Providence raises $3.3m as deal over key asset progresses

Troubled Irish oil and gas explorer Providence Resources has raised about $3.3 million (€3.06m) by selling new shares to institutional investors as it progresses in arranging a deal for development of its most important asset.

The explorer, which is listed in both Dublin and London, said the issue price of 1.5p represented a 13 per cent discount to the stock’s closing price of 1.73p on Friday.

“Institutional and other investors” were responsible for about $2.63 million of the cash, while a subscription by Norwegian oil and gas development company SpotOn Energy Ltd will raise $370,000.

In a stock market update Providence said it has agreed non-binding heads of terms with SpotOn in relation to its Barryroe well off the south coast of Ireland.

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A farm-out deal for Barryroe has been agreed with other companies twice previously, but on both occasions fell through.

Under the deal SpotOn has a period of exclusivity until October 31st of this year, during which Providence plans to agree an appraisal work programme and develop commercial terms in an effort to conclude a binding farm-out agreement.

In addition to its investment through subscription securities, SpotOn will invest a further £200,000 (€226,804) within the coming six weeks through a subscription for new ordinary shares at market price.

“When we went with the placing SpotOn said they’d like to participate in the placing. No other farm-in contenders in the history of Providence have put money up front to be part of the business,” Alan Linn, Providence’s chief executive, told The Irish Times.

Farm-out

Providence was forced to re-engineer its business after the last farm-out deal over Barryroe fell through, and has now “materially reduced its running costs”.

The group has also reviewed its exploration portfolio, something it expects to result in additional licence and work programme cost-reductions this year.

The company’s September 2019 fundraising was only expected to provide sufficient funds until February of this year. While that period was extended, the company still had an “urgent need for additional working capital in order to allow it to continue as a going concern”.

The company will use the proceeds of the fundraising, which is expected to be received by May 6th, to provide general working capital. Mr Linn said that this capital-raising “will see us for a year, possibly slightly more”.

“In that time, assuming we move ahead with SpotOn, we would have a farm-in with SpotOn. Our view is if we can move this model through we get the services to do appraisal when costs are low. and we should be bringing the field on in three years’ time in the first phase.”