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Providence sells its English assets

Friday, September 28 10:03:50

Irish oil and gas explorer Providence Resources is to sell its onshore UK license interests to IGas Energy for $66 million, it said today in reporting a rise in first-half losses due to impairment charges on the UK licenses.

The sale was welcomed by analysts in Dublin with Davy saying the divestment "made sense".

The sale of Singleton completes the restructuring of Providence's balance sheet, the broker said.

"The $66m consideration will be used to pay down its outstanding debt of $44m with the remainder used for working capital purposes.The divestment of Singleton is strategically sensible. Providence now more than ever offers two things: a means to invest in the Irish offshore and some very simple, yet large, upside plays that have barely begun to be reflected in the share price. We will update our valuation once the deal is completed."

Providence reported a loss before tax of E29.7 million in the six months to end-June, compared with a E9.8 million loss a year ago because of mechanical issues at a well at Singleton in June.

The company said the sale of the interests in two licenses in West Sussex will enable it to become debt-free and concentrate on Barryroe, Ireland's biggest ever oil strike. "We're not selling because we had a bad afternoon, we're selling because it was the right price and it made sense in the context of what we're doing offshore Ireland," Chief Executive Tony O'Reilly told Reuters.

"It (Barryroe) just keeps giving," he added.

The Dublin-based company hiked its estimate of oil reserves at Barryroe, off the Cork coast in July to as much as 1.6 billion barrels and noted there was further potential in hydrocarbon-bearing sands.

The company reported a 36 percent increase in first-half revenues from continuing operations at 7.75 million euros, thanks to better volumes and higher oil prices.

Shares in Providence were up 1.1 percent at 682 pence in early London trading after climbing to a four-year high earlier in September on prospects for development of Barryroe.