Providence Resources PLC (LON:PVR) saw its shares gain 8% today after it unveiled two “transformative” commercial deals with French oil giant Total SA bringing another “super-major” on board and giving a clear programme for its oil and gas exploration programme offshore Ireland.
In late afternoon trading, Providence Resources shares were up 8.3%, or 1.25p at 16.25p, with broker Cantor Fitzgerald reiterating a 'buy' rating and 33p price target on the stock today.
READ: Cantor Fitzgerald thinks today’s deals for Providence Resources a “significant step forward”
Three months after unveiling a 30% farm-in deal with Cairn Energy PLC, the AIM-listed explorer has entered into an exclusive option agreement for a 35% farm-in deal with Total’s Irish subsidiary for the Frontier Exploration Licence, FEL 2/14 which contain the Druid, Dromberg and Diablo prospects.
The FEL 2/14 licence, which lies in around 2,250 metre water depth in the southern Porcupine Basin and is located about 220 kilometres off the south west coast of Ireland is currently operated by Providence Resources, on behalf of its partners Capricorn Ireland Limited - a wholly owned subsidiary of Cairn Energy - and Sosina Exploration Limited.
Total would pay US$27mln for the farm-in stake under the terms of the FEL 2/14 option - US$21.6mln for Providence and US$5.4mln for Sosina.
Tony O'Reilly, Providence’s chief executive said: "We are delighted to have agreed this Exclusive Option with one of the world's leading E&P companies."
He added: “Should TOTAL subsequently elect to exercise the Option and farm-in to FEL 2/14, the JV Partners will have the benefit of being operated by an industry leader in deep-water hydrocarbon exploration and development".
Avalon farm-in and option deals too
In a separate deal, Total E&P Ireland has also signed a farm-in agreement with Providence Resources and Sosina which will see it take a 50% working interest in Licensing Option, LO 16/27, which contains the Avalon prospect
Under the agreement, Total will pay its pro-rata share of past gross drilling costs of around US$0.175mln and assume operatorship of the licence.
READ: Providence Resources shares lifted by Cairn Energy farm-outs
The French firm will also pay its pro-rata share, 21.4% of the past and future costs during the 2-year term of LO 16/27, subject to a gross cost cap of around US$1.33mln.
In addition, Cairn Energy’s Capricorn subsidiary has signed an option agreement for the right to farm-in to a 20% working interest in the same licensing option.
If Cairn elects to exercise the option, in addition to paying its pro-rata share of past gross costs of up to US$0.175mln, the FTSE 250-listed firm will pay 8.6% of the past and future costs during the 2-year term of LO 16/27, subject to a gross cost cap of US$1.33mln.
LO 16/27 lies in around 1,300 metre water depth in the southern Porcupine Basin and is located about 150 kilometres off the south west coast of Ireland.
Providence’s O'Reilly commented “This further potential transaction would serve to create a common partnership with our nearby Druid block with which Avalon shares many geological similarities."
All the agreements are subject to Irish ministerial consent, with Total potentially to become 50% owner and operator of both licences.
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