The easter bunny has arrived early for all PVR and LOGP investors. It’s taken a few years to get to this point but finally Barryroe bags a farm out agreement. Based on timelines, it’s likely that any drilling of the 3 x wells will occur in 2019 due to seasonal weather issues in the Celtic Basin. It’s the big news that all have been waiting for and it hasn’t disappointed. As a word of caution, the chinese are well known for their time consuming diligence so be aware that the deal still needs to conclude via all the usual sign off’s.
PVR is part of TheShareHub top ten for 2018 and looks like it may have sealed a place in the 2019 picks too. Subject to deal concluding of course.
UK Regulatory (RNS & others)
Dublin and London – March 28, 2018 – Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Oil & Gas Exploration Company (“Providence” or the “Company”), today provides a commercial update on Standard Exploration Licence (“SEL”) 1/11 that contains the Barryroe oil accumulation. SEL 1/11 is operated by EXOLA DAC (“EXOLA”)(80%), a wholly-owned Providence subsidiary, on behalf of its partner Lansdowne Celtic Sea Limited (“Lansdowne”)(20%), collectively referred to as the “Barryroe Partners”. The area lies in c. 100 metre water depth in the North Celtic Sea Basin and is located c. 50 km off the south coast of Ireland.
Standard Exploration Licence (“SEL”) 1/11
Farm-Out The Company is pleased to announce that the Barryroe Partners have signed a Farm-Out Agreement (“FOA”) with APEC in relation to SEL 1/11. APEC is a privately owned Chinese company which has a strategic partnership with China Oilfield Services Co., Ltd (“COSL”) and JIC Capital Management Limited (“JIC”) for the investment and development of offshore oil and gas opportunities worldwide utilising Chinese drilling units, services and equipment. Under the terms of the FOA, in consideration for APEC being assigned a 50% working interest in SEL 1/11:
Commercial Terms — APEC will be directly responsible for paying 50% of all the cost obligations associated with the drilling of 3 vertical wells, plus any associated side-tracks and well testing (hereinafter referred to as the “Drilling Programme”); — APEC will provide a drilling unit and related operational services for the Drilling Programme; — APEC will finance, by way of a non-recourse loan facility (the “Loan”), the remaining 50% of all costs of the Barryroe Partners in respect of the Drilling Programme; — The Loan, drawable against the budget for the Drilling Programme, will incur an annual interest rate of LIBOR +5% and will be repayable from production cashflow from SEL 1/11 with APEC being entitled to 80% of production cashflow from SEL 1/11 until the Loan is repaid in full; — Following repayment of the Loan, APEC will be entitled to 50% of production cashflow from SEL 1/11 with EXOLA and Lansdowne being entitled to 40% and 10% of production cashflow, respectively. Operational Terms — EXOLA will act as Operator for the Drilling Programme with technical assistance being provided by the APEC Consortium; and, — After the completion of the Drilling Programme, APEC will have the right to become Operator for the development/production phase. Issuance of Warrants to APEC — Upon completion of the Drilling Programme, APEC will be able to subscribe for warrants over 59.2 million shares in Providence at a strike price of GBP0.12 per share (the “Warrants”). — The Warrants, representing circa 9.9% of the current issued share capital of Providence, are exercisable for a period of 6 months following the completion of the Drilling Programme.
The Closing of the Farm-Out (“Closing”), which is expected to occur in Q3 2018, is conditional on completion of all ancillary legal documentation required to implement the terms of the FOA, and is subject to the approval of the Minister of State at the Department of Communications, Climate Action and Environment and the approval of the Chinese government. In addition, the details of and schedule for the Drilling Programme are subject to further ongoing technical discussions between the Consortium, Exola and Lansdowne. Subject to Closing, the revised equity in SEL 1/11 will be EXOLA (Operator, 40%), APEC (50%) & Lansdowne (10%). Further announcements on the transaction will be made in due course.
Speaking today, Tony O’Reilly, Chief Executive of Providence said: “This is a significant transaction for Providence and Lansdowne which will deliver multiple new penetrations of the areally extensive Barryroe field. In addition, it also provides for the acquisition of modern dynamic well test data that should assist in advancing the field to production. Over the coming months, we will be working with the APEC Consortium to close the transaction and finalise the specific timeline and the precise details of the drilling programme. We are very pleased to have agreed this deal, which will allow us to avail of ‘state of the art’ drilling units and technical capabilities in order to advance Barryroe to first oil.”
Mr. Colin Lui , Chairman of APEC Energy Enterprise Limited commented: “APEC, supported by Jianyin Investment Company and China Offshore Services Ltd, are very pleased to have strategically joined forces with Providence and Lansdowne to develop the Barryroe field. This field has significant recoverable resources and we look forward to jointly developing this opportunity. Whilst the Farm-Out Agreement has been agreed specifically for Barryroe, the parties have also agreed to jointly investigate further opportunities in other licensed blocks offshore Ireland in the future.”