Providence Resources clears debt as partnership talks progress

Irish explorer Providence Resources has confirmed the formal elimination of a near $25m (€23m) debt mountain, potentially putting it in a stronger position to land development partners for three of its biggest assets.

In a brief statement, Providence yesterday said that it has paid out the $21.7m owed to chief lender Melody Capital — via a $20m cash payment and nearly 10m shares — and has settled the outstanding amount, nearly $5m, payable from a drilling dispute with services firm Transocean.

The moves follow shareholders last week approving a vital $70m fundraising round, which will also meet working capital needs and cover the costs of planned drilling at the company’s Druid prospect off the west coast next year.

“This should lead to an improved outcome with respect to farm-in deals and, consequently, a better outcome for shareholders,” said Davy Stockbrokers analyst Job Langbroek.

“Providence is now in an unencumbered position with respect to negotiations.”

Cenkos Securities, in London, noted that Providence has a clean balance sheet, saying it “is rare among exploration and production companies”.

Providence’s update coincided with a small uptick in oil prices. Brent crude was up 1% at $47.12 per barrel, while US crude rebounded from a two-month low to $44.89.

“In terms of timing, industry sentiment looks to have bottomed out with recent oil price improvement reflecting a tightening oil market as demand remains strong and supply looks to be threatened by a significant lack of investment,” said Mr Langbroek.

Providence said a number of ‘super-majors’ have shown interest in its assets.