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I think the contract is governed by Irish law because that is where Barryroe is situated.
I have to say, though, that no payment can be indefinitely delayed on the ground that the contract doesn't specify a date by which it has to be made.
Furthermore, if APEC were to insist on delaying the payment indefinitely while retaining its contractual rights, it would lay itself open to a claim for damages as it would be wilfully preventing Barryroe from being developed!
Have you ever heard the term "the law is an ass".
I made a legal mistake in the past when I signed a deal "subject to California law". Now, I did this with an American company out of ignorance but the reason why American companies do that even though they are not in California is because Californian law is the one most favourable to Americans and your chances of winning pretty well goes out the window.
I was lucky because I had to hire an American lawyer through my own solicitors who were able to get a decision in my favour but it was an easy mistake to make and while it initially cost me money it ended up well spent.
So, we do not know under what legal system the deal was written. If you have ever dealt with contracts you will know the last line normally says "Subject to he laws of xxxxx" where xxxx is the land where the law is applied. If Providence's says "Subject to the laws of Ireland" then all well but what if it said "Subject to the laws of China (or even Hong Kong) "? You have just let go a real bag of worms and "reasonableness" goes out the window.
'Can APEC invoke the original contract without paying anything up front?'
That would not be reasonable, because it is obvious that the whole point of the contract was to enable one party - PVR - to develop Barryroe with the help of the other party - APEC - and that the deal depended on APEC providing the finance.
The test of 'reasonableness' would defeat APEC in any legal action.
The Chinese deal was the only "zero cost " deal on the table. That is why it was so attractive. Providence and Lansdowne did not have to pay a penny until the oil started to flow and even then "no oil no fee". Where is Providence going to get $100m to develop its half of Barryroe?
The only thing for Providence is to sell a share in Exola to a third party and with the money develop Barryroe without an input from Providence. Other than that, a deal similar to the APEC one of no money up front is the only solution when you have no money. But that begs the question is the oil in Barryroe actually accessible on a commercial basis?
It is not to say Providence has not had the money to develop Barryroe over the years at a cost of $100m since 2012. It has raised and spent well over that amount since 2012. The only issue is it has squandered it on dead duck projects such as Dunquin North and Druid/Drombeg etc even though it said it was going to use it to develop Barryroe. All of which had to be at the insistence of John O'Sullivan who must have convinced O'Reilly of the success chances of these "dead ducks" otherwise why did they do it? Good riddance to him, I say.
Now all that is left for Providence is to sell out its equity holdings but the first thing it has to do is get back the 50% stake in EXOLA it passed to APEC as part of the deal which is why I raised the issue of the deal before. If the original deal does not stand why did they give APEC 50% shares in EXOLA without getting the upfront loans? Without that equity it has nothing of real value to offer an alternative partner.
The reason it passed the 50% equity to APEC is because the "loans" it is waiting on were never part of the original contract. They were only added in when they amended the contract was signed on 20th March 2018 which was subsequently amended on September 20th 2018 with the addition of the $19m loans and again further extended on February 1st 2019 when the COSLInnovator was nominated as the drilling ship for the Barryroe wells with COSL doing the drilling, and then on June 5th the upfront costs increased to $24m and Providence was questioning the non-payment of the first $9m which up to then we were not told about but had not been paid due to the An Taisce challenge.
Now, how about that for a bag of worms. So, actually under the original contract, APEC were not due to pay anything up front but to do the surveys and the drilling. The loans only came in on subsequent amendments. So what is the legal status of the contract? Can APEC invoke the original contract without paying anything up front? Your guess is as good as mine since we have not actually seen the contract and the amendments but if the original contract is not binding why did Providence assign the 50% equity in EXOLA without having the loans included?
Sounds like a good old Laurel and Hardy sketch "Another fine mess you got me into!!!"
The Chinese deal was the only one in sight at the time and the company was right to take it, as there was always a chance it would go through. The Asset still stands, BUT, elsewhere in the world oil can now be discovered, and targeted easier through 4D technology scanning. The increasing supply keeps prices down. The upside, is PVR assets, that extraction process is improving too.
