News

Barryroe Farm-Out Update Agreement

28 March 2018

San Leon notes the announcement today from Providence Resources Plc ("Providence") regarding the Barryroe Field, offshore Ireland, in which San Leon holds a 4.5% Net Profit Interest. San Leon Energy is not required to pay any further appraisal or development costs on the Licence. The main text of Providence's announcement is set out below for reference.

The Company wishes Providence a successful completion to the farm-out.

Start of text from Providence's announcement:

  • PROVIDENCE & LANSDOWNE AGREE TO FARM-OUT A 50% WORKING INTEREST IN BARRYROE TO A CHINESE CONSORTIUM ("THE CONSORTIUM") LED BY APEC ENERGY ENTERPRISE LIMITED ("APEC")
  • THE CONSORTIUM TO FUND 100% OF DRILLING COSTS FOR 3 WELLS AND ASSOCIATED SIDE-TRACKS
  • THE CONSORTIUM TO FINANCE PROVIDENCE & LANSDOWNE'S 50% SHARE OF DRILLING PROGRAMME COSTS BY WAY OF A NON-RECOURSE LOAN WHICH IS SECURED AGAINST FUTURE BARRYROE PRODUCTION CASHFLOW
  • APEC TO BE GRANTED WARRANTS WITH THE RIGHT TO SUBSCRIBE FOR 59.2 MILLION PROVIDENCE SHARES AT GBP0.12 PER SHARE POST COMPLETION OF THE DRILLING PROGRAMME

Dublin and London - March 28, 2018 - Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Oil & Gas Exploration Company ("Providence" or the "Company"), today provides a commercial update on Standard Exploration Licence ("SEL") 1/11 that contains the Barryroe oil accumulation. SEL 1/11 is operated by EXOLA DAC ("EXOLA")(80%), a wholly-owned Providence subsidiary, on behalf of its partner Lansdowne Celtic Sea Limited ("Lansdowne")(20%), collectively referred to as the "Barryroe Partners". The area lies in c. 100 metre water depth 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 APEC in relation to SEL 1/11. APEC is a privately owned Chinese company which has a strategic partnership with China Oilfield Services Co., Ltd ("COSL") and JIC Capital Management Limited ("JIC") for the investment and development of offshore oil and gas opportunities worldwide utilising Chinese drilling units, services and equipment.

Under the terms of the FOA, in consideration for APEC being assigned a 50% working interest in SEL 1/11:

Commercial Terms

  • APEC will be directly responsible for paying 50% of all the cost obligations associated with the drilling of 3 vertical wells, plus any associated side-tracks and well testing (hereinafter referred to as the "Drilling Programme");
  • APEC will provide a drilling unit and related operational services for the Drilling Programme;
  • APEC will finance, by way of a non-recourse loan facility (the "Loan"), the remaining 50% of all costs of the Barryroe Partners in respect of the Drilling Programme;
  • The Loan, drawable against the budget for the Drilling Programme, will incur an annual interest rate of LIBOR +5% and will be repayable from production cashflow from SEL 1/11 with APEC being entitled to 80% of production cashflow from SEL 1/11 until the Loan is repaid in full;
  • Following repayment of the Loan, APEC will be entitled to 50% of production cashflow from SEL 1/11 with EXOLA and Lansdowne being entitled to 40% and 10% of production cashflow, respectively.

Operational Terms

  • EXOLA will act as Operator for the Drilling Programme with technical assistance being provided by the APEC Consortium; and,
  • After the completion of the Drilling Programme, APEC will have the right to become Operator for the development/production phase.

Issuance of Warrants to APEC

  • Upon completion of the Drilling Programme, APEC will be able to subscribe for warrants over 59.2 million shares in Providence at a strike price of GBP0.12 per share (the "Warrants").
  • The Warrants, representing circa 9.9% of the current issued share capital of Providence, are exercisable for a period of 6 months following the completion of the Drilling Programme.

 

Closing

The Closing of the Farm-Out ("Closing"), which is expected to occur in Q3 2018, is conditional on completion of all ancillary legal documentation required to implement the terms of the FOA, and is subject to the approval of the Minister of State at the Department of Communications, Climate Action and Environment and the approval of the Chinese government. In addition, the details of and schedule for the Drilling Programme are subject to further ongoing technical discussions between the Consortium, Exola and Lansdowne. Subject to Closing, the revised equity in SEL 1/11 will be EXOLA (Operator, 40%), APEC (50%) & Lansdowne (10%).

Further announcements on the transaction will be made in due course.

Speaking today, Tony O'Reilly, Chief Executive of Providence said:

"This is a significant transaction for Providence and Lansdowne which will deliver multiple new penetrations of the areally extensive Barryroe field. In addition, it also provides for the acquisition of modern dynamic well test data that should assist in advancing the field to production. Over the coming months, we will be working with the APEC Consortium to close the transaction and finalise the specific timeline and the precise details of the drilling programme. We are very pleased to have agreed this deal, which will allow us to avail of 'state of the art' drilling units and technical capabilities in order to advance Barryroe to first oil."

Mr. Colin Lui , Chairman of APEC Energy Enterprise Limited commented:

"APEC, supported by Jianyin Investment Company and China Offshore Services Ltd, are very pleased to have strategically joined forces with Providence and Lansdowne to develop the Barryroe field. This field has significant recoverable resources and we look forward to jointly developing this opportunity. Whilst the Farm-Out Agreement has been agreed specifically for Barryroe, the parties have also agreed to jointly investigate further opportunities in other licensed blocks offshore Ireland in the future."    

End of text from Providence's announcement

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

Enquiries:
San Leon Energy plc
+ 353 1291 6292
Oisin Fanning, Chief Executive

SP Angel Corporate Finance LLP (Nominated Adviser)
+44 20 3470 0470
Richard Morrison
Ewan Leggat
Soltan Tagiev

Whitman Howard Limited (Financial adviser and Joint broker)
+44 20 7659 1234
Nick Lovering
Francis North

Brandon Hill Capital Limited (Joint broker to the Company)
+44 20 3463 5000
Oliver Stansfield
Jonathan Evans

Vigo Communications (Financial Public Relations)
+44 20 7830 9700
Chris McMahon
Kate Rogucheva

Plunkett Public Relations
+353 1 280 7873
Sharon Plunkett

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