Ireland: Barryroe farm-out terminated over funding issues

Oil and gas company Providence Resources has terminated its farm-out agreement with SpotOn Energy for the Barryroe project off Ireland because the key financing conditions have not been met.

Providence, as the operator of the project, signed the farm-out agreement with SpotOn Energy for the offshore block in Ireland containing the Barryroe oil and gas discovery at the beginning of December 2020.

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In an update on Thursday, Providence Resources said it has terminated the farm-out agreement with SpotOn Energy for the Barryroe licence and is progressing arrangements for an alternative funding package to finance 100 per cent of the costs of the early development scheme (EDS) for the Barryroe licence (SEL 1/11).

The agreement was terminated because key financing conditions were not met and Providence will now lead the project development and funding arrangements.

According to Providence, building from the many positive elements of the SpotOn project development and financing model, the Barryroe partners are pursuing a similar development approach.

This includes payment deferrals by individual service providers on equivalent or better terms and a Nordic bond issue.

This revised approach will enable Providence to participate in a much greater share of the value of the Barryroe asset than was proposed under the SpotOn structure, the company explained.

Work to progress the funding solution is well advanced and is expected to be concluded before the end of the third quarter, in time to progress a 2022 drilling programme.

Barryroe map - Providence Resources
Barryroe map; Source: Providence Resources

To maintain development pace, Pageant Holdings, a substantial shareholder, has made an offer to underwrite a capital raise for $2.5 million at 3p per share to cover the incremental project funding requirement which was originally expected from SpotOn upon completion of the farm-out.

The funding will be used to support critical path, project specific work programmes, providing space for the full project funding solutions to be finalised.

Providence CEO, Alan Linn, commented: “Having actively supported SpotOn over the past year it is disappointing that it’s become necessary to terminate the farm-out process with them. However, we are looking forward and actively building a revised development partnership with key service providers and a financing package designed to meet the needs of the project.

He added: “We are currently working with key service providers to structure direct long-term partnerships on a risk/ reward basis and we are also in discussions with brokers to raise a Nordic bond. The interim funding offer from Pageant Holdings is very welcome and a confirmation of their continuing support for the value potential of the development.

“The Barryroe early development scheme is an attractive investment which offers excellent returns, even in a low oil price environment”.

Barryroe – Early Oil Development Scheme

Providence has existing government approval to undertake an offshore site survey at the K- site location, and this work is scheduled to be completed before the end of 2021, ahead of a planned drilling programme during 2H 2022.

The drilling programme will require an environmental impact assessment report to be completed as well as various regulatory approvals before the commencement of operations.

In April 2019, the Barryroe Partners submitted an application for a Lease Undertaking to the Irish authorities. This has been updated to reflect the latest work programme which is designed to progress granting of a Petroleum Lease and early production from the eastern part of the Barryroe field, subject to government approvals.

Subject to successful completion of the various technical workflows and funding plus various government approvals, the Barryroe partners remain confident that the overall project schedule will be achieved.

The Early Oil Development Scheme (EDS) project will include three production wells with horizontal completions into the A-sand reservoir, one water injection well into the A-sand reservoir, subsea production trees with manifold and umbilicals tied back to a leased FPSO, and processing capability will include oil processing/water and gas injection/power generation and flow assurance facilities.

The EDS is based upon the economic recovery of approximately 48 million barrels of oil or 16 per cent of the independently assessed 2C resources within the SEL 1/11 license area.