Providence finds partner for Barryroe field

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Oil and gas explorer Providence Resources has sold a 50 per cent stake in its Barryroe prospect off the south coast of Ireland to a Beijing-headquartered company which will finance half of the costs.

The 50 per cent sale, known in the industry as a farm-out agreement, has been agreed with APEC, a privately owned Chinese company which has strategic partnerships for the investment and development of offshore oil and gas opportunities worldwide.

Under the terms of the agreement APEC will be responsible for paying 50 per cent of costs associated with the drilling of three wells, the company will provide a drilling unit and it will finance the remaining half of all costs of the Barryroe prospect.

The news will likely please investors who responded positively to similar news in December when Providence said it had entered exclusive talks to sell a stake in its Barryroe oil prospect off the Cork coast to an unnamed partner.

A previous farm-in agreement for Barryroe – which was found in 2012 to have more than 300 million barrels of recoverable oil – fell through in 2015 after the chosen partner, Sequa Petroleum, failed to raise the necessary funds to participate.

Providence shares were hammered in the latter half of 2017 when the group abandoned its Druid and Drombeg prospects some 220km off the southwest of Ireland after initial drilling revealed little more than water in the reservoirs. After that it said surplus cash following its abandonment of the Druid/Drombeg fields, would be partially deployed to the Barryroe prospect.

Providence’s interest in the Barryroe field is operated by Exola, a wholly-owned subsidiary, on behalf of its partner, Lansdowne Celtic Sea Limited.

In operational terms, Exola will act as operator for the drilling programme with technical assistance being provided by the APEC consortium and, after the completion of drilling, APEC will have the right to become operator for the development and production phase.

Tony O’Reilly Jr, the company’s chief executive, said the transaction was a “significant” one “which will deliver multiple new penetrations of the areally extensive Barryroe field”.

“In addition, it also provides for the acquisition of modern dynamic well test data that should assist in advancing the field to production. Over the coming months, we will be working with the APEC Consortium to close the transaction and finalise the specific timeline and the precise details of the drilling programme,” he said.

Colin Lui, the chairman of APEC Energy Enterprise Limited noted that while this agreement specifically pertains to Barryroe, the parties have agreed to jointly “investigate further opportunities in other licensed blocks offshore Ireland in the future”.

The deal is expected to close in the third quarter of 2018 and is subject to the approval of the Minister of State at the Department of Communications, Climate Action and Environment and the approval of the Chinese government.

Upon completion of the drilling programme, APEC will be able to subscribe for warrants over 59.2 million shares in providence at a price of £0.12 per share. The warrants represent around 9.9 per cent of the current issued share capital of Providence.

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