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Providence stands to net up to $22m from sale of US portfolio

PROVIDENCE Resources is to sell off its US oil and gas portfolio in a deal worth up to $22m (€15.5m).

In a statement, the company said it will sell the portfolio in the Gulf of Mexico to Dynamic Offshore resources for $15m with another $7m to follow if Dynamic hits certain production levels prior to January 2013.

The proceeds from the sale would be used to reduce Providence's reserve-backed lending facility with BNP Paribas, while the sale would also allow the firm to concentrate on its offshore Ireland drilling programme and its Singleton field in the UK.

Providence said the deal would result in a non-cash write-off of some €29m in its annual accounts. Total current production from Providence's Gulf of Mexico portfolio amounts to about 700 barrels of oil equivalent per day (BOEPD), comprising 3,060 thousand cubic feet of gas (MCFG) and 190 BOEPD. Despite spending some $67.5m on the portfolio in early 2008, the company said it had performed well and served its purpose for the company.

"Whilst the assets have delivered cash flow, the impact of shale gas production on US domestic gas prices have limited the company's options to develop this gas-weighted portfolio and production levels have fallen to 700 BOEPD.

"Accordingly, the company took the decision to withdraw from the Gulf of Mexico," Providence said in a statement.

Davy's Job Langbroek welcomed the sale.

"(This) is another step in the re-focusing of the group to a portfolio of high-impact exploration assets that will be drilled over the next two years.

"We see the sale as a positive development for Providence; the price reflects the changing reality in the Gulf of Mexico offshore where the onset of prodigious quantities of shale gas has severely impacted gas pricing compared to a number of years ago.

"Providence is in a process of deleveraging, at the end of which it will be a focused exploration group with a multi-well drilling programme of very significant value leverage. We think that this is a much more attractive proposition," he said.

Providence was up nearly 1pc in afternoon trading yesterday at €3.02.

Irish Independent