Larry Goodman eyes Providence success but Eamon Ryan is stalling

Market Beat: Businessman has raised his holding in Barryroe-owner Providence to 16.1%

Larry Goodman, the beef carcass king, is making a habit out of picking through parts of Tony O’Reilly’s former empire when it comes to selecting stocks for his family office.

The Co Louth businessman’s Vevan Unlimited Company investment vehicle spent about €2.31 million building up a 2.14 per cent stake in Independent New & Media (INM) between March 2018 and May the following year.

O’Reilly, who controlled the Irish Independent and Sunday Independent publisher for nearly 40 years up until 2012, had long since sold down his INM shares and filed for bankruptcy by the time Goodman cropped up on the share register alongside Denis O’Brien and Dermot Desmond. He would be the only one among the three to make a clear profit – an estimated 35 per cent return – on his investment when Antwerp-based publisher Mediahuis bought INM three years ago.

More recently Goodman has set his sights on Providence Resources, the oil and gas explorer that traces it roots back to the 1981 foundation of Atlantic Resources by a group led by O’Reilly. It has been one big sinkhole for hundreds of millions of euro of investors’ money ever since. Decades of drilling have delivered just one decent discovery – Barryroe, an oil and gas field about 50km off the Cork coastline that was found in 2012 to hold more than 300 million barrels of recoverable oil.

Yet 10 years later the prospect of black gold flowing from the field is as elusive as ever. A precipitous slide in oil prices between 2014 and 2015 didn’t help. Nor did a period where Providence management, then led by Tony O’Reilly jnr, was distracted by potentially much bigger – but riskier and, ultimately, dud – prospects off the west coast of Ireland.

And then there was a series of three planned Barryroe development partnership deals – or so-called farm-out agreements – that came to nothing. The latest, a deal with Norway’s SpotOn, which was supposed to receive a 50 per cent stake in the project subject to completing a $166 million fundraising to develop the field, collapsed in April last year.

Goodman reportedly entered the market to buy Providence shares later that month, just as confidence in the stock hit a fresh nadir. Vevan disclosed a 4.66 per cent holding in July last year. By last Monday it had almost doubled to 8.83 per cent, with the octogenarian businessman using a $1.8 million (€1.7m) cash call by the company in recent weeks to keep the show on the road to boost his holding.

On Thursday it was revealed that the Vevan stake had jumped to 16.1 per cent, making Goodman the largest shareholder in the company, at a time when long-term investor M&G was known to be selling its stake. The M&G holding had been in its so-called Recovery Fund, a home for stocks that are “out of favour, in difficulty or whose future prospects are not fully recognised by the market”. But even that fund has its limits.

Certainly the pitiful prices at which the businessman has been mopping up Providence shares – at between 1.5p and 3.5p a piece – means they are trading more like options than stocks.

While Providence, led since last year by executive chairman James Menton, plans to proceed with an appraisal well at the Barryroe field in 2023 which could pave the way for first production in 2026, one major obstacle stands in the way: the Minister for the Environment Eamon Ryan.

Providence has had an application since April last year with the Minister’s department for a key lease undertaking for the field in which it has an 80 per cent stake. Without this the company can’t do anything on the field or go about raising the $65 million it estimates it needs to cover its share of a planned three-well appraisal drilling programme.

Providence said in its annual results filing this week that it has written to Ryan on a number of occasions, asking him to grant the lease undertaking “as a matter of urgency”. (Barryroe also has gas reserves but the focus until now has been on its oil.)

It’s clear the Green Party Minister is reluctant to be seen to be signing off on the lease even though he committed to allowing existing exploration licences to run their course when laws were passed last year banning new permits.

As Providence continues to quietly lobby members of Government, it used its earnings release to make a more public pitch. “We are confident that our development plans can be progressed rapidly and Barryroe can have a significant impact on Ireland’s security of energy supply over the next two decades,” Menton said. “It’s an opportunity we cannot afford to squander as, in any scenario to 2050, there is still some level of demand for oil and gas through the duration of the energy transition to net zero.”

The war in Ukraine has pushed energy security and pricing to the top of the agenda for governments across Europe. And there are hopes in some quarters the expected publication in the coming months of a long-awaited Government-commissioned energy security report will provide Ryan with political cover to finally sign off on the lease.

Ryan’s colleague, Tánaiste Leo Varadkar, indicated in an interview last month with The Currency, an online business news publisher, that the main stumbling block in the way of renewing the licence lies in the fact that there is a question mark hanging over whether Providence has the financial backing to move forward with the next stage of its appraisal.

The growing presence of Goodman, with his deep pockets, on the shareholder register may assuage such concerns. It could also provide comfort to Providence, which plans to rename itself as Barryroe Offshore Energy, if it ultimately feels the need to take legal action.