Providence Resources in $12m bond issue

Providence Resources is planning to raise $12 million (€12.6 million) through the issue of unquoted convertible bonds. The company has also announced the start of the Helvic drilling programme in the Celtic Sea. The two-year bonds are fully underwritten by Dr Tony O'Reilly, who has irrevocably undertaken to subscribe for $5.26 million of the bonds, an amount which represents his pro rata entitlement.

The bonds are being issued at a price of $1 (£0.82) on the basis of one bond for every 65.886 ordinary shares. They will be designated in dollars but may be subscribed for in Irish pounds.

The bonds will be redeemed by their conversion at the foreign exchange rate prevailing on the relevant conversion date (unless the rate is below €1 to $0.80, in which case that rate will apply, or is above €1 to $0.94, in which case that rate will apply at an exchange rate of €0.02 per ordinary share).

That represents a discount of 42.9 per cent over the share price of €0.035 prior to the announcement. Shareholders, excluding Dr O'Reilly, will have to approve the issue of the bonds at an extraordinary general meeting to be held on June 29th.

The funds will be used to finance the beginning of the drilling programme at the Helvick oilfield next month.

"This represents implementation of the first step in the overall strategy of the company to realise the value inherent in the company's Celtic Sea portfolio," a Providence statement said. The field is located in the south-west corner of block 49/9.

The objective of the drilling programme is to provide further information on the oil-in-place and on the projected recoverable reserves, including areas not previously tested.

It is also intended to confirm expected maximum flow rates in the region of 10,000 barrels of oil per day, the statement said.

Seismic tests have resulted in the estimated reserves going up from 18 million barrels to 28 million barrels. This increase and the improvement in the oil price led the company to proceed to the next stage in developing the oilfield, according to the statement.

The group's latest results show a return to profit before tax of £330,000 (€419,014) in 1999, compared with a loss of £1,903,000 in 1998.