Thursday 23 November 2017

Providence €1bn sale would have saved O'Reilly

Indian group ONGC eyed up takeover last year

Providence Resources: The Barryroe well successfully flows oil and gas. Picture credit: Finbarr O'Rourke
Providence Resources: The Barryroe well successfully flows oil and gas. Picture credit: Finbarr O'Rourke
Tony O'Reilly Jnr
Tony O'Reily Snr.
Nick Webb

Nick Webb

Indian State-owned energy company Oil and Natural Gas Corporation (ONGC) last year eyed a full takeover of Providence Resources at a value of up to $1.5bn (€1.1bn). A deal at that level would have valued biggest shareholder Tony O'Reilly's 15pc stake at €165m – almost enough to clear his personal debts to AIB and a group of eight other banks.

At the same time that Tony O'Reilly Jnr was presenting Providence's results to the market on Friday morning last, Judge Kelly was preparing to give his judgement on the case brought by AIB against his father.

It was ultimately to be a tale of contrasting fortunes for the family. One analyst described the Providence results as an "upbeat presentation" – but over in the Four Courts, Judge Kelly punctured O'Reilly Sr's proposals to repay his debts.

Last Friday, O'Reilly failed in a bid to get more time to repay his loans to the bank. He was refused a stay on execution of a €22.6m judgement entered against him by AIB. His debts to the banks total €195m. The court ruling will now lead to a sale of some of his assets to pay off his debts.

Last Friday, O'Reilly sold off 3.7 million shares in INM, which were secured to ACC. He is also selling the 750-acre Castlemartin Estate in Kildare. He also owns a stake in industrial holding group Fitzwilton, shares in INM as well as the 15 per cent stake of Providence Resources.

Last Friday, Providence boss Tony O'Reilly Jr told investors on a conference call that the Irish oil-exploration company had been close to a buyout deal last year. He declined to comment on the identity of the suitor.

The Sunday Independent has since established that the Indian state-owned energy company, Oil and Natural Gas Corporation (ONGC), eyed a full takeover of the Irish listed company at a value of up to $1.5bn company (€1.1bn).

Investment banking sources told the Sunday independent that ONGC was "ready to pull the trigger" in April last year. Providence's oil find at Barryroe in the sea off Cork was attracting worldwide attention, with Malay- sian oil firm Petronas also said to be interested.

However, ONGC shifted position at a late stage and moved to invest close to $9bn in two deals for acreage off the coast of Mozambique instead.

The timing of a buyout would have been extremely advantageous to Ireland's first billionaire Tony O'Reilly, who has spent the last two years negotiating a repayment plan with his bankers over his personal loans. He owes money to AIB and eight other banks – including Bank of Ireland, Ulster Bank, Mellon Bank, Trust Bahamas Ltd, Lloyds TSB, EFG and Lone Star, which acquired his Anglo Irish Bank loans.

The repayment plan has seen O'Reilly sell off more than €100m worth of other shares, art and other assets to pay down his debt.

O'Reilly has said that he was "disappointed" that AIB had decided to go on a solo run and depart from a forbearance understanding that he had with his creditors. The ONGC deal for Providence – had it gone through – would have netted around €165m for O'Reilly, almost enough to clear his debt.

An almost complete shutdown in buyout deals in the global exploration and production sector has seen share prices for companies such as Providence hammered on the markets.

Last week, Providence shares were trading at just stg £1.40 in London, valuing the whole company at €120m – a year after it was worth €1.1bn. Stockbroking firms value Providence at a huge multiple of its current share price with the planned farmout of Barryroe unlocking this value.

UK broker Cenkos estimates that the Providence Resources drilling programme is worth £26.59 per share. Davy values the firm at around £16.08 per share, with Liberum guiding £22 per share.

Last year, Providence appointed Rothschild to advise on the long-awaited farmout of Barryroe. It is understood that the a number of high-profile oil majors have attended the Providence data room, with a small number of serious companies in detailed negotiations over a deal.

This renewed interest is said to stem from Providence's revised development programme for Barryroe which reduces upfront capital and accelerates the timeline to first production. Industry sources have also pointed to an increased interest in oil and gas exploration off Ireland in recent months as the ISIS insurgency in Iraq threatens to push oil prices higher.

The spat between Ukraine and Russia is also said to be influencing companies' thinking on looking at safer geo-political locations.

The Irish Government's move to introduce a new oil tax regime recently has also removed a huge uncertainty for investors eyeing explorations assets. A number of large buyouts in the sector in recent weeks have also improved investor sentiment.

Sunday Indo Business

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