UD To start, can you tell us anything further about the status of the Barryroe farm out, where drilling is targeted for 2019? Is it still on track to close in Q3 this year?
TOR Due to confidentiality provisions, we are limited by what we have publicly stated already on the Farm-Out – but the stated objective is to close the transaction in Q3 2018 and commence drilling in 2019, subject to receipt of all permits etc. There has been no change to the indicated timeline.
UD APEC will be granted warrants to subscribe for 59.2 million shares at 12p per share, exercisable only after completion of the Barryroe drilling programme. Is it a performance incentive, or is the idea perhaps to give them a platform to mount a bid?
TOR APEC wanted an equity interest in PVR from the outset – but we were obviously reticent about dilution for existing shareholders whilst Barryroe still had to undergo further impactful drilling, which in itself would be a significant value driver. So through negotiation, we arrived at a position whereby APEC can only subscribe for the warrants after the drilling programme is completed in full. So yes, in one sense, one could call it an incentive because it represents a good value opportunity to buy PVR shares at a fixed price and for PVR, if the warrants are exercised, it also delivers a deferred cash payment of c.$10 million. The key aspect of the Farm-out is that it is a multi-well drilling programme where Providence takes no upfront capital risk.
UD A further prospect you’re hoping to drill in 2019 is Newgrange, which is another relatively low cost drilling opportunity. How confident are you of a farm out on this one?
TOR No deal is done until it is done – but the combination of the new technical data, the low drilling costs and good industry interest is encouraging – and PVR has a track record of getting farm-outs done; in the past 18 months PVR has announced 4 farm-outs.
UD Dunquin South is then slated for drilling in 2020. By how much have the results of the 3D seismic acquisition upgraded the prospect?
TOR Obviously, the precise date for drilling has yet to be formally confirmed by the JV, but the new 3D has significantly upgraded Dunquin South.
UD Next up is Avalon with potential drilling in 2021. The licence already is farmed out to Total. What progress is there so far in the evaluation of this prospect?
TOR Again, we are restricted by what we can say here but obviously, we are delighted to have brought TOTAL in as a 50% equity holder and now Operator of this licence as they bring a wealth of technical and operating experience.
UD Diablo already has farm outs to Cairn and Total in place. What is a possible drilling date for this one and what are the potential resources?
TOR No date has been set by the JV for the drilling of Diablo – but interestingly, industry speculation is ripe that Nexen CNOOC will be drilling their “Iolar” prospect next spring. Why this is of interest is that the “Iolar” well will test the same geological play structure as Diablo and the “Iolar” licence is immediately adjacent to our Diablo licence – so obviously, the Diablo partners will be watching this well with real interest and any hint of success could certainly influence timing on Diablo.
UD The prospective resource numbers are huge: Barryroe with 346 MMBOE recoverable, Newgrange with 13.6 TCF or 9.2 BBO, Dunequin South with 1.389 BBOE recoverable and Avalon with 12 BBOE, plus of course Diablo. Barryroe is appraisal, but what sort of chance of success do you believe the others may have?
TOR They all have differing levels of chance of success (CoS) – but due to partner confidentiality provisions, we can’t specifically disclose at this time…but certainly, with the work being done on Newgrange and Dunquin this past year, there is a great deal of new information which would help to increase the CoS levels of these assets.
UD There’s also Hook Head, Kish Bank, Spanish Point, Dragon, Helvick and Dunmore. How much additional potential do you believe they represent?
TOR It is a mixed portfolio with some assets advancing, whilst others are subject to discussions with the Irish regulator as to future status due to consenting issues and/or revised resource estimates/economics.
UD If it all comes off, or even just part of it, what sort of value do you believe PVR might have?
TOR The analysts all have substantial “risked” valuations for PVR well in excess of the current share price – and the “unrisked” valuations are many multiples of PVR’s current share price.
UD Thank you. To finish, would you like to add any further comments which you believe might be of interest to investors?
TOR The key points about Providence that investors should note are: we had the first mover advantage in what is now being recognised as an exploration “hot spot” area; we have a portfolio of large and material exploration and development projects, where we retain material equity positions (even post farm-out deals); we have successfully agreed farm out deals/worked with some of the leading E&P companies including ENI, Total, ExxonMobil, Repsol, Petronas and Cairn; our focus is on “turning the drill bit” and through various commercial deals, there is now a schedule of planned drilling; our shareholder base represents some of the leading UK Tier 1 investors in the oil and gas space; and we have no current capital requirements and are debt free.