Chinese energy firm agrees Barryroe farm-out
Providence Resources has secured backing to develop its Barryroe prospect from Chinese backers that will help the long-running effort to land oil from wells off the Irish coast.
The Irish Stock Market listed company said it has signed a farm-out agreement with Chinese company Apec Energy in respect of the Standard Exploration Licence ("SEL") 1/11 that contains the potentially huge Barryroe offshore field.
The licence is operated by Exola (80pc stake), a wholly-owned Providence subsidiary, on behalf of its partner Lansdowne Celtic Sea, which has a 20pc stake.
Under the terms of the farm-out agreement, Apec will be directly responsible for paying 50pc of all the cost obligations associated with the drilling of three vertical wells, plus any associated side-tracks and well testing. It covers an area in the Celtic Sea Basin located around 50 km off the south coast.
In addition, Apec will provide a drilling unit and related operational services for the drilling programme, and will finance, by way of a non-recourse loan facility, the remaining 50pc of costs of the Barryroe Partners in respect of the drilling programme.
"This is a significant transaction for Providence and Lansdowne, which will deliver multiple new penetrations of the really extensive Barryroe field," said Providence CEO Tony O'Reilly.
"In addition, it also provides for the acquisition of modern dynamic well test data that should assist in advancing the field to production."
The loan will be repayable from production cash flow from SEL 1/11 with APEC being entitled to 80pc of production cash flow until the debt is repaid in full.
Following repayment of the loan, APEC will be entitled to 50pc of production cash flow from SEL 1/11, with Exola and Lansdowne being entitled to 40pc and 10pc of production cash flow, respectively.
"This field has significant recoverable resources and we look forward to jointly developing this opportunity," Colin Lui , chairman of APEC Energy Enterprise, said.
The agreement is subject to the approval of the Minister for Communications in Ireland, as well as the Chinese government.