www.providenceresources.com
The combination of board and management talent, together with Providence's major shareholder worldwide network, presents a unique ability to succeed on the international stage. Providence has appropriate experience in the financing of large developments and is well equipped to plan and access finance for a wide range of activities and projects. Providence has established banking relations with a number of leading international financial institutions.
Since its formation, Providence has built a diversified portfolio of oil and gas exploration licences and concessions with the key focus being the pursuit of exploration and appraisal interests offshore Ireland. The Company’s board and management have a well-established background in the oil and gas business having worked closely with many major companies throughout the world. Providence works with leading companies including ExxonMobil, Repsol, ENI, Petronas, Chrysaor and Nautical Petroleum.
Providence Resources: Numis raises target price after barryroe swap
Broker Numis has raised its target price on Irish oil and gas group Providence Resources (LON:PVR) by 10% due to increased stakes in the Barryroe and Dragon fields offshore Ireland.
The new target price is 446p, up from 400p, which reflects a 9% or 73p increase in estimated net asset value to 891p to reflect the higher exposure to the two fields.
As Providence is an explorer, Numis applied a 50% discount to the NAV but even with this says the group continues to look materially undervalued.
“The portfolio offers several very high impact exploration wells that could unlock value many times the current share price,” it added.
Risks of potential farm down dilution and near-term appraisal drilling are also overpriced.
Providence recently lifted its take in Barryroe to 80% by acquiring San Leon's 30% holding in exchange for paying San Leon 4.5% of any future profits.
“An 80% exposure is high, in our view, for an unproven asset - Barryroe is now worth 294p to our NAV, and while the asset could ultimately add 33% to our NAV if fully derisked, a non-commercial well result would strip 33% from our NAV,” Numis said.
Barryroe's ongoing 48/24-10 appraisal well must flow at over 1,800bopd to be commercial, a target that Numis said still carries some risk as previous wells have only delivered a maximum 1,600bopd.
If it does hit the flow target, Numis expects Providence to farm down its Barryroe stake aggressively to reduce its share of the likely $600m cost to get the project up and producing.
The broker believes a 20% stake in Barryroe is more manageable, though any farm-down is likely to be dilutive.
Even if Barryroe is non-commercial, stripping out the asset NAV would still leave a valuation more than twice the current share price and underpins its buy stance.
At Dragon, Providence was recently awarded 50% of UK offshore block 103/1, home to part of the Dragon gas discovery which extends into Providence's 100%-owned Irish SEL 1/07.
Providence now has an effective 88% exposure and which is valued at 58p/share with 15% unrisked upside.
