Barryroe preferred partner 'unlikely' to fulfil terms for deal
Irish oil explorer Providence Resources does not think that its preferred partner for its flagship asset, the Barryroe oil field, will fulfil the conditions needed for a deal to go ahead.
Barryroe, which is located in the Celtic Sea off the Cork coast, was the first commercially viable well found in Irish waters when it was discovered in 2012. An independent audit of the field estimated that there could be more than 300m barrels of recoverable oil at the site.
Providence has been attempting to secure a farm-out partner to help develop the field since making the initial find.
Earlier this year it said it had reached agreement in principle on the deal. As well as providing more funds for development the deal could also halve the Irish firm's stake in the project to around 40pc.
The preferred partner on the bid was not identified. However, London-based oil and gas firm Sequa Petroleum has long been touted as the preferred farm-out partner. Last month Sequa announced it had raised $300m in a bond offering. Sourcing finance for the project was one of the terms for securing the deal.
However, Providence chief executive Tony O'Reilly has said that he does not expect the company's preferred partner to follow through with its commitment to the project, and says that the Dublin-based explorer is focusing on discussions with other prospective partners. He declined to comment on whether Sequa is the preferred bidder.
Speaking at the company's annual general meeting in Dublin yesterday, he said: "The counterparty raised the capital but they have not satisfied the conditions [for the deal].
"They can raise all the money they want, but if they don't give us the money they have no deal.
"That company can still do a deal if they honour their closing conditions. We assume they will not and that's why we have continued discussions with other people. We have four other companies who are talking and are serious players."
In response to criticism from shareholders over the length of time in securing a farm-out partner for the venture, he added: "If people think we are sitting in our offices twiddling our thumbs, let me tell you we are working our asses off to make sure we get a deal done as quickly as possible."
Mr O'Reilly said that the company is aiming to secure a farm out partner by the end of the year, and said that a "realistic" timeline would see drilling at the site next year and first oil in either 2019 or 2020. He said that the firm is also looking at a similar development timeframe for its Spanish Point well in the Northern Porcupine basin.
Mr O'Reilly also admitted he was disappointed with the company's low share price after coming in for criticism from shareholders. "Am I upset about the share price going down? Damn right we all are, everyone is upset about it," he said.
The company's share price has been decimated in recent years as global oil prices have plunged and the Barryroe farm-out deal has dragged on. Shares are currently trading at 22.5 pence compared to more than 140 pence at the start of the year. The firm has a market capitalisation of about £30m (€42m).
Mr O'Reilly also admitted that the company's low market cap could make it an attractive takeover target as it could be cheaper to acquire Providence than to help develop Barryroe.
"I would say that there is no doubt that there are people looking at us. The issue for some of these companies is that they want to invest in the asset, that's the way you create value.
"Buying the company gives you access to a great portfolio but you still have to money into the asset."