LONDON (Alliance News) - Providence Resources PLC on Wednesday announced delays at the Barryroe oil project and said more funds have been allocated for forward costs.
Shares in Providence were down 17% at 8.50 pence in morning trade. Shares in Lansdowne Oil & Gas PLC, which has an interest in Barryroe and noted the Providence announcement, were down 9.0% at 1.57p
Barryroe is located 50 kilometres off the south coast of Ireland in the North Celtic Sea Basin and operated by Providence unit Exola DAC. A restated farm-out agreement for the project was signed in September 2018 between Providence, APEC Energy Enterprises Ltd, and Lansdowne Oil.
In November 2018, the three companies decided not to act on the well site-survey permission they had been granted and would instead apply for new consent. This followed an application for judicial review by An Taisce - an Irish environmental organisation - against the Irish Minister of Communications, Climate Action & Environment, which challenged the legality of Exola's permission to conduct well-site survey operations.
A new application was submitted in February 2019, superseding previous consent. Questions were raised by the Irish regulator and replies have been submitted, with the application currently being adjudicated by regulators.
If regulatory consent and financing are obtained, then well-site operations at Barryroe will take place in the third quarter of 2019, having previously been expected in the second quarter.
In light of the delays from the legal challenge, as well as its damage to planning and pre-drill consent operations, drilling at Barryroe is expected in the fourth quarter and not the third quarter as was previously anticipated.
New amendments to the agreement have allocated USD24 million to fund Exola's forward costs, up from a previous USD19.5 million. These costs include well-site survey operation, consent for the drilling programme, and other project-related costs.
The higher figure of USD24 million, Providence said, "reflects an agreed augmented scope of operator-related costs associated with the drilling programme".
Within that, USD9 million is to cover well-site survey operations and pre-drill well consents, which have not been incurred because of the legal challenge to survey consent. The other USD15 million is to cover operator-related drill costs before the first well is spudded.
The costs will be financed by APEC through a non-recourse loan with an annual interest rate of LIBOR plus 5% and is repayable from cashflow from the SEL 1/11 licence containing Barryroe. Once the loan is repaid, APEC is entitled to 50% of production cashflow from the licence, Exola to 40% and Lansdowne 10%.
A USD9 million loan advance from APEC has not yet been received, although it was originally due in the fourth quarter of 2018. A number of amendments to the farm-out agreement have been made to extend the date of the initial loan advance. A revised backstop date of June 14 has now been set.
Providence said it "understands that this delay is due, in part, to a change in the composition of APEC's funding mechanism" and "will issue a further update in due course".
