Providence Resources close to $300m deal to extract Irish oil
Published 15/04/2014 | 12:00
Providence Resources is close to securing a $300m investment in his project to extract oil off the coast of Ireland.
Shares in Providence gained 11pc this morning.
The company, which is headed up by Tony O'Reilly Jnr, has been sounding out bigger industry partners to invest in the Barryroe oilfield in an arrangement known as a “farm-out” in the industry. Such deals are common for smaller explorers, who specialise in discovering the oil fields but lack the resources or engineering expertise to exploit what they find.
Providence today confirmed it is in talks with a number of third parties in relation to the development of Barryroe, off the coast of Cork.
Investors have been holding out for decades for a major Irish oil play. Exxon first found oil at Barryroe – 45 miles south of the Irish coast – in 1974 but deemed it uncommercial with that era’s technology. The Corrib field, 52 miles off the west coast could be enough to supply 60pc of Ireland’s gas needs, its operator Shell has claimed, although that field’s exploitation was delayed by environmental concerns.
However, with new engineering techniques, and a higher oil price, Mr O’Reilly has said Barryroe “could be the new North Sea”.
Providence shareholders include Tony O'Reilly Snr with 15.4pc. Although he has kept quiet on the issue, others have clearly been losing patience, with the share price currently languishing at 182p compared with 710p in 2012. Ballyroe is by far the company’s biggest prospect. Brokers at Liberum Capital put a value on it of as much as 1730p a share, so if a deal is forthcoming, Providence’s share price could leap.
However, many oil assets are currently up for sale or have licensees seeking outside investors. Oil majors including BP and Shell have huge disposal programmes. This has made it hard for the likes of Providence to strike farm-out deals.
An independent report on the Ballyroe asset, in which Providence owns an 80pc stake, found that there were some 311 million barrels of recoverable oil there.
Independent News Service