EXPLORATION COMPANY Providence Resources has raised €42 million in a convertible bond issue which will be used to fund drilling in the company's Celtic Sea projects and certain potential new Gulf of Mexico projects, writes Fiona Reddan.

The deal was placed in the London market and was mostly subscribed to by large British-based institutions and a US institution, as well as some Irish clients.

"We are particularly pleased that this deal was well received by the market, despite the very tough market conditions," said Tony O'Reilly, chief executive of Providence Resources, adding that the firm had chosen a bond issue to raise funds, as raising equity capital in the current environment was "near on impossible".

The company initially sought to raise €40 million through the bond issue, but it was over-subscribed. The bonds can be converted into ordinary shares of nominal value €0.001 each at a conversion price of €0.10 per share. The conversion price represents a 19 per cent premium to the closing price on July 21st of €0.084, the date on which the board of the company agreed the terms of the bonds.

Denominated in units of €100,000 each, the bonds carry annual interest of 12 per cent, payable semi-annually in arrears; they mature on July 29th, 2012.

Last November, Providence agreed a $250 million revolving credit facility with Macquarie Bank, which will be used for development and acquisition financing, with the funds from the bond issue used for drilling opportunities.

Providence Resources has also moved a step closer to commencing its multi-well appraisal drilling programme at the Hook Head and Dunmore oil accumulations in the north Celtic Sea. It has just taken delivery of the GSF Arctic II, a semi-submersible drilling rig. Drilling is expected to commence within the next two weeks.

Mr O'Reilly said that the firm expects to recover some 60 million barrels of oil from Hook Head and 18 million barrels from Dunmore.