Industry & Business

Announcing its half-year results yesterday, the oil and gas explorer said it is in discussions with its debt provider, US-based Melody Finance, regarding a “possible extension of the terms and maturity” of its debt facility.

Providence agreed $24m in financing with Melody in June 2014. This was made up of two credit facilities, one for $20m and one for $4m. The $4m was repaid in June. The balance of the $20m is currently due to be repaid in May 2016.

Under the terms of the agreement made between the two companies, Providence is required to repay the $20m facility with the proceeds of the farm-out of the Barryroe oil and gas field. The company’s half-year results show it had €15.6m of the facility outstanding as of the end of June, and also had €11.3m in cash and cash equivalents.

Providence, which has an 80pc stake in Barryroe, has been attempting to secure a farm-out partner to help fund the development of the field since its discovery in 2012.

An independent audit of the field, which is located off the coast of Cork in the Celtic Sea, estimated that there could be more than 300m barrels of recoverable oil at the site.

Although it was announced in February that a preferred partner for the farm out had been identified, a final deal has failed to materialise and Providence is still on the hunt for a partner to help develop the field. At the company’s annual general meeting in June, chief executive Tony O’Reilly,  said that there were four interested parties in the Barryroe data-room, which provides information on the project.

The company has previously said it is aiming to close a deal on Barryroe by the end of 2015.

Speaking to the Irish Independent, Mr O’Reilly said that a debt extension is a ‘Plan B’ for the firm, which is instead hoping to complete a farm-out deal for the Barryroe before the repayment falls due in May.

“If Barryroe is delayed for whatever reason we would be looking to extend the terms of the facility rather than looking for more capital,” he said. “We rescheduled the debt last year, our financiers have been good, they like our assets.

“They showed a pragmatic attitude last year and I think they would this year. We want to exit [the facility] through the farm-out process [but] plan B is to reschedule the debt if it hasn’t been exited beforehand.”

Mr O’Reilly would not be drawn on the possible terms of any new debt deal. Regarding the farm out he said that talks are still continuing.

“We are talking about what to do in terms of drilling, so that is the level of detail of the conversations we are having now,” he said. “Drilling costs have dropped by 40-50pc recently [and] someone looking at our portfolio is looking at what oil prices will be in 2018/2019 [so] now is a good time for a deal.”

During the first half of the year the company also increased its stake in the Spanish Point licence off the west coast of Ireland, although work there has since been delayed, and signed a strategic exploration agreement with industry giant Schlumberger.

The company’s half-year results also showed that operating losses widened from €3m to €3.8m in the first half of 2014, roughly in line with analysts expectations.

Providence, which is not yet revenue-generating, saw full-year losses increase from €3.4m to €8.4m. Losses per share rose from 5.22 cents per share in 2014 to 7.94 cents.

The firm also flagged yesterday that it has embarked on a cost-cutting programme to reduce non-essential costs.

This is forecast to reduce general and administrative costs by 12pc this year, and by 20pc next year. It is also forecasting a 40pc reduction in its capital expenditure programme.

Shares in Providence were down 4.3pc to 13.40 pence in mid-afternoon trading in London yesterday.