US sale hits Providence results

Exploration company Providence Resources Production reported a net loss of more than €41 million in 2010, as falling oil prices and a loss on the sale of its US operations hit results.

The company reported revenue on continuing operations of €11.1 million, broadly similar to the previous year's €11.7 million. Providence said there was a slight fall in UK production volumes, which it attributed to drilling operations interrupting production rates in the final quarter.

Lower oil prices during the year were offset somewhat by a stronger dollar.

The company also recorded a loss from discontinued operations of €31.8 million.

Chief executive Tony O'Reilly said the net loss was mainly due to the sale of its US operations. Providence sold its Gulf of Mexico oil and gas production portfolio in a deal worth up to $22 million, which included a cash payment of $15 million and $7 million in deferred payments subject to performance. However, this selling price was below the $65.5 million that was originally paid for it, with Davy analysts saying it reflected lower gas pricing.

Mr O'Reilly said there was a huge increase in activity at Providence in 2010, including expanding its production base onshore UK and the announcement of the largest drilling programme to be carried out offshore Ireland.

"We took a strategic decision to divest our portfolio of non-operated assets in the Gulf of Mexico, which was the main reason for the significant loss for the year," Mr O'Reilly said.

"Additionally, we took the decision not to proceed with the Kinsale Head Option for gas storage. However, we still see significant potential in gas storage and are therefore continuing to examine the feasibility of the Ulysses Project in the Irish Sea."

The company raised £41 million from a share placing in March 2011.

Looking ahead to 2011, Providence said it was expecting a period of “high activity”.

"The whole focus of the group, rightly in our opinion, is now on delivering value through the drill-bit. The drilling programme that will be undertaken in the coming months and years has the potential to transform the group," Davy analyst Job Langbroek wrote in a note.

"If it can demonstrate that it is possible to deliver oil and gas value from offshore Ireland, it is in a firstmover position in most areas. This is what the next two years can deliver and is the primary investor attraction of the stock."