share sale.

The sale — to be put before shareholders at an extraordinary general meeting next month — will enable Providence to eliminate its debt and fund a planned drilling round next year; as well as increase its chances of concluding deals with development partners on its main assets off the west coast of Ireland and at Barryroe in the Celtic Sea.

Speaking yesterday, Mr. O’Reilly said, if approved, the share sale will “completely restructure” Providence’s balance sheet and remove its financial instability.

It will also broaden the company’s UK institutional shareholder base.

The $74m will come via a $68.4m placing of 399.6m ordinary shares with institutional and other investors and up to €4.84m through an additional open offer.

The shares will be offered at a 13% discount to Providence’s trading price before its shares were suspended in April.

The money will allow Providence pay off what it owes drilling services firm Transocean from a long-running dispute relating to the Barryroe field.

London’s Court of Appeal, last April, ruled Transocean was owed up to $7m in costs by Providence and Lansdowne Oil and Gas, the 20% junior partner in Barryroe. Providence needs to pay 80% of those costs.

Both firms’ shares have been suspended since that ruling, which resulted in Providence entering emergency funding talks with its chief lender Melody Capital.

At the time of the court ruling, Providence had $4m in cash. It also owed Melody $21.7m by May of this year.

This fund raise will also see Providence pay down $20m of that Melody debt, with the US lender converting the outstanding $1.7m into an equity stake in Providence.

The money will also fund general working capital needs and Providence’s share of planned drilling costs. It plans to drill an exploration well at its Druid prospect, off the west coast, next year, dependent on getting a joint-venture partner, regulatory approval, and equipment availability.

Providence said that its ongoing viability “is likely to be dependent” on the success of the proposed placing and open offers.

It has applied for its shares to restart trading as of this morning (Lansdowne Oil and Gas announced its own funding deal and readmission plans late last week).

Mr O’Reilly said Providence’s farm-out discussions on all assets remain “active” and “encouraging”.

However, the company warned that even if a deal is done on its flagship Barryroe asset, the timing of actual drilling may be delayed as companies continue to reduce spending levels in the face of the current oil price environment.