It amazes me how little you people know of Providence and its history. So here are a few questions which might explain why it is in such mess today?
Why did Providence chase other opportunities instead of using the money, as it promised, to develop Barryroe?
Who was the largest shareholder in Providence up to 2015 and why are they no longer a shareholder in Providence?
What happened in 2017 that made Providence put the development of Barryroe on hold? Who invested in a development based on bad advice and who bought into the development?
What type of license is Barryroe and what are the conditions attached to it that limit its life expectancy? What can Providence do or has done to protect it?
Let us just start with those.
Absolutely no way of knowing, LW. It's immaterial anyway as there's nothing any of us can do but wait. I won't be holding my breath. Some of Barryroe's history can be put down to bad luck. Some of the focus on other projects to the detriment of Barryroe can be put down to pressure from II's. But the APEC episode is one that can be put down to monumental incompetence on the part of management. It doesn't bode well.
You don't believe that PVR have received any 'overtures,' then, ps?
Oil had recovered to today's prices or thereabouts before Providence's wagon got hitched to the APEC donkey. There was no Total knocking on the door, and giving 50% of the farm away to a shady Chinese consortium must have been the option of last resort. If Total weren't knocking then, why would they (or anyone else) come knocking now? Is there something toxic about Providence?
The reason why there was little interest in Providence in the years between 2012 and now is the price of oil.
In 2012 up to 2014 the price of oil was over $100 a barrel. In 2014 it fell off the cliff falling to a low of $29.44 before rising again to where it is now at about $52. Check out the following chart:
https://www.macrotrends.net/2516/wti-crude-oil-prices-10-year-daily-chart
The major impact on the price during that period was the increase in oil production in the US where shale oil and gas have made the US the world's largest producer of oil and accordingly the price fell as we live in a "supply and demand" world.
But even in this natural resources world it is anticipated that oil prices will rise over the coming years. Interesting statistic recently is that there are 650 million automobiles in the world and 75 million are produced annually. If 3 million are electric that leaves a lot of petrol and diesel cars already here and more being produced.
So, only now with the price of oil improving is it worthwhile for somebody to develop Barryroe. Providence estimates it will cost $25 a barrel to produce which is expensive when you consider others look to $5 in places like Africa but then Ireland is a stable and low tax oil country whereas other countries are not. For example, Tullow just completed a two-year tax battle with the Ugandan government over a sale of assets to Total, note: "British Oil firm Tullow is set to formally exit active operations in Uganda, after agreeing to a payment plan for taxes on its farm-down to Total E&P."
So, only now with a reasonable and stable oil price is it worth developing Barryroe especially as it is probably going to be the only oil and gas development in Ireland for the next ten years given the track record to date of getting licenses and even finding any oil or gas.
I'm sure some of the bigger investors have TO'R on speed dial. However, he has never felt any obligation to update us mere plebs. He implied he'd be reviewing his own position if APEC didn't come through by end of September. Another half a month on now, and not a peep out of him. His own shareholding is worth less than a year's salary which has to be a concern. We can only hope that the seven IIs who own 60% of Providence are putting a bomb under him. Barryroe still oozes potential but given the history I think it's last chance saloon. Can easily see the lights going out in February or, at least, dilution to oblivion which amounts to the same thing for anyone who cannot countenance yet another roll of the dice. Getting Total on board sounds like a nice idea until you wonder why they weren't knocking at the door instead of Sapinda or APEC when they were already involved with PVR. To me, any success with Barryroe at this stage will be a pleasant surprise rather than an expectation.
Yes these are critical legal issues affecting PVR, Exola, Lansdowne, and their respective shareholders. It's just a great pity that PVR either isn't clear about the legal position, at this late stage of proceedings, or, if it has been given a sound legal opinion, why PVR hasn't informed ALL shareholders, publicly.
Financially Total is raking it in and could easily take over the APEC deal as is, obviously also take operatorship of Barryroe and Providence and Lansdowne could just sit back and wait for the money to roll in.
Perfect solution.
