Final agreement to allow the farm-in of APEC Energy into the licence (SEL 1/11) will provide not only a much-needed cash resources but also a fillip for shareholders, said SP Angel.
“We expect to see share price appreciation as news of the planning stages indicates the approach of the drilling stages of the appraisal programme.”
Ireland’s first commercial project
Barryroe will be Ireland’s first commercial offshore oil project, though the immediate focus will be on preparations for a new drilling programme slated to start next year.
Specifically, the now binding deal commits the Chinese partners to carry Providence and Lansdowne Oil & Gas Ltd (LON:LOGP) for a programme of four vertical wells and one horizontal sidetrack plus the option to extend the programme with a further two horizontal wells.
Also, significantly, the deal comes with a US$19.5mln cash advance to Providence covering project and operational costs – US$9mln will be released initially, with a further US$10.5mln will be paid 14-days prior to the start of drilling.
A survey of the proposed well sites will now be advanced in the fourth quarter of this year, setting up a timeline for rig mobilisation during the second quarter of 2019.
“The finalisation of these binding farm-out terms with APEC is transformational for Providence,” said chief executive Tony O’Reilly.
“Importantly, the structure of the farm-out transaction means that Providence has no upfront risk or capital exposure for the drilling programme.”
In terms of financials, the pre-revenue explorer reported a €2.37mln loss for the six-month period, compared to a €3.44mln loss for the same period a year ago.
Providence had €12.35mln of cash and no debt at the end of the period.
Dunquin, Druid and Drumbeg
Elsewhere Providence has completed another 3D seismic shot of its Dunquin South prospect, in the Porcupine Basin, offshore Ireland.
Providence owns a 26.8% stake in FEL 3/04, which hosts Dunquin South, with its partners in the venture Eni (operator), Repsol, and Sosina Exploration.
Providence is also exploring Druid and Drumbeg, two big exploration targets located within Frontier Exploration Licence (FEL) 2/14, in the Atlantic Margin off Ireland’s west coast.
FEL 2/14 lies in 2,250 metres of water in the southern Porcupine Basin some 220 kilometres off
Druid and Drombeg are, on paper, estimated to be very large with the former modelled at 3.1bn barrels of mean oil resources and the latter estimated to have 1.9bn barrels.
Providence also recently received results from a seabed survey of the Newgrange Prospect (FEL6/14).
Newgrange is contained within Frontier Exploration Licence 6/14, 260km off south-west Ireland and sits beneath 1,000 metres of water.