Providence bucks crisis to raise €3m and land Barryroe partner

Irish oil and gas exploration company Providence Resources is set to raise $3.3m (€3.05m) in emergency funding and hopes to formally have a new development partner for its flagship Barryroe field in place by the end of October.
Providence bucks crisis to raise €3m and land Barryroe partner
Providence is targeting the drilling of fresh appraisal wells at Barryroe by late summer 2021 and could be producing oil from the field by the middle of 2022. Picture: Finbarr O’Rourke

Irish oil and gas exploration company Providence Resources is set to raise $3.3m (€3.05m) in emergency funding and hopes to formally have a new development partner for its flagship Barryroe field in place by the end of October.

Despite a Covid-19-prompted drop in investment and corporate spending, cash-strapped Providence has managed to tap institutional investors and attract Norwegian company SpotOn Energy to take a punt on Barryroe, which lies off the Cork coast and is a potential gas as well as oil play.

The bulk of the money will be raised through the sale of extra shares to institutional investors, a move which is reliant on shareholder approval at a meeting next month.

It is the second time Providence has tapped shareholders for money since the breakdown – late last year – of an initial Barryroe development deal with Chinese consortium APEC Energy.

That investor support gave it enough money to survive until the end of last month.

The new funds will cover Providence’s costs until April 2021, but the company warned that if shareholders fail to back the plan its chances of survival beyond mid-May would be “materially compromised”.

SpotOn will also partake in the share placing, through an initial $370,000 investment, before adding a further £200,000 (€230,000).

SpotOn has entered a period of exclusivity regarding Barryroe and Providence’s chief executive Alan Linn – who replaced Tony O’Reilly Jr in January – said he hopes the farm-in deal can be completed by the end of October.

Mr Linn said Providence is targeting the drilling of fresh appraisal wells at Barryroe by late summer 2021 and could be producing oil from the field by the middle of 2022.

Providence is currently engaged in due diligence proceedings with SpotOn – including proving it has necessary funding capacity – ahead of full commercial terms being agreed.

Providence recently re-took 80% control of Barryroe, with Lansdowne Oil and Gas its 20% junior partner. Mr Linn said it was likely that – much like the previous deal with APEC – Providence would dilute its Barryroe share to around 40% in the next farm-out deal.

He also said that following additional cost reductions across its licence portfolio, Providence will likely have a sole focus on the northern part of the Celtic Sea and effectively pull out of Ireland’s Atlantic coastal area.

With Brent crude trading at between $33 and $34 per barrel, Mr Linn said Providence could still make money against a price backdrop of $26 per barrel.

Mr Linn said Providence had spoken to “a number of parties” interested in investing in Barryroe and said the exploration farm-out market is likely to be “pretty quiet” over the next six months as companies protect their operating costs and row back on spend.

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