I raised the issue of APEC the other day on whether they had a blocker on the deal even though they have not fulfilled the terms of the loans. But if you read the original contract between Providence, APEC you will see there was no mention of upfront payments. They appeared in the first amendment when it was to be only three wells and was then raised upwards again in June of this year when it went to five wells and a side track.
So the question is what sort of contract was actually written and under what law? Hopefully not "subject to Chinese law" for example. Now that would be a belly full of worms.
So, if Providence has to get back its 50% of Exola from APEC it means it has transferred it. Another bag of worms?
So how long before we get an update as to what is going on? A piece of string approach?
In its dealings with Total, Providence has always been well treated. Can't say the same for APEC.
Would be great if they decided to farm into Barryroe Manyana. I think the cloud of uncertainty created by the Climate change movement has really affected sentiment around offshore Ireland, but I do believe that the main political parties in Ireland have no problem with developing Ireland's oil and gas reserves.
This is old hat and is a Sunday newspaper filler.
Yes, Total took over Diablo Ridge which was the third element in the Druid/Drombeg fiasco but it was never envisaged as being other than totally speculative as Druid/Drombeg were water. The chances of oil seeping out of them into Diablo Ridge was very, very remote.
I believe Total took it just to have a finger in the Irish oil pie as, other than its arrangements with Providence for Diablo, it only has an interest in Providences' Avalon license 2/19 which it took control of in February of this year.
"Irish oil and gas company Providence has informed that the Total-operated licensing option 16/27 offshore Ireland has been granted a Frontier Exploration License Status 2/19, with effect from February 1, 2019".
Now that it has dropped Diablo Ridge the only thing Total has now in Irish waters is its partnership with Providence in Avalon. "It is operated by TOTAL E&P Ireland B.V. (“TOTAL”) (50.0%), with partners being Providence Resources P.l.c. (40.0%) and Sosina Exploration Limited (10.0%)."
The chances of it being developed in the next few years is in the lap of the gods so what has Total, one of the biggest oil companies in the world, got in Ireland other than a few petrol stations and what are its intentions?
Article in today's Irish Independent newspaper:
October 13 2019 7:00 AM
A joint venture between four oil and gas explorers has dropped a frontier exploration licence for a prospect in Irish waters.
Irish oil and gas explorer Providence Resources announced the decision as part of a corporate update.
The joint venture, which also included Total, Cairn Energy and Sosina, said it had conducted detailed technical assessments of the area and had concluded it could not recommend any further development of the prospect
Total, the French oil exploration company, informed the Government of the decision to voluntarily surrender the exploration licence for the FEL 2/14 Diablo site, located off the south-west coast of Ireland, by the end of the year.
It follows Taoiseach Leo Varadkar's declaration during September's UN Climate Summit in New York that Ireland would not issue oil exploration licences for the Atlantic area in future, affecting 80pc of the country's waters.
The status of issued licences, such as the one given to the joint venture, is unaffected by Varadkar's declaration.
FEL 2/14 was awarded to Providence and Sosina as part of the 2011 Irish Atlantic Margin Licensing Round.
Total currently holds a 35pc stake in FEL 2/14 after farming into the licence in late 2017.
Total's block partners include Capricorn, a wholly-owned subsidiary of Cairn Energy, which holds 30pc of the prospect.
Providence has 28pc and Sosina holds 7pc.
According to the Irish Offshore Operators Association, about €1bn has been invested in the hunt for oil and gas off the coast of Ireland.
Nearly 160 wells have been drilled in Irish waters since exploration began in the 1970s, with only the Kinsale and Corrib gas fields yielding recoverable hydrocarbons.
In 2012, Irish-headquartered Providence, headed by Tony O'Reilly Jnr, discovered oil at the Barryroe oilfield in the Celtic Sea, 50km off the coast of Cork. The company believes the area holds 311m barrels of recoverable oil.
It is seeking a new partner to help fund the recovery of the oil after APEC, a Chinese backer, failed to provide $9bn (€8.1bn) in funding. Providence said it was laying off technical and support staff to cut running costs.