Investors spooked as Providence Resources terminates Barryroe funding deal 

Shares in Irish explorer plummeted as much as 18% after it said it would likely have to tap investors for more money after terminating partner deal for its Barryroe oil and gas field off Cork coast

Providence Resources has said the development of its Barryroe oil and gas field, off the Cork coast, remains on track despite the breakdown of its latest funding deal.

Shares in Irish explorer Providence Resources plummeted as much as 18% after it said it would likely have to tap investors for more money after terminating the development partner deal for its Barryroe oil and gas field, which lies off the Cork coast.

Providence said its €166m so-called farm-out agreement with Norwegian firm SpotOn Energy – put in place to bankroll the development of the Barryroe field – has been terminated due to “key financing conditions” not being met.

It said Barryroe’s development remains on track – including a planned drilling campaign starting late next year and the potential for initial commercial gas flow from the site sometime in 2023.

However, Providence now aims to retain its 80% ownership of Barryroe and lead the funding of the field’s development itself.

Tapping investors

That will likely see the company tapping investors, through a share sale, for the third time in two years. 

However, Providence chief executive Alan Linn said it won’t be a huge raise, with the company “close to not having to do equity”.

Providence already has sufficient working capital to see it through this year. That has been bolstered by funds raised through investors exercising warrants from last year’s emergency share placing.

Investment firm Pageant Holdings – a leading shareholder in Providence – is underwriting a separate $2.5m (€2m) capital raise, which Mr Linn said showed investors are onside.

Additionally, Providence will largely fund Barryroe’s development through a bond raise, already well-negotiated before SpotOn’s exit.

Funding gap

Mr Linn said there was a funding gap between current finances and the original €166m deal, but he said the company was “mostly covered”.

He said Providence was hopeful of increasing the size of the bond and improving payment deferral terms for drilling service providers. 

Most of the service companies, which formed part of the original farm-out consortium, are expected to remain in place.

Providence has said its shareholders stand to benefit more from the new funding arrangement and has valued Barryroe at $560m in an oil price environment of $60 per barrel.

Initially, drilling will target an area of up to 50m barrels of recoverable resources.