Providence Resources: Barryroe deal ‘this year’

Providence Resources chief Tony O’Reilly Jr has said he remains “hopeful” the company can land a long-awaited development partner for its flagship Barryroe field, in the Celtic Sea, in the next six months.

Speaking on the back of the exploration company’s 2015 annual results — which showed a more than doubling of total losses to €24.1m and a 10% rise in losses per share to 19.57c —Mr O’Reilly said the combination of historically low drilling and operational costs, signs of oil price recovery and Providence fixing its balance sheet should act as major catalysts.

Providence, last week, announced plans to raise nearly $74m (€66m) in fresh funds via a two-pronged share sale, which shareholders will vote on next month.

If passed, the money will remove the company’s debt, grant it much-needed working capital and fund a planned drilling round off the west coast of Ireland next year.

Mr O’Reilly said landing a partner for Barryroe remains the company’s “major focus” and that doing a deal by year’s end is the objective and a “not unrealistic expectation”.

Last week, Providence said drilling at Barryroe could be delayed, even after a deal is done, in the face of companies lowering spending output in the current oil price environment.

However, yesterday, Mr O’Reilly said any farm-in partner would likely want to work fast on progressing the asset.

Further appraisal work is needed at Barryroe and Mr O’Reilly said the possibility — as reported back in February — of Providence drilling a low-cost appraisal well on the asset as part of a risk-sharing model with a number of third parties (rig operators, drilling managers and well-servicing firms) is “still in the mix”.

Providence’s shares haven’t performed well since resuming trading last week after a two-month suspension and were down by over 3% yesterday.

However, analysts seemed to echo management’s upbeat tones. “The renewed interest in the region [offshore Ireland] following last year’s Atlantic Margin Licensing Round, coupled with attractive project economics, even at the current oil price, notwithstanding Providence’s robust financial position, could see a deal [on Barryroe] take place before year end,” said analysts at Cantor Fitzgerald.

“In an environment of somewhat better oil markets the funding has secured the future of the group over the next number of years and given it the opportunity to again lead the exploration effort offshore Ireland,” said Davy Stockbrokers’ Job Langbroek.