Providence Resources is hoping to start a multi-well, six-month drilling programme at its Barryroe field off the Cork coast early next year, after finalising a development partner for its flagship asset.
Shares in the Dublin-based exploration company jumped 25% on the announcement that a Chinese consortium, headed by Beijing-based investment company APEC Energy Enterprise, has agreed to take a 50% stake in Barryroe in return for covering half of the costs of the drilling programme.
Providence’s share of Barryroe will decrease from 80% to 40% if and when the deal formally completes, as expected, during the third quarter of this year.
Approval is required from both the Irish and Chinese governments. Lansdowne Oil and Gas will remain a junior partner, but now with a 10% rather than 20% share.
Exola, a subsidiary of Providence, will act as operator of the field. APEC will also loan Providence/Exola and Lansdowne the necessary money needed to cover their drilling costs. That money will be repayable from future production cash flow from Barryroe.
APEC will also have the opportunity, in return for another €8m or so, to subscribe for share warrants within six months of the completion of the proposed drilling programme. If exercised, that would give it a near 10% stake in Providence.
While the specific timeline is still unclear, it is understood that Providence and its partners will aim to start a six-well drilling campaign at Barryroe in the first half of next year. This should run for around six months after which all parties would hope to fast-track the field to commercial status by the early 2020s.
Providence boss Tony O’Reilly Jr, who has come close to executing a Barryroe deal numerous times in recent years, called it “a significant transaction”, which will provide for the acquisition of modern dynamic well test data that “should assist in advancing the field to production.”
Latest estimates put Barryroe’s recoverable oil resources at 346m barrels. The deal marks Providence’s fourth farm-out agreement in the last 12 months and the company said it is progressing with efforts to find development partners for other assets.
Indeed, future deals could also include APEC, with its chairman Colin Lui saying the parties have also agreed to “jointly investigate further opportunities in other licensed blocks offshore Ireland in the future”.
The consortium buying into Barryroe also includes JIC Capital Management and China Oilfield Services.