Providence Resources is pleased to announce the publication of its annual report and accounts for the year ended 31st December 2020.
Alan Linn, CEO of Providence comments: “The decision by the Board to take control of the Barryroe development is an important strategic moment for Providence. We are convinced it is the best way to deliver the full value potential from our Celtic Sea acreage for shareholders whose ongoing support is recognized and appreciated.”
Financial summary:
- Operating loss for the period of €2.440 million versus €25.936 million in 2019.
- Loss for year of €10.358 million versus €26.853 million in 2019.
- Loss per share of 1.31 cents versus 4.39 cents in 2019
- At 31 December 2020, total cash and cash equivalents were €2.110 million versus
€0.710 million in 2019.
- The Company has no debt as at 31 December 2020.
- In May 2020, the Board raised c. €3.0 million (gross proceeds) through the issue of 177,973,004 ordinary shares which comprised of one ordinary share, one £0.03 warrant which expired on 6 May 2021 and one £0.09 warrant which expires on 6 May 2022. The total proceeds raised in 2020 by the equity raise and conversion of warrants was c. €4.8 million gross.
- The total issued and voting share capital comprises 974,864,403 ordinary shares of €0.001 each as at 17 June 2021.
2020 in review
In March 2020 SpotOn Energy, a privately owned Norwegian oil and gas company, entered the Barryroe farmout process offering an attractive business model which included partnering with an incentivized consortium of “world-class” service companies to deliver a low cost, high-quality project. SpotOn Energy also committed to secure non-recourse financing for the full project development capital requirement. SpotOn were unable to meet the farmout conditions as agreed, and in April 2021 Providence elected to terminate the farm-out Agreement.
A Board review of the Barryroe project following termination of the farmout concluded that a significant opportunity exists to progress the Barryroe appraisal and development by taking direct control of all elements of the appraisal and development project.
Providence is building upon existing in-house project and technical competencies and has established the team required to fully resource the project design and development. Given the phased nature of the field appraisal and development this is a pragmatic and practical decision for Providence ensuring that project development expenditure is carefully managed and the reservoir development optimized.
The commercial relationships with service providers, established during the farm-out process, have been refreshed and continue to present an opportunity for Providence to work in partnership to optimize overall project development. Providence is also progressing discussions with several Norwegian banks proposing to raise a conventional bond to contribute a material portion of the Early Development Scheme capital requirement.
In May 2020 Providence raised €3.0 million by way of a placing of ordinary shares. This placing consisted of one share, one £0.03 warrant exercisable up to 6 May 2021 and one £0.09 warrant exercisable up to 6 May 2022. Together equity raised as well as the conversion of warrants contributed a total of €4.8 million in 2020 which will be primarily deployed to progress the Barryroe project.
In July 2020 Andrew Mackay joined the Board as a non-executive director bringing extensive industry experience. Subsequent to the year-end in May 2021 James Menton was appointed as a Senior Non-Executive Director. James Menton is a highly experienced advisor to a number of leading companies in Ireland and overseas.
Providence’s primary focus is properly on Barryroe, however, our licenses in the North Celtic Sea hold significant near field appraisal and exploration potential and will be incorporated into future plans. The Jurassic formations beneath the proven lower Cretaceous reservoirs in Barryroe are an attractive prospect and the investment case for existing satellite discoveries is improved assuming that they can be utilized with future development infrastructure on Barryroe.
Elsewhere Providence has taken a pragmatic cost reduction approach in reducing its deep- water exploration portfolio along the western seaboard.
Barryroe remains a source of significant value
Technically and commercially the Barryroe oil and gas field has come of age. The large fields in the North Sea are declining and smaller more challenging fields are being developed. The Barryroe field economics are competitive with the best of the UK development projects.
The field is located in shallow water just 50km from shore, far enough offshore not to be visible from land and close enough to access local services in Cork. Currently the oil production is expected to be lifted offshore from a Floating Production Storage Offshore (FPSO) vessel by shuttle tankers. The gas, when brought into production, is expected to be used to generate offshore power to both electrify the offshore processing facilities and supply electricity to the national grid by undersea cable. Commercial technology is available to introduce carbon capture offshore by sequestering the power generation exhaust gases which, with government support, will ensure that all the electricity produced from gas offshore is carbon neutral.
The regulatory process
The Irish government introduced a ban on new oil exploration in September 2019 in response to a call for direct action to reduce the impacts of climate change. The government has confirmed on many occasions that existing licenses are unaffected. Moreover, it has confirmed it will continue to progress existing licenses through their various stages, as the regulations intended. The constitutional property rights over existing licenses are expected to be further confirmed in the Climate Action Bill, which is expected to be finalized in legislation during 2021. The bill is designed to legislate for the introduction of various measures designed to transform Ireland into a low carbon economy by 2050. In April 2019 the Barryroe Partners applied for a Lease Undertaking to the Irish authorities. The Lease Undertaking application did not progress as APEC was unable to comply with the terms of the farmout agreement which was ultimately terminated. A Lease Undertaking submission is made to the government when a field has been discovered and additional work is proposed to confirm commerciality. An updated Lease Undertaking was submitted on 9 April 2021, more than three months before the end of the exploration license, as required by the regulator. The submission includes an updated work programme focusing upon proving commerciality for the EDS area and, subject to government approval, a declaration of commerciality and the award of a Petroleum Lease, prior to commencement of early production from the eastern panel area of the Barryroe Field.
The future
Providence has taken back control of the Barryroe appraisal and development work programme and, with government support and continuing shareholder backing, we expect to deliver an exceptional project which will support Ireland’s transition to a low carbon economy and produce significant benefits for the local economy through investment and employment at a time when the country is looking for economic certainty. The Board is grateful to each one of our shareholders for their continuing support and firmly believes the Barryroe field has come of age and with government support can be fully developed over the next few years.
