5 Aug 2019 07:00
Corporate Update
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
CORPORATE UPDATE
Update on Barryroe Farm-out Transaction Further Extension Granted to August 12, 2019Site-Survey Consent Pending Corporate Update Proposed Re-engineering of Providence’s Corporate Business ModelWorking Capital Update Board Update Planned Changes to Composition of Providence’s BoardDublin and London – August 5, 2019 - Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Energy Company (“Providence” or the “Company”), today provides the following corporate update.
UPDATE ON BARRYROE FARM-OUT TRANSACTION
Barryroe Licence
Standard Exploration Licence (“SEL”) 1/11, which contains the Barryroe oil accumulation (the “Barryroe Project”), is operated by EXOLA DAC ("EXOLA" or the “Operator”, 40%), a wholly-owned Providence subsidiary, on behalf of its partners, APEC Energy Enterprises Limited (“APEC”) and Lansdowne Celtic Sea Limited ("Lansdowne", 10%). The area lies in c. 100-metre water depth in the North Celtic Sea Basin and is located c. 50 km off the south coast of Ireland.
Background
On June 5, 2019, the Company announced that APEC, EXOLA and Lansdowne (together, the “Barryroe Partners”) had agreed certain amendments to the Farm-Out Agreement (the "Updated FOA") for the Barryroe Project, including a revised backstop date with APEC for receipt of the US$ 9 million loan advance to June 14, 2019, which was subsequently extended through various extensions to August 2, 2019.
Extension of Backstop Date
As at close of business on August 2, 2019, no funds had been received in the Company’s account as the payment date is still pending due to final processing by HSBC. Accordingly, to facilitate this, the Barryroe Partners have agreed to a further backstop extension of on or before August 12, 2019.
Site-Survey Consent Pending
The Company is still waiting for consent to conduct a site survey over Barryroe. As of August 2, 2019, the application is still pending with Ireland’s Department of Communications, Climate Action & Environment. The Board believes that the carrying out of the site survey in the immediate term is essential to expedite the forward drilling plans for the Barryroe Project which will be managed by a dedicated project management team.
CORPORATE UPDATE
Proposed Re-engineering of Providence’s Business Model
In its FY 2018 results release of June 28, 2019, the Company announced that the Board had carried out a strategic review of the Company’s operations to ensure that its business model continues to be ‘fit for purpose’. As a result, the Board concluded that there was an immediate requirement to re-engineer Providence’s business model to reflect the changes evident in its operating environment.
This re-engineering reflected a number of material factors, including:
the Company’s success in farming out the majority of its portfolio, which has led to: the transfer of Operatorship in most of the Company’s key assets; anda substantially reduced technical role for the Company; the fact that the Company is not a revenue generating Company the Company’s past two years of working capital have been financed solely through the completion of farm-out deals with third parties; and the inability to pursue international expansion.Since that announcement, the Company has continued to progress this business re-engineering by implementing a project-based, outsourced business model which is more aligned with the current reduced and sporadic nature of its operated activities. The Company has engaged in a consultation process with its staff and its Board and conditional on the Company having sufficient working capital to implement the necessary changes (see ‘Working Capital Update’ below), the following actions have been identified as necessary:
the Company will vacate its current Dublin office in early Q4 2019 (at the expiry of the current lease) and re-locate to smaller serviced facility in Dublin;all technical and support staff will be made redundant;the size and composition of the Board of Directors will change (see below); andthe use of various services providers and advisors will be reduced.The Company projects that, when implemented, the annual cost base of the business (excluding CAPEX) will be reduced to US$1.9 million from US$5.3 million currently, representing a c.65% reduction in total annualised costs.
Working Capital Update
As at August 2, 2019, the Company had unaudited cash in bank of approximately US$ 1.45 million. As outlined above, the Company has received further assurances that the US$10 million loan advances due under the Updated FOA are in the process of being paid. However, the Board advises that, should these funds not be received by the revised backstop date and taking into account creditors on the balance sheet and existing forward commitments, including the necessary planned site survey at Barryroe and the proposed business re-engineering, the Company would need to put in place alternative financing arrangements in order to provide it with sufficient working capital beyond the end of August 2019.
BOARD UPDATE
Planned Changes to Composition of Providence’s Board
As part of the re-engineering process, the Board feels that it is an opportune time to reduce the size and composition of the Board consistent with Providence’s business needs and is implementing the following changes to the Board:
John O’Sullivan, Technical Director, will step down with immediate effect;James McCarthy, Non-executive Director, will not seek re-election at the upcoming 2019 Annual General Meeting (”AGM”) in September 2019;Lex Gamble, Non-Executive Director, will step down on December 31, 2019; andPhilip O’Quigley, Non-executive Director, will not seek re-election at the 2020 AGM;The 2019 AGM will take place at The Hilton Hotel, Charlemont Place, Dublin D02 A893, Ireland, on Thursday, September 12, 2019 at 11.00am.
| INVESTOR ENQUIRIES | |
| Providence Resources P.l.c. | Tel: +353 1 219 4074 |
| Tony O’Reilly, Chief Executive Officer | |
| Cenkos Securities plc | Tel: +44 131 220 9771 |
| Neil McDonald/Derrick Lee | |
| J&E Davy | Tel: +353 1 679 6363 |
| Anthony Farrell | |
| Mirabaud Securities Limited | Tel: + 44 20 3167 7221 |
| Peter Krens | |
| MEDIA ENQUIRIES | |
| Powerscourt | Tel: +44 207 250 1446 |
| Peter Ogden | |
| Murray Consultants | Tel: +353 1 498 0300 |
| Pauline McAlester |
ANNOUNCEMENT & FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements. Actual results may differ materially from those projected or implied in such forward-looking statements. Such forward-looking information involves risks and uncertainties that could significantly affect expected results. No representation is made that any of those statements or forecasts will come to pass or that any forecast results will be achieved. You are cautioned not to place any reliance on such statements or forecasts. Those forward-looking and other statements speak only as at the date of this announcement. Providence Resources P.l.c undertakes no obligation to update any forward-looking statements.
ABOUT PROVIDENCE RESOURCES PLCProvidence Resources is an Irish based Oil & Gas Energy Company with a portfolio of appraisal and exploration assets located offshore Ireland. Providence’s shares are quoted on the AIM in London and the Euronext Growth Market in Dublin. Further information on Providence can be found on www.providenceresources.com