Member Info for ps200306

chef136: "On another 'issue' Iam loosing track on the amount of warrants being used to shore up finances while diluting and ignoring small shareholders.Anyone else got thoughts on this?"

The easiest way to factor this into your calculations is to just assume there will be 1.2 billion shares on issue this time next year. That way there will be no surprises, and any warrants not exercised will be an improvement to your equity.

Summary of the position since last year is that there were 657m shares before the April 2020 placing. That resulted in 178m new shares, and an equal number each of 3p and 9p warrants. Of the 3p warrants, 94m have been exercised as of today, with 84m still outstanding and expiring on May 6th. If all get exercised you will have a little over 1000m shares on issue by May, and 1200m by this time next year if the 9p warrants are exercised. Any new placing is on top of that.

We'll see how DCCAE reacts to the petroleum lease undertaking application from PVR when the existing license expires in June. I would assume it's a formality and Ryan can't use it as an excuse to quash Barryroe.

They were tardy in coming up with 200k last year. They'd have to come up with 600k for the warrants, to make 100k if they're lucky. That's assuming there isn't a load more quick-in-and-out merchants doing the same. They already dumped their existing 20m shares like a hot potato. Dunno, sounds to me like they'd steer clear, but could be wrong.

The Indo says 103 million 3p warrants outstanding. By my reckoning it's 117 million, but maybe I missed something. 20 million of them belong to SpotOn, which I'd hazard a guess won't be exercised.

[177,973,004 issued -333,333 (25-Aug) -16,433,333 (28-Sep) -8,181,669 (15-Oct) -10,666,667 (22-Oct) -11,673,812 (10-Dec) -1,954,038 (19-Feb) -11,877,250 (27-Apr) = 116,852,902]

db71, just means that anyone paying 2.5p is either overpaying or is anticipating a pipeline deal. That's all fair enough, of course. The stock market is generally forward looking.

buggsbunni: "would like appreciate an update on how things are expected to be in the next 12 t0 24 months."

If SOU close the various deals to get to LNG, they will be worth -1p (MINUS one) per share in two years and debt free in ten. On the slim chance that they also raise $87m in finance for a pipeline AND get someone to farm in they will be worth 6.5p in two to four years. Possible chance of some more drilling beyond that. All laid out in the optimistic valuation that they commissioned themselves.

The RNS does mention that the service providers will provide cost deferrals "on equivalent or better terms" than under SpotOn, and "on a risk/ reward basis ". Hard to know if that effectively means they farm in to a percentage. I guess the details will come out in the wash.

Just a wee thought on the defunct SpotOn deal ... I had always assumed that the 50% share of B'Roe that SpotOn were getting was going to be partly used to incentivise the service providers and bond purchasers. From Linn's interviews and Q&A it sounds like the service providers only get paid the cost of the services plus, presumably, some extra amount reflecting the fact that they have to defer the payments. They don't get any equity in the field itself. Which means SpotOn were literally pocketing half the value for themselves in return for being go-betweens. Sounds incredibly sweet for them and a monumentally bad deal for PVR. It really does seem like PVR are better off without them ... if they can pull off what SpotOn couldn't, which is a big "if".

LONGWAIT: "Something doesn't 'add up,' ps! Assuming PVR retains a 40 percent interest, the breakeven would have to be $30.83 to produce a profit share of $560 m. Assuming a breakeven of $26, a profit of $560 m would imply a share of just 34.3 percent.

You've left out the NPV10 discount, LONGWAIT. It depends on the specific cashflows, so requires assumptions about the ramp-up period to max production. I played with some (to me) plausible ones. The net result is that you have to multiply all income by about 60% to get the right value. Using that, the PVR share looks to be about 60% (assuming $26/bbl breakeven). Linn confirms $25 breakeven in latest info doc which I posted below, and says PVR will, in fact, retain 80%.

Probably where I'm going wrong is a) PVR will eventually have to pay tax, after recouping its $240m in tax losses, b) I ignored San Leon's 4.5% net profit interest, c) other stuff I can't even begin to guess at.

So Linn really thinks he can keep 80% ! Amazing if true (but I'll wait till I see it). Also means an extra bonanza if oil stays significantly above $60.

Providence Resources Plc -- Questions and Answers (1 of 4)

* Why have the Barryroe partners terminated the agreement with SpotOn?

