Pictured: Tony O’Reilly, Chief Executive, Providence Resources.
Providence Resources partnered with Chinese consortium, Beijing-headquartered Apec, to develop the Barryroe oil field in the Celtic Sea.
After five years searching for a partner to develop the Barryroe oil field in the Celtic Sea, Providence announced in March that a Chinese consortium led by Apec Energy Enterprise has agreed to take a 50% interest in the project in return for the cost of three wells and associated side-tracks.
Known in the industry as a farm-out agreement, the sale sees Providence’s 80% holding drop to 40% and Lansdowne Oil & Gas PLC surrender 10% of their 20% holding.
Under the terms of the agreement APEC will be responsible for 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.
Providence, through its Exola subsidiary, will remain in charge of the drilling programme though beyond the three well deal Apec has the option to take over the development.
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. The Barryroe Field is expected to yield around 311million barrels of oil.
Pursuant to a successful drilling programme, Apec may choose to exercise a warrant for the purchase of almost 60 million shares at 12 cents per share – giving them around a 10 per cent stake for £7.1 million.
Tony O’Reilly, Chief Executive of Providence, said the deal was a significant transaction that would allow exploration of the different parts of the Barryroe field and give it the tools to bring the field into production. The deal is expected to formally close in Q3 of this year, with the drilling programme expected to be complete by the end of 2019.
He has also hinted that after further talks in Beijing at the end of last month, that there may be more in the pipeline (pardon the pun).
The announcement was good news for Providence’s share price, which took a hammering last year after abandoning the Druid and Drombeg prospects some 220km off the southwest of Ireland after initial drilling revealed little more than water in the reservoirs.
The company’s share price saw a jump from around 10 cents to a high of 13 cents the week the news of the deal broke, and the deal has drawn plenty of praise from industry analysts.