News & Analysis

Providence Resources Plc (PVR: AIM) review and analysis

By PSQ Analytics

Founded in 1997 from the de-merger of Arcon International Resources Plc’s hydrocarbon assets, Providence Resource Plc (Providence) is an international upstream oil and gas company operating in exploration, appraisal, development and production of oil and gas. The company entered the gas storage and trading activities by exercising the option to acquire a 40% interest in the Kinsale Head Area assets (offshore Ireland) from Petroliam Nasional Berhad (PETRONAS) in September 2009. The acquisition is expected to complete by the end of 1Q2010.

Providence has a portfolio of offshore and onshore assets in Ireland, the UK, US and Africa (Nigeria). The company has invested in these assets in partnership with established industry players including ExxonMobil, Chevron, Chrysaor, Star Energy and PETRONAS. Providence plans to increase its production rate to 5,000 boepd by 2011-end and to 10,000 boepd by 2014- end from 2,000 boepd in 2008.

Providence has a portfolio of assets under appraisal and development, including 5% interest in Nigeria’s Aje field, 56% interest in the Spanish Point (Ireland), 72.5% interest in southern and central region of Celtic Sea Area (Ireland) and 25% interest in Dragon Gas field located in St George’s Channel Basin (Ireland). The company also has numerous assets under exploration of which a significant portion is located in Ireland. It recently procured a Licensing Option over the Baltimore heavy oil discovery in the North Celtic Sea Basin (offshore Ireland) with a resource potential of up to c. 300 million barrels.

In the last few years, Providence has embarked on the strategy to acquire interests in producing assets to reduce its risk profile and generate cash flows. The majority of Providence’s interests in producing assets, located in the UK and US, have been acquired over the last few years. Singleton field (99.125% interest) – onshore asset located in West Sussex, the UK - registered a production rate of 750 boepd in 2008 (with another 200 boepd of gas being flared but awaiting completion of gas-towire project). The company is undertaking numerous activities including facilities de-bottlenecking, drilling of a new production well to increase the production from this field to 1,500 boepd in 2012. Producing assets located in Gulf of Mexico include High Island (5% interest) and the recently acquired Triangle portfolio (varying interests), with a combined production of ~1300 boepd in 2008 which the company aims to increase up to 3,500 boepd by 2012 via re-instatement of production impacted by hurricanes in 2008, increa ing production rate and new drilling and acquisition activities.

Key recent news

16 February 2010: Announced the procurement of a Licensing Option over the Baltimore heavy oil discovery located in the North Celtic Sea Basin, offshore Ireland. The discovery well is situated c. 30 km off the south coast of Ireland in c.100 m water depth and carries resource potential of up to 300 mn barrels oil.

11 February 2010: Announced the placement of 448,750,000 new ordinary shares at 3.2 p per share, raising GBP14.4 mn. The proceeds will be used for investing in increasing production levels and providing general working capital.