With no sign of Chinese money, Providence plans major cuts to address funding crisis
IRISH energy exploration company Providence Resources announced plans on Monday for job cuts and other immediate cost-cutting measures as it sought to address a cash crisis amid no sign of promised finance arriving from its Chinese partner.
Providence’s already battered shares slumped by nearly 30pc to below 8 pence on the London Stock Exchange as the firm announced that its cash reserves had fallen to $1.45m (€1.3m), less than 20pc what it had on deposit at the start of the year.
The company warned that, unless its Chinese backer APEC came through with promised funds soon, it would need to secure “alternative financing arrangements” for working capital to pay existing creditors and keep Providence running beyond the end of this month.
Providence confirmed it has yet to receive $10m (€8.9m) due from Beijing-based APEC to fund their joint Barryroe well-drilling project some 50 kilometers off the coast of Cork. Providence gave APEC a 50pc share of the project in 2018 and had expected to receive APEC's first cash transfer in mid-June but, with no transfer of the agreed funds, has repeatedly extended what it calls “the backstop date” for APEC’s money to appear.
On Monday, Providence said APEC had provided “further assurances” that the money was coming and again extended the deadline by a further week to August 12.
Dublin-based Providence said it would leave its Donnybrook headquarters for a smaller office once its lease expired this autumn, reduce spending on service providers and advisors, and lay off support and technical staff to slash its annual cost base from $5.3m to $1.9m.
Providence said while chief executive Tony O’Reilly Jnr would stay at the helm, the remaining board would be pruned from seven to three over the coming year. Technical director John O’Sullivan was stepping down immediately, it said, while non-executive director James McCarthy would not seek re-election at the company AGM on September 12. Two other board members, Lex Gamble and Philip O’Quigley, would not seek re-election at the end of December and at the 2020 AGM, respectively.
Providence said it had generated revenue over the past two years “solely through the completion of farm-out deals to third parties” and was experiencing an “inability to pursue international expansion”.
Providence declined to specify how many support and technical posts would be eliminated. The company’s most recent annual report said it employed 14 people last year.