Providence Resources PLC (LON:PVR) has evidently lost patience with its proposed farm-out partner’s non-payment of an agreed loan advance.
The Irish junior oiler, in a statement on Tuesday morning, revealed that it would not grant an extension for the US$9mln payment - after previously rolling over several extensions in recent months – and will now kick off a ‘licence reversion’ process to take back a 40% stake in the Barryroe project from China's APEC.
Proposed partner APEC has now been advised that it no longer holds 'exclusivity' over the stake in the Barryroe project.
Providence highlighted that it is now “free” to open up commercial discussions with other third parties.
READ: Providence Resources completes Barryroe well site survey
At the same time, Providence revealed that it and the partners of the Druid exploration project – TOTAL, Cairn Energy and Sosina - have decided to drop the licence.
The decision follows a detailed technical assessment of the project area, after which the partners could not recommend any further prospect maturation.
Uncertainty amid Ireland’s political headwinds
Today’s negative but generally expected news comes just a week after the Irish Taoiseach Leo Varadkar told the audience at the United Nations Climate Action Summit that Ireland plans to ‘phase out’ new offshore oil exploration.
Whilst precise details of the proposals aren’t yet known it represents the sort of political headwind that Providence previously flagged last year.
Now that the investment from Chinese group APEC is less likely, attentions will now be on Providence’s efforts to bring in an alternative farm-out partner in order to maintain its plan to drill at Barryroe ahead of a future field development programme.
READ: Providence believes existing Irish exploration will be ‘allowed to progress’
An APEC-led consortium of Chinese government-backed investors last March pledged to arrange non-recourse financing to enable the development of Barryroe in return for a 50% stake in the project.
Through a programme of up to six new wells (strictly speaking three wells and three sidetracks), originally slated to start this year, the plan was to prove up sufficient sections of the Barryroe reservoir and establish wells for use in future oil production.
Progress stalled on both regulatory and financing fronts, first with the Irish government’s requirement for additional well site surveys (completed recently) and then by APEC failing to deliver the loan advance within the agreed timeframes.
Providence last month told investors that it had enough capital to cover its operations until February 2020 – following a share placing arranged in September.
It launched a strategic review to consider its options for financing alternatives and its working capital obligations.
Redundancies and equity funding approved
The Irish firm this morning also told investor that, after approval at Monday’s AGM, it was now implementing the proposed redundancy programme which sees certain technical and support staff leave the company amid a ‘re-engineering’ of the company’s business model.
It similarly confirmed that non-executive directors Lex Gamble and Philip O’Quigley have stepped down from the board – which will now comprise Pat Plunkett, as chairman, chief executive Tony O’Reilly, and Tullow Oil’s exploration director Dr Angus McCoss as Providence’s senior independent director.
The AGM votes also approved Providence’s recently agreed US$3.7mln equity-based fund raiser, with shareholder’s greenlighting the sale of 59.76mln new shares in total, priced at 5.1p each.