PROVIDENCE Resources’ chief executive Tony O’Reilly Jnr has said he is confident in the exploration company’s share price belatedly gaining momentum in the wake of it finalising its move into the potentially lucrative gas storage and trading market.
The Dublin-based oil and gas exploration firm yesterday announced that it had formally exercised, via its Eirgas subsidiary, the option to buy a 40% stake in the Kinsale Head asset — which includes the Kinsale Head, South-West Kinsale and Ballycotton gas fields — and a 34.6% stake in the adjacent Seven Heads gas field from Malaysia’s national oil company, Petronas, for a total consideration of around $40 million (€27.4m).
Yesterday’s announcement comes within the three month completion window — the option actually being awarded to Eirgas/Providence back in June.
Providence has already stated that this deal could double the company’s daily production rate to over 4,000 barrels of oil equivalent per day (boepd).
The Kinsale asset is the only gas storage facility in Ireland and the deal makes Providence the first Irish company to gain a large equity stake in the realm of Irish-based gas production.
London-based broker, Cenkos, has valued the Kinsale portfolio at a combined $144m (Providence’s total market capitalisation is around €150m at present) with the ability to rise to over $300m within the next two to three years.
This latest bit of good newsflow from Providence, since the summer began, boosted its share price by over 2% to 5c yesterday. However, the company’s shares have been stuck at between 4.5c and 5c for the past number of months. Mr O’Reilly said yesterday, he was confident that Providence’s quality asset base would eventually be reflected in its share price.
Job Langbroek of Davy Stockbrokers said: “The real upside of the deal should come through the expansion of the gas storage business...
“With both Ireland and the UK very short of gas storage, the acquisition represents a major business opportunity.”
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