Providence warns working capital could run out by next month
Oil and gas explorer says it has enough funds to meet costs until early April at the latest
Providence flagged as promising a formation lying beneath the Barryroe field which has yet been undrilled. Photograph: Finbarr O’Rourke
Beleaguered oil and gas explorer Providence Resources only has enough working capital to meet its costs until the end of March or early April, the company said on Thursday.
In an update to the stock market, the company said additional funds will be required to provide “sufficient working capital to support the business in the near term”. The board is considering “all funding options”, it said.
In September, Providence set out details of a plan to re-engineer its business model and has since completed a redundancy programme and “materially reduced the cost base”.
Its troubles stem from the loss of its Chinese partner Apec on the key Barryroe prospect off the south west coast of Ireland. After missing several deadlines for the payment of funds, the company abandoned Apec as a partner and has since been seeking a new partner for the Barryroe site. It also replaced Tony O’Reilly jnr as chief executive with Alan Linn.
“All exploration licences are being reassessed based on cost and relevance to the new business model,” the company said.
“It may be new management, but the basic requirement does not change,” Davy analyst Job Langbroek wrote in a note to clients. “For the hydrocarbon potential of Barryroe ... to be realised, a farm-out deal to complete its appraisal is needed.”
Providence has initiated the regulatory process to transfer back its interest in Barryroe from Apec. The company has begun the farm-out process again and said on Thursday that “a number of companies are actively assessing the field data”.
It said that a review of Barryroe’s potential confirms that there is a considerable gas resource there, in addition to the oil resource which was the original focus of the farm out process.
“Several additional companies not included within the initial process have express interest in the gas potential and have been invited into the data room.”
Providence also flagged as promising a formation lying beneath the Barryroe field which has yet been undrilled. It is considering whether to dig deeper to establish the potential that may lie further down.
Appearing to address concerns over the carbon footprint of oil and gas exploration, Providence said that it is assessing the possibility of using nearby depleted gas fields for carbon sequestration, something that may minimise the carbon footprint of the development by recycling some of the existing pipelines and infrastructure.