Providence inks Barryroe farm-out deal with SpotOn

Irish oil and gas exploration company Providence Resources has signed a farm-out deal with SpotOn Energy for the offshore block in Ireland containing the Barryroe oil and gas discovery.

Providence Resources and its partner Lansdowne Oil & Gas
agreed to farm out a 50 per cent working interest in SEL 1/11 offshore license
containing the Barryroe field to Norwegian firm SpotOn.

This comes months after the initial start of negotiations between the companies. Namely, Providence entered into an exclusivity deal for Barryroe farm-out with SpotOn Energy in early April. After securing exclusivity, SpotOn put in place binding term sheets with the six consortium members participating in the Barryroe field appraisal and development project in July.

Following the transaction, SpotOn will become the operator
of the block and will, with its consortium of leading oilfield services
providers, fund a 100 per cent of the early development program costs and full-field
development.

The members of the consortium are Schlumberger, Aker Solutions, Maersk Drilling, Keppel FELS, Aibel, and AGR.

SpotOn will own a 50 per cent stake, Providence – via its
subsidiary Exola – will retain 40 per cent and Lansdowne will retain a 10 per
cent stake.

Barryroe, located around 50 kilometres off the south coast of Ireland in shallow water, is dubbed as one of the largest undeveloped oil and gas discoveries offshore Europe.

The agreement also includes SpotOn providing a $5 million
non-recourse loan to Providence to fund Exola in the preparatory and permitting
works required to progress the EDP work programme for the Barryroe oil and gas
field.

SpotOn will also provide finance, by way of non-recourse
loan facilities, for the remaining 50 per cent of agreed cost obligations
attributable to Lansdowne and Exola in respect of the EDP work programme and
the full field development.

The company will be entitled 80 per cent of the net production
cashflow from the offshore block until the debt is repaid, after which it will
be entitled to 50 per cent of the net production cashflow.

The farm-in is conditional upon SpotOn confirming that a
minimum of $166 million in funding and receiving approval from the Irish
government.

The early development programme is a precursor to the phased
full-field development of the field. The program includes drilling of
production wells, installation of subsea trees, subsea production manifold and
connected to a leased FPSO with production separation, water and gas injection
capabilities, and include flow assurance measures.

The consortium is sourcing the rig which, subject to
regulatory approval, expects to mobilize to the Barryroe oil and gas field in
late 2022.

Alan Linn, chief executive of Providence, said: “The development of the Barryroe field is an exciting opportunity for the people of Ireland and the Barryroe partnership and, as production builds following the implementation of the EDP, we will begin to produce indigenous energy and petrochemical feedstocks for the Irish market. 

“Over the coming months, we will be working with the SpotOn Team to complete the transaction; finalize the project schedule, progress the government approvals, and develop the detailed drilling and facilities work programs”.

According to Providence, the reports of the hydrocarbons
recoverable within the Barryroe field concluded that a mid-case of 346 mmboe of
2C resources was present within the Middle and Basal Wealden sands.