The farm-out agreement stipulated that SpotOn would source the capital to appraise and develop the Barryroe oil & Gas field. This involved a contribution by GIEK, the Norwegian export credit agency and also the sourcing of a corporate bond. GIEK will not be participating (RNS March 1st) and the bond issue is not complete. These were substantial changes to the funding proposition which were unacceptable to Providence. Consequently, a decision was taken that SpotOn would not be able to deliver a funding package as required and any benefits from a farm-out would be much diminished.

* What are the implications for Providence?

As operator of the licence Providence will immediately become more involved in project workflows and the provision of finance to advance the project.

* Has the value of the project to Providence changed?

Yes, all things being equal the net present value of the project (PVR model) to Providence is now greater in NPV terms (e.g. @ $60/bl, NPV to Providence’s share was $327m and is now $560m). This is because the 50% farm-out to SpotOn is not taking place. Providence will now have an 80% share in the field rather than a 40% share as envisaged under the SpotOn farm-out agreement.

* What is different between this and the termination of the previous Farm-out?

Both Apex and SpotOn ultimately failed to meet expectations as set out in the respective Farm-out agreements. Nonetheless there is one fundamental difference in that the work undertaken to put in place a bond and to source service company cost deferrals as a source of capital remain in place. In effect the Barryroe partners now have a funding model to proceed with.

* Have the service companies confirmed their ongoing participation?

Early stage MOU agreements have been confirmed with the service groups involved that are similar to the agreements with SpotOn.

* Does the termination imply anything about the quality of Barryroe?

No. Development efforts for Barryroe have taken place during nearly a decade of difficult oil markets, industry deleveraging and shifting investment perceptions for oil and gas. Efforts to secure capital have been from unconventional sources. It is this factor which is largely accountable for the difficulty in completing a funding package.

Providence Resources Plc -- Questions and Answers (2 of 4)

* What are the qualities of Barryroe?

Barryroe is one the largest undeveloped oil accumulations offshore Europe. It is in shallow water has a favourable tax regime and is close to markets for both oil and gas. The lower Wealden sands have been penetrated five times and the last well demonstrated that although a waxy crude (which is valuable) it can flow commercial rates with appropriate technology. Moreover, it can be developed in stages minimising overall commercial risk. Any production will also be very tax efficient on Providence’s part given the carry forward of $240m of tax losses.Apart from the project specific benefits of Barryroe it would provide material exchequer benefits especially if the field is developed beyond the eastern panel (48 million barrels only). It also provides security of oil supply and would under the right Government backdrop offer a significant opportunity to generate CO2 neutral power and carbon capture.

* Has any progress has been made?

Yes. The SpotOn farm-out work resulted in a broad funding structure, albeit it was not completed as agreed. At the same time the various verification workflows undertaken have confirmed expectations for the field.

* What is the timing of the project now?

Importantly development timelines have been largely unaffected. Project design is based around an early development concept and, subject to funding completion and regulatory approval, drilling of a well and first oil is still being targeted for 2023.

* What is the status of the Barryroe licence?

Following a two-year extension SEL 1/11 expires this summer. As provided for in State licencing legislation Providence has applied for a Lease Undertaking. Lease Undertakings are issued where the licence holder believes a discovery is commercial but more time is required for confirmation.

* What is the scale of the funding?

The original farm-out agreement with SpotOn included the provision of at least $166m of finance towards the early development programme. SpotOn was also required to provide a non-recourse $5m loan to Providence.

* How will the project be financed now?

The Barryroe partners will now become directly involved in securing and putting in place the capital required to progress the project and source development capital, the exact makeup of the funding has yet to be determined but it will consist of a mix of debt and service company cost deferrals.

* Has the preparation for the capital market element (Bond) of the funding started?

Yes. Active discussions are underway with Scandinavian brokers with a view to raising the bond.

* Have other sources of capital contribution been sought?

Providence remains open to other sources of capital such as pre-sale of final product to oil buyers.

Providence Resources Plc -- Questions and Answers (3 of 4)

* What about the requirement for short term working capital?

To maintain development pace and demonstrate their continuing and material support for the project, Pageant Holdings, a substantial shareholder, has made an offer to underwrite a capital raise for US$2.5m at 3p per share. The offer includes a one for one warrant which would potentially raise a similar amount.

* What will happen over the next year?

The next 12 months will require the completion of the funding package agreement. Operationally Providence will secure the Lease Undertaking for the project and State approved site survey of the K well location on Barryroe is scheduled to complete before the end of the year in preparation of theexpected drilling programme in 2022. In parallel various regulatory approvals are required included environmental and drilling programme designs.

