Providence has found a Chinese partner to fund its oil drilling off the Cork coast
A consortium has agreed to fund the Barryroe offshore project.
IRISH EXPLORATION FIRM Providence Resources has signed a deal with a Chinese consortium that will see the Asian outfit fund its oil-drilling project near the Cork coastline.
After a failed attempt to drill last year off the coast of Kerry, Dublin-based Providence Resources has turned its attention to its site at Barryroe – about 50km from the south coast of Ireland.
The firm’s chief executive Tony O’Reilly said the company had been looking for a partner to work on the Celtic Sea prospect, which is estimated to hold more than 300 million recoverable barrels of oil.
The Dublin-based exploration firm has announced today it has entered into an agreement with a Chinese-led consortium, headed by APEC Energy Enterprise, to help progress works at the Cork site.
APEC is a private Chinese company that has strategic partnerships with both Oilfield Services (COSL) and JIC Capital Management. JIC is a Chinese state-owned company, while COSL is a subsidiary of China National Offshore Oil Corporation.
Providence Resources said that APEC will be assigned half of the Irish firm’s share of the Barryroe project in return for paying for all of the drilling work and providing necessary equipment.
The Chinese firm will also issue a loan to Providence to finance the Irish firm’s share of the project. The loan will be repayable from the production cash flows arising from the Barryroe development.
APEC will receive four-fifths of the cash flow from the Barryroe project until the loan has been repaid.
Providence Resources CEO Tony O'Reilly
Providence boss O’Reilly said the deal was a “significant transaction” and that his firm will finalise the drilling timeline over the next few months.
In a briefing note, Davy analyst Job Langbroek stated that no overall pricetag had been attached to the project, but he estimated the gross costs of the programme would be between €80 million and €97 million.
“The news that Providence has achieved a farm-out of the Barryroe project offshore Ireland is very good for the project and shareholders,” said Langbroek.
He added that although oil markets have recovered over the last 18 months, the number of farm-out agreements remain low.
“An agreement that results in a three-hole and three-sidetrack drilling programme is a good outcome and again shows Providence to be the main driving force behind drilling offshore Ireland.”
Providence has been working for years to progress the field. Some of the Irish firm’s shareholders previously threatened to revolt as a result of the company’s inability to progress work at the Barryroe oil field.
