Providence scales back Barryroe plans

Capital challenge: Tony O'Reilly says market squeeze has meant few major M&A deals

Ireland’s Providence Resources has scaled back the initial development of its Barryroe oil & gas field in a bid to fuel its long-running efforts to tempt would-be partners with a lower capital commitment for the field off southern Ireland.

The Dublin-based explorer is now looking to a staged development of the North Celtic Sea field, initially only ramping up to 30,000 barrels per day of oil but coming online sooner.

Chief executive Tony O’Reilly said that the revised plans had come “in light of the marked reduction in capital expenditure programmes by major industry players”.

O’Reilly said that “this phased approach has been well received and the company is now in advanced discussions with a select number of international E&P companies on terms”, while cautioning there was no certainty of a deal.

Situated 50 kilometres off the county Cork coast, the field is estimated to hold 311 million barrels of oil and 207 billion cubic feet of gas from Basal Wealden and Middle Wealden reservoirs, according to a pair of independent audits.

The explorer has been chasing a partner for the FEL 1/11 development for more than a year, leading to its shares taking a battering over rumoured problems in the protracted negotiations with multiple parties who were previously described as being from North America, Asia and Europe.

O’Reilly said that “overall, the farmout and M&A market in the oil & gas sector remains challenging, with caution evident across the sector”, suggesting that few projects in the whole region were seeing any major deals.

“The majority of worldwide oil and gas investments and M&A deals have been concluded either in the North American shale gas and oil sector or in the East African region with very few major farm out deals being completed in the North-West European sector over the past year,” he said.

O’Reilly also said meanwhile that Providence Resources intended to be a “major player” in the Atlantic margin licensing round signalled by Irish authorities earlier this month.

He did not criticise Dublin’s recent decision to raise the top tax on Irish oil & gas fields to 55%, but did say that the company welcomed the government’s decision not to make the increase retroactive.

Shares in the company were trading down 2% at £1.38 on Friday morning on London’s AIM, where the stock was worth £5.42 this time last year before the farmout woes and disappointment over the results of ExxonMobil’s Dunquin North wildcat.

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