Providence says Barryroe would break even with oil prices at $26

CEO Alan Linn says oil field ‘economically compelling’ with oil prices at $50 a barrel

Providence Resources’ Barryroe well off the coast of Ireland. Photograph: Finbarr O’Rourke

Providence Resources’ Barryroe well off the coast of Ireland. Photograph: Finbarr O’Rourke

 

Providence Resources estimates that the initial development of the group’s key Barryroe oil prospect off the Cork coast would be at breakeven levels at about $26 (€23) a barrel, chief executive Alan Linn said in the company’s annual report.

Mr Linn, who took over as chief executive in January after Tony O’Reilly jnr quit late last year following a tumultuous period for the company, said that the oil field would be “economically compelling” with oil prices at $50-$60 a barrel, which, was “likely to represent a sustainable crude price range for the midterm”.

Brent oil is currently trading at $39 a barrel, double where it stood in late April when the oil markets were roiled by oversupply at a time when demand had been severely hit by the economic shock of Covid-19. Some short-term oil futures had even fallen into negative territory in recent months, as a result of a severe shortage of places to store oil deliverable under those contracts.

Providence reported last week that it recorded losses in 2019 of €26.8 million, after taking a €23.8 million impairment charge against the Barryroe exploration asset.

O’Reilly

Last week’s statement said that Providence made a termination payment to Mr O’Reilly of €448,000 in December, relating to a service contract with a company owned by him, called Kildare Consulting. The payment, in lieu of one year’s notice, brought his total remuneration for the year under that contract to €865,000.

However, the annual report put Mr O’Reilly’s total remuneration at €954,000. It is understood that this includes €88,000 relating to a separate employment contract with Providence Resources, including €45,000 for early termination.

Barryroe, located in shallow waters 50km off the Cork coast, was found in 2012 to have 346 million barrels of oil equivalent. However, two farm-in agreements – struck in 2015 and 2018, respectively – fell through after the selected partners, most recently Chinese company Apec, failed to come up with the necessary funds to complete a transaction.

In April, Providence selected a preferred new farm-in candidate, Norwegian oil field development company SpotOn, with a view to striking a deal by the end of October.