Providence losses top €9m as Barryroe talks continue

Oil could begin flowing from the Barryroe field off the south coast in around two years, Providence Resources chief executive, Alan Linn, estimated on Wednesday.

The news came as Providence reported a loss of €9.25 million for the first six months of the year after accounting for shifts in the value of warrants issued as part of a fund raising in May.

Providence’s operations lost €1 million in the six months to June 30th from €5.3 million during the same period in 2019. The company cut costs by 63 per cent.

Talks with potential partner, Norwegian Player, Spoton Energy, are ongoing on plans to develop Barryroe, where Mr Linn suggested oil production could begin in around two years.

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Lying around 50km from the Cork coast, Barryroe could yield 350 million barrels of oil with, potentially, significant quantities of natural gas.

Early development means that the partners will not go through further appraisals of the field as Mr Linn noted they already have a lot on information on its reserves.

"We know that it flows and that it's extensive," he said. "We have come up with an early development scheme. We will go out and drill a number of wells, basically get it on line and produce oil." Cash from selling the oil would then finance the next stage.

This will require the Government approving Spoton’s inclusion in the licence for Barryroe and an environmental impact assessment.

Providence will also have to ensure its drilling rigs are qualified to operate in Irish waters. Working through these procedures could take around two years, Mr Linn estimates.

An agreed period of exclusive talks between Providence and Spoton is due to end on October 31st.

Spoton is bringing in a consortium of businesses to develop the field, including multinationals Schlumberger, Maersk Drilling, Keppel FELS, Aibel and AGR.

Mr Linn said that working through the commercial terms of a deal with the various partners was taking time.

Agreeing a partnership with Spoton, known as a “farmout” in industry parlance, would release a further €5.5 million to Providence under warrants issued to shareholders in May when it raised $3.3 million (€2.8 million).

Another series of warrants issued at the same time would bring in a further €16.5 million if progress continues with the Barryroe project.

Mr Linn pointed out this means Providence would be unlikely to tap shareholders for further cash.

However, accounting for movement in the the value of the warrants issued in May meant that Providenc’s results for the first six months included finance expenses of €7.764 million, pushing losses to €9.25 million.

Mr Linn stressed that this was an accounting exercise. Its actual expenses for the period were €819,000. On June 30th the company had €2.27 million in cash and no debt.

Providence is disposing of several oil and gas exploration licences issued for areas off the west coast.

It is holding on to permits covering the north Celtic Sea off the south coast. If Providence and its partners successfully develop Barryroe, its long-term plan is to use the field as a hub to bring these licences on line also.

On Wednesday, Mr Linn described Barryroe as one of Europe’s biggest undeveloped oil and gas fields. Providence owns 80 per cent of it while Landsdowne Oil and Gas holds the remainder.

Several efforts by Providence to strike deals on the field’s development failed in the past.

Mr Linn has said his main focus since taking the company’s helm in January has been on bringing Barryroe to production.