EXPLORATION GROUP Providence will use the €75 million that it plans to raise from investors to pay off some debt and to fund further drilling and testing at its oil and gas prospect off the south coast.
Providence recently announced that drilling in its Barryroe licence area off the Republic’s south coast had turned up commercial quantities of both oil and gas.
Yesterday, the company said it has agreed terms for a share placement that will raise £63 million (€75 million) from Irish and British institutions. The Dublin- and London-listed company plans to issue up to 13.15 million new shares at £4.80 a share.
The company said yesterday that it will use the cash to repay the $30 million (€22.5 million) balance of a convertible bond due in July.
A further €22.5 million will be used to pay for the increase in its stake in Barryroe to 80 per cent from 50 per cent, a deal agreed last December. Its partner in the licence, Lansdowne Oil and Gas, another independent exploration company, holds the remaining 20 per cent.
The balance will be used to pay for further testing and drilling at Barryroe, and to fund a wider drilling programme that Providence intends following for the rest of this year.
Providence has built up a large acreage of exploration licences around the Irish coast. A number of these areas, including Barryroe and Spanish Point, which is off the west coast, were drilled in the past and showed evidence of both oil and gas.
Tony O’Reilly jnr said yesterday that it was “highly probable” that Barryroe could be developed commercially. The licence area is close to existing pipelines used to service the Kinsale gas field.
Once it reaches the point where it is ready to be exploited, Mr O’Reilly said Providence is likely to bring in a partner to bring it to production. In this scenario the company would exchange a stake in Barryroe for a “free carry”, which would entitled it to a share of the proceeds from production. The company’s chief executive said the fact institutional investors were willing to take part in its rights issue means they “recognise that Providence has a good story to tell”. He also argued that its success could help to reignite interest in Irish territorial waters among the industry’s heavyweights.
The company recently announced that multinational Repsol, the largest refiner in Spain and Argentina, and a company that specialises in frontier exploration in the Atlantic, will operate its Newgrange licence, which covers a 1,000sq km area off the southwest coast.
Providence shares closed 9 per cent up at €5.994 in Dublin yesterday and remained unchanged at £5 in London, more than 4 per cent above the rights issue price.
