Providence Resources P.l.c.: Farm-out Agreement Signed – Standard Exploration Licence 1/11 Barryroe Oil and Gas Field, North Celtic Sea
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 Early Development Programme (EDP), we will begin to produce indigenous energy and petrochemical feedstocks for the Irish market.
Indigenous production will support Irish energy security; encourage the progress of renewable technologies and deliver raw materials used in the production of many of the essential items we take for granted in our daily lives.
Over the coming months, we will be working with the SpotOn Team to complete the transaction; finalise the project schedule; progress the government approvals and develop the detailed drilling and facilities work programmes. I think Ireland and the Cork area will benefit economically from the field development and subsequent production for many years to come.”
Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Resources Company (“Providence” or the “Company”), today provides a commercial update for Standard Exploration Licence (“SEL”) 1/11 which includes the Barryroe oil and gas field. SEL 1/11 is operated by EXOLA DAC (“EXOLA”) (80%), a wholly-owned subsidiary of Providence Resources, on behalf of its partner Lansdowne Celtic Sea Limited (“Lansdowne”) (20%), collectively the “Barryroe Partners”. SEL 1/11 lies in c. 100 metre water depths in the North Celtic Sea Basin and is located c. 50 km off the south coast of Ireland.
Standard Exploration Licence (“SEL”) 1/11 Farm-Out
The Company is pleased to announce that the Barryroe Partners have signed a Farm-Out Agreement (“FOA”) with SpotOn Energy Ltd (“SpotOn”) in relation to SEL 1/11.
Under the terms of the FOA; in consideration for SpotOn being assigned a 50% working interest in SEL 1/11, SpotOn, upon closing of the Farm-Out,is committing to the following commercial terms and work programme commitments:
MAIN COMMERCIAL TERMS
SpotOn farms-in to a 50% interest in SEL 1/11 which includes the Barryroe oil and gas field. EXOLA, will retain a 40% interest, and Lansdowne will retain a 10% interest in SEL 1/11.
The farmin is conditional upon SpotOn confirming that a minimum of US$ 166 million in funding (the Agreed Funding), for the Early Development Programme (EDP) is in place and that Irish government approval for the Farmout agreement has been received.
SpotOn provides a $5million 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 is directly responsible for paying 50% of all cost obligations associated with the EDP Work Programme and the Full Field Development of the Barryroe oil and gas field.
SpotOn will also provide finance, by way of non-recourse loan facilities, for the remaining 50% of the agreed cost obligations attributable to EXOLA & Lansdowne in respect of the EDP Work Programme and the Full Field Development.
The funding will incur a blended annual interest rate of less than 8% through the repayment period which will be repayable from SEL 1/11 production cashflow. SpotOn is entitled to 80% of the nett production cashflow from SEL 1/11 until the debt is repaid.
Following debt repayment, SpotOn will be entitled to 50% of the nett production cashflow from SEL 1/11 with EXOLA & Lansdowne being entitled to 40% and 10% of nett production cashflow, respectively.
On receipt of the proceeds from the first lifting of oil, following completion of the EDP Work Programme, SpotOn will have an option to subscribe for warrants of 60 million shares in Providence at a strike price of €0.17 per share. The warrants are exercisable for a period of 6 months.
WORK PROGRAMME COMMITMENTS (SUBJECT TO REGULATORY APPROVAL)
The EDP work programme, which is subject to declaration of commerciality and the granting of a petroleum lease, is focused upon delivery of production from the Eastern panel within the Barryroe licence area of the Barryroe oil and gas field as a precursor to the phased full field development of the field and will include:
Drilling and completing three production wells each with a horizontal production section in the Basal Wealden A reservoir.
Drilling and completing a water injection well in the Basal Wealden A reservoir.
The four wells will be directionally drilled to access optimum locations within the Eastern panel and will deliver further information on the main Basal Wealden reservoir.
The horizontal reservoir sections will be designed to maximise production and may extend into adjacent reservoir panels to assess reservoir connectivity.
The wells will be completed with subsea trees, tied into a subsea production manifold and connected to a leased FPSO with production separation, water and gas injection capabilities and include flow assurance measures.
Planning for the drilling of these wells is at an advanced stage with two well site locations already surveyed and a third location which is subject to Ministerial approval.
The SpotOn consortium is sourcing the rig which, subject to regulatory approval, expects to mobilise to the Barryroe oil and gas field in late 2022.
SpotOn will be appointed Technical Advisor and work in partnership with EXOLA to prepare the detailed work programme for the EDP.
EXOLA as Operator of SEL 1/11 will work with SpotOn to expedite the transfer of operatorship to SpotOn, subject to Government approvals.
Closing
The Closing of the Farm-Out (“Closing”), is conditional on completion of all ancillary documentation required to implement the terms of the FOA, confirmation of the Agreed Funding by SpotOn and is subject to the approval of the Minister at the Department of the Environment, Climate and Communications.
*Photograph: Daragh McSweeney/Provision
