Providence Resources P.l.c., the Irish based Oil and Gas Exploration Company, provides a commercial update on Licensing Option (LO) 16/27, which lies in c. 1,300 metre water depth in the southern Porcupine Basin and is located c. 150 kilometres off the south west coast of Ireland. The Licencing Option is operated by Providence Resources P.l.c. (Providence, 80%) on behalf of its partner Sosina Exploration Limited (Sosina, 20%). LO 16/27 contains the Paleocene “Avalon” exploration prospect.
Farm-in Agreement with TOTAL for 50% Working Interest
Providence and Sosina have signed a Farm-in Agreement (FIA) with TOTAL E&P Ireland B.V. (TOTAL), a wholly owned subsidiary of TOTAL S.A. In consideration for TOTAL taking a 50% working interest in LO 16/27, TOTAL will:
? Pay its pro-rata share of past gross costs of c. US$ 0.175 million
? In addition to its pro-rata share, pay 21.4% of the past and future costs during the 2-year term of LO 16/27, subject to a gross cost cap of US$ 1.33 million
? Under the terms of the FIA, and subject to Ministerial approval, TOTAL will assume Operatorship of LO 16/27 and any subsequent licensing authorisations issued
? In the event that the JV partners agree to convert LO 16/27 into a Frontier Exploration Licence, and a subsequent decision is taken to drill an exploration well, TOTAL will pay 60% of the drilling costs, subject to a gross well cap of US$ 42 million
The TOTAL farm-in is subject to the approval of the Minister of Communications, Climate Action and Environment. Subject to this, the resultant equity in LO 16/27 will be TOTAL (Operator – 50%), Providence (40%) and Sosina (10%).
Option Agreement with Cairn for 20% Working Interest
Providence and Sosina have signed an Option Agreement (the “Option”) with Capricorn Ireland Limited (Capricorn), a wholly owned subsidiary of Cairn Energy PLC (Cairn). Under the terms of the Option, Capricorn has the right to farm-in to a 20% working interest in LO 16/27 from Providence & Sosina. The Option can be exercised by Capricorn within 60 days of the completion (plugging and abandoning) of the upcoming 53/6-A well on Frontier Exploration Licence 2/14.
If Capricorn elects to exercise the Option, Providence, Sosina and Capricorn will enter into an agreed Farm-in Agreement (FIA) to effect the transfer of a 20% working interest in FEL 2/14 to Capricorn, based on the following terms where Capricorn will:
? Pay its pro-rata share of past gross costs of up to US$ 0.175 million
? In addition to its pro-rata share, pay 8.6% of the past and future costs during the 2-year term of LO 16/27, subject to a gross cost cap of US$ 1.33 million
? In the event that the JV partners agree to convert LO 16/27 into a Frontier Exploration Licence, and a subsequent decision is taken to drill an exploration well, Capricorn will pay 24% of the drilling costs, subject to a gross well cap of US$ 42 million
In the event that Capricorn exercises the Option, the final equity would be TOTAL (Operator – 50%), Providence (24%), Capricorn (20%) and Sosina (6%). Conclusion of any farm-in by Cairn would be subject to the approval by the Minister of Communications, Climate Action and Environment.
Speaking today, Tony O’Reilly, Chief Executive of Providence said:
“We are delighted to have agreed this farm-in transaction on Avalon with one of the world’s leading E&P companies which provides further significant technical, financial and operational capability to the LO 16/27 joint venture group. We are also pleased to announce this option agreement with Cairn. This further potential transaction would serve to create a common partnership with our nearby Druid block with which Avalon shares many geological similarities.”
