Business Irish

Monday 23 April 2018

Share price spike as Providence gears up for historic deal

Barryroe oilfield, off the Cork coast, could be farmed out in a deal worth €217m
Barryroe oilfield, off the Cork coast, could be farmed out in a deal worth €217m
Sarah McCabe

Sarah McCabe

SHARE prices at Providence Resources have shot up after the company announced that it was in talks "with a number of third parties" about the development of its Barryroe oilfield, off the Irish coast.

The explorer's share price jumped 11pc in early trading after the UK 'Independent' newspaper reported that it is in advanced talks with a large American operator to "farm-out" or invest in Barryroe, in exchange for a stake in the project.

A deal is speculated to be worth around $300m (€217m) and would move the oil prospect closer to being the first successful commercialisation of Irish oil.

Farm-out deals are common for smaller explorers, who specialise in discovering, but lack the resources or engineering expertise to exploit findings.

Providence's advisers Rothschild have narrowed talks with potential partners down to a single American operator following negotiations with at least 12 interested parties, 'The Independent' reported.

Investors had previously been concerned that farm-out talks for Barryroe were not progressing quickly enough, an issue that pushed the company's share price down considerably in the early months of this year.

In a statement Providence said that said it is in talks "with a number of third parties" about the development of Barryroe and there was no certainty that a mutually acceptable agreement would be reached.

The deal, if it eventually closes, will be a milestone for the Irish oil and gas industry.

Providence boss Tony O'Reilly has said a successful farm-out of Barryroe could be worth several billion euro.

Those comments were made months before his company and partner, Lansdowne Oil and Gas, were granted an expansion of the exploration licence, suggesting the deal could be worth more.

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.

However, with new engineering techniques, and a higher oil price, Mr O'Reilly said Barryroe "could be the new North Sea".

Barryroe is Providence's most promising prospect by far – an independent report on the asset, in which Providence owns an 80pc stake, found that there were some 311m barrels of recoverable oil. Providence itself pegs this much higher.

The company stands to reap huge benefits if it can successfully commercialise the field. Its shares are currently priced at £1.82 (€2.20) – down from £7.10 (€8.60) in 2012 – but brokers at Liberum Capital say it could be valued at as much as £17.30 (€21) per share.

Taxpayers also stand to benefit, with the field possibly generating taxes of €4.5bn over its lifespan, according to a report released last year by auditing firm PricewaterhouseCoopers.

That's a figure equivalent to the entire annual corporation tax take in Ireland for 2011.

Irish Independent

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