* What will Providence’s role be?

Providence as operator will now become very heavily involved in the process of securing and putting in place the various elements of the financing package. It will also manage and control the operational work streams required.

* Is Providence sufficiently resourced operationally to complete this?

Providence formerly operated deep water wells in the Porcupine using quality service Group’s managed by in-house expertise. Activity over the next three years will follow the same model. In fact steps have already been taken to increase Providence’s operating and financial structuring capabilities.

* Is the project viable in the context of the transition to low carbon?

Yes, absolutely. In fact, Barryroe will play an important role in any energy transition for Ireland. Any oil and gas produced ensures security of supply to provide the platform to make low carbon investments. The presence of substantial quantities of gas in Barryroe is a potential replacement for existing domestic production but also creates opportunities to supply net CO2 neutral energy to Irish markets.

* How do oil prices affect Barryroe’s viability?

Barryroe is operationally cash positive down to $25 per barrel. Above $35 per barrel it generates material positive IRR’s. At current oil prices retunes from Barryroe are very attractive. With respect to the longer oil price outlook all accepted major forecasters (OPEC, IEA, EIA) of oil supply/demand propose mid-case models that see oil demand at similar or higher levels between 2040 and 2050. With overall investment in the industry declining as the transition to low carbon energy takes place, Providence believes oil prices will have to be at appropriate levels to meet that demand.

Providence Resources Plc -- Questions and Answers (4 of 4)

* Is the cost deferral model by Service companies normal?

This structure is not a traditional source of finance but it has become more common over the last 10 years as service companies have looked to offset the decline in operating activity by the oil and gas industry. The model provides higher returns for service companies through equity participation by taking on greater upfront project risk.

https://www.providenceresources.com/sites/default/files/providence_resources_plc_-_question_and_answers_in_relation_to_termination_of_spoton_energy_barryroe_limited.pdf

Someone check my arithmetic? Linn says NPV10 on 48m barrels of oil is worth $560m to Providence at US$60 per barrel, according to "internal modelling". That works out a little under $12/bbl. Breakeven, we were told, was about $26/bbl so there's a margin of $34/bbl. Applying a reasonable production ramp-up time of several years, an NPV10 would imply about a 40% discount on the total cash flows. Comparing PVR's $12/bbl to 40% of $34/bbl suggest to me that PVR expects to retain about 60% of Barryroe when the dust settles. That wouldn't be a bad result (if it ever happens). We could do with a bit of an information dump from Linn, though.

The only idiots are those still crowing about Graham's successes when SOU is still light years from generating any actual value. I suggest we let the share price do the talking.

Absolutely much better, Tincan. Phase 2 looks to be worth less than hoped as well. But a lot better than nothing.

Can't be much doubt at this stage that Sharetrader123 is a paid ramper. Post after sycophantic post with nothing but brown-nosing platitudes. The hard facts are that SOU hasn't even closed the Phase 1 deal yet and, although it seems likely they will, even then it's worth ZERO. *That's* why the SP has hardly moved.

"but you keep 80% vs 40%. That is much more valuable!"

Yes, but it doesn't take too many 15% dilutions before it ends up being the same thing. We've just had another 15% go to Pageant for a pittance. Would be amazed if we didn't have to offer a chunk to consortium members and bond purchasers as part of any revised plan. On the upside (at least from a dilution, though not cash flow, point of view) , we have a ton of 3p warrants expiring next week. By my reckoning, only 50m of 177m have been exercised so far. Share price could under 3p by next week, so hard to see a flood of takers.

SpotOn had an option on 60m shares at €0.17 after oil started flowing. The Pageant offer is 160m shares and warrants at 3p, regardless of whether EDP goes ahead. Hard to begrudge it as the lights would be going off at Providence otherwise, but the dilution just underscores the cost of the SpotOn timewasting.

I'd feel more comfortable if Linn had been forthcoming about exactly what sank the SpotOn deal. What's to say that the go-it-alone version won't hit the same or similar obstacles? One thing that's always been missing from the Sequa/APEC/SpotOn fiascos is any sort of assessment (either up front or post mortem) of what could/did go wrong. Understandable, as PVR are usually raising funds from hapless shareholders on the back of the latest feelgood narrative. As others have said, it starts to wear a bit thin on the fourth attempt. On the other hand, some of us have little option but to suck it up. It's just a pity to have to acknowledge that Linn is no more trustworthy / competent than the Bronze.