Providence axes jobs amid dwindling cash

Oil and gas explorer Providence Resources, whose shares have been rattled in the past two months by funding delays for its main project, saw its shares tumble as much as 34 per cent in London as the company reported its cash level has dwindled to $1.45 million (€1.3 million).

The company, led by chief executive Tony O'Reilly jnr, warned it would have to put "alternative financing arrangements" in place to fund itself beyond the end of August if $10 million (€8.9 million), which has been long overdue from the Chinese backer of its Barryroe project off the coast of Cork, has not been received by then.

Providence also revealed in a stock exchange announcement that it had decided to make all its technical and support staff redundant, with its technical director John O’Sullivan leaving with immediate effect. It is understood that they account for 10 of the company’s 13 staff.

The job cuts are in order to make the business “fit for purpose” after it sold large stakes and the rights to operate wells in most of its key assets, according to the company. In addition, it has moved to reduce its current seven-man board to three, plus a company secretary.

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“The company projects that, with implementation, the current cost base of the business will be reduced to $1.9 million from $5.3 million, annually, representing a 65 per cent reduction in total annualised costs,” it said, adding that this excluded capital expenditure.

Providence will also leave its existing headquarters in Donnybrook in Dublin 4 at the expiry of its current lease and move to a smaller office in the fourth quarter, it said.

Shares plummet

Shares in Providence plummeted by as much as 32 per cent to 7.35p in London. Its stock fell 15.8 per cent in Dublin amid thin trading volumes due to the August bank holiday.

Providence agreed in March last year to give Chinese company APEC a 50 per cent stake in Barryroe, which is estimated to have 311 million barrels of recoverable oil, in exchange for the Beijing-based firm covering half of the cost of an associated $200 million five-well drilling programme. The deal also covered APEC lending Providence and Lansdowne Oil & Gas, which has a 10 per cent stake in the field, money to cover their costs.

However, Providence revealed in early June that it had not received an initial $10 million (€8.9 million) payment from APEC. A series of subsequent deadlines for receipt of the funds have been missed, with Providence saying on Monday that the money had not yet been transferred to its account as of the last deadline at close of business on Friday. The company has previously said it had received documents provided to APEC's funders by banking giant HSBC showing that the money has debited from their account for payment to Providence but the transaction was not fully processed.

The Irish company has given APEC a further extension, until close of business next Monday.

Meanwhile, Providence’s cash position has fallen to $1.45 million (€1.3 million) from $7.62 million (€6.83 million) at the end of December and $19.6 million (€17.58 million) at the end of 2017.

The total remuneration of Mr O’Reilly and Mr O’Sullivan amounted to €845,000 for that financial year, down from €1.19 million for the previous 12 months.

Meanwhile, Providence said it was still waiting for a permit from the Government to conduct a site survey over Barryroe.

“The board believes that the carrying out of the site survey in the immediate term is essential to expedite the forward drilling plans for the Barryroe project which will be managed by a dedicated project management team,” it said.