Providence cuts costs as it waits even longer for loan advance from APEC

(Sharecast News) - Ireland-based energy company Providence Resources updated the market on Standard Exploration Licence 1/11 on Tuesday, which contains the Barryroe oil accumulation.
The AIM-traded firm explained that SEL 1/11 was operated by its wholly-owned subsidiary EXOLA DAC, with a 40% working interest, on behalf of partners APEC Energy Enterprises and Lansdowne Celtic Sea.

It said the area lay in around 100-metre deep water in the North Celtic Sea Basin, about 50 kilometres off the south coast of Ireland.

On 5 June, the company announced that it had agreed to certain amendments to the farm-out agreement for the Barryroe Project with APEC and Lansdowne, including a revised backstop date with APEC for receipt of the $9m loan advance to 14 June, which was subsequently extended through various extensions to 19 August.

"As at close of business on 19 August, no funds had been received in the company's account but the company has again received assurances that the $9m loan advance due under the updated farm-out agreement is in the process of being paid," the Providence board said in its statement.

"Accordingly, the Barryroe partners have agreed to a backstop extension of on or before 26 August."

The company also noted that on 9 August, the Barryroe partners confirmed that they had received permission from the Minister of State at the Department of Communications, Climate Action and Environment to undertake a seabed debris clearance, environmental baseline and habitat assessment site survey over the area of the Barryroe field within SEL 1/11.

It said on Tuesday that, while the implementation of the site survey was subject to the receipt of funding from APEC or alternative financing arrangements being put in place, it had agreed payment of the contractual mobilisation fee to ensure that the contracted vessel could mobilise to Ireland.

The nominated vessel was currently finishing up activities in the North Sea prior to its planned mobilisation to Ireland, which was expected to occur later in the week, with an expected start of operations before the end of the month.

On 5 August, Providence also advised shareholders of the proposed re-engineering of its business model.

It said that, in addition to its announcement that it would vacate its current Dublin office early in the fourth quarter and relocate to a smaller serviced office facility, that the size and composition of the board would change and that the use of various service providers and advisors would be reduced.

The firm also said that all technical and support staff would be made redundant.

Providence projected that, when implemented, the re-engineering would reduce the annual cost base of the business, excluding capital expenditure, from the current $5.3m to $1.9m, representing a 65% reduction in total annualised costs.

"Today, the company updates that all technical and support staff affected by the proposed re-engineering are no longer reporting to work and that, subject to the receipt of the loan advance or alternative financing arrangements being put in place, final settlement agreements agreed between the Company and the staff will be signed and the redundancies will be implemented," the board said on Tuesday.

Looking at its working capital, Providence had previously reported that as at 2 August, it had unaudited cash balances of approximately $1.45m and that, in the event that the loan advance was not received from APEC by the revised backstop extension, it would need to put in place alternative financing arrangements in order to provide it with sufficient working capital beyond the end of August.

"The company has continued to review and revise its working capital position to reflect the corporate and operational matters outlined above.

"Accordingly, the company updates that, in the event that the loan advance is not received by APEC, the date by which it will need to have in place alternative financing arrangements in order to provide it with sufficient ongoing working capital has been extended into the third week of September 2019."