Providence signs farm-out agreement for Barryroe
Providence Resources has announced that it has signed a farm-out agreement with Chinese company APEC in respect of the Standard Exploration Licence ("SEL") 1/11 that contains the potentially huge Barryroe offshore field.
SEL 1/11 is operated by Exola (80pc stake), a wholly-owned Providence subsidiary, on behalf of its partner Lansdowne Celtic Sea, which has a 20pc stake, collectively referred to as the "Barryroe Partners”.
APEC, a privately-owned Chinese company, has a strategic partnership with China Oilfield Services and JIC Capital Management for the investment and development of offshore oil and gas opportunities worldwide utilising Chinese drilling units, services and equipment.
Under the terms of the farm-out agreement, which covers an area in the North Celtic Sea Basin and is located around 50 km off the south coast of Ireland, 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.
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 all costs of the Barryroe Partners in respect of the drilling programme.
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"This is a significant transaction for Providence and Lansdowne which will deliver multiple new penetrations of the areally extensive Barryroe field," Tony O'Reilly, CEO of Providence, said.
"In addition, it also provides for the acquisition of modern dynamic well test data that should assist in advancing the field to production. Over the coming months, we will be working with APEC to close the transaction and finalise the specific timeline and the precise details of the drilling programme."
The loan will be repayable from production cashflow from SEL 1/11 with APEC being entitled to 80pc of production cashflow from SEL 1/11 until the loan is repaid in full.
Following repayment of the loan, APEC will be entitled to 50pc of production cashflow from SEL 1/11 with Exola and Lansdowne being entitled to 40pc and 10pc of production cashflow, respectively.
"This field has significant recoverable resources and we look forward to jointly developing this opportunity," Mr. Colin Lui , chairman of APEC Energy Enterprise, said.
"Whilst the Farm-Out Agreement has been agreed specifically for Barryroe, the parties have also agreed to jointly investigate further opportunities in other licensed blocks offshore Ireland in the future."
The agreement is subject to the approval of the Minister of State at the Department of Communications, Climate Action and Environment and the approval of the Chinese government.