One of the world’s largest oil companies, France’s Total has signed two commercial development deals with Irish exploration company Providence Resources – a move which sent the latter’s shares soaring as much as 11% yesterday.
Total, one of the energy sector’s so-called ‘super majors’, has signed up – via its Irish subsidiary – Total E&P Ireland - for a 50% working interest in the Providence-controlled Avalon prospect off the west coast of Ireland.
Separately, the French giant has entered into an exclusive option agreement for a 35% share of the frontier exploration licence which contains the Druid, Drombeg and Diablo prospects. The latter will see Providence and junior partner Sosina receive phased cash payments of $27m. It also comes three months after Providence farmed out a 30% stake in the licence area to Scottish explorer Cairn Energy.
Drilling work, targeting five billion barrels of oil, is due to take place at Druid/Drombeg end of this month for a maximum of two months. Total has 60 working days from the completion of that drilling round to exercise its farm-in option.
Providence’s shares are up about 3% since the start of the year, but jumped by more than 11% - before paring back slightly in later trading – on the back of yesterday’s announcements.
If Total exercises its option at Druid/Drombeg, Providence’s shareholding will lower from 56% to 28%. Additionally, Cairn Energy has agreed on an option for a 20% stake in the Avalon asset; exercise of which would lower Providence’s interest there from 40% to 24%.
The latest deals place a tick beside two of the five asset farm-out talks Providence’s chief executive Tony O’Reilly Jr said the company was engaged in at its AGM last month. He said, at the time, some had been at a “very late stage” of agreement. Of the outstanding deals, Mr O’Reilly said finding a partner for Providence’s flagship asset – the Barryroe oil and gas field off the Cork coast – remains the company’s “top priority”.
Total’s introduction as a partner was hailed as “a significant step forward” for Providence which “should generate further interest in Providence’s portfolio”.
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