Providence Resources’ chief executive, Tony O’Reilly Jnr yesterday stressed that the company is progressing towards a long-awaited farm-out agreement on its much-heralded Barryroe field off the Cork coast, with signs of “new momentum” evident.
He made his comments on the back of new figures showing Providence’s first half losses ballooned by over €5m, and confirmation that the company has sounded out its lenders about a potential extended repayment deadline should further delays over Barryroe develop.
Providence yesterday reported pre-tax losses of €8.42m for the six months to the end of June; up from just under €3.4m for the same period last year.
The company’s total losses for 2014, as a whole, amounted to almost €11.5m. Operating losses, for the first half of this year, came to almost €3.8m; up on the €3m noted at the halfway mark of 2014.
“Similar to other junior exploration and production companies, Providence has been impacted by the fall in oil prices, which has led to a significant divergence between our market capitalisation and the underlying value of our substantial resource base,” Mr O’Reilly said.
The company is to cut general and administrative costs by 12% this year and another 20% next year and reduce capital expenditure by 40% this year.
While €21.7m is due to be repaid to Melody Finance next May, Providence, which only has cash balances of just over €11m, at present, has held talks with its debt providers over a possible extension of terms and the maturity of the facility.
Mr O’Reilly said the talks with Melody are being treated as a default option should Barryroe suffer further significant delays, but he said he remained confident of a deal being done on the asset.
Providence said farm-out discussions are continuing “with a number of counterparties” and Mr O’Reilly said that the company is looking at concluding a deal “as soon as possible”.
It is understood that around four interested companies are still circling Barryroe, but Dutch oil finance firm, Sequa Petroleum has been overtaken as frontrunner.
Mr O’Reilly said that any interested party is looking at investing based on what oil prices may be at in three-to-four years time, when first commercial flow from Barryroe is anticipated, rather than now and added that the current Irish environment bodes well.
“We believe that first gas from Corrib, together with the record high level of applications for the 2015 Irish Atlantic Margin Licensing Round, are defining moments for the Irish offshore, only serving to further enhance the value of our exploration and appraisal portfolio,” he said.
That said, analysts are still only really looking at when a Barryroe deal might be done.
“Providence is looking to reduce expenditure, manage its debt profile and, at the same time, pursue the development of its offshore Ireland assets.
It has made some progress in the latter, but in the absence of a major oil price recovery, the near-term fate of the stock remains tied into the Barryroe farm-out,” said Davy Stockbrokers’ Job Langbroek.
“Excluding any possible cash proceeds from a Barryroe farm-out, Providence is funded to May 2016. As the Melody facility is repayable then, the company will need a farm-out to cover the repayment,” according to Will Dymott, analyst at London-based Cenkos.
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