Ireland's Barryroe farm-out falls through
Irish juniors Providence Resources and Lansdowne Oil & Gas said on April 22 they had ended plans to farm out a 50% stake in the Barryroe oil and gas discovery in the Atlantic ocean to Norway's SpotOn Energy, after the latter was unable to arrange Norwegian financing for the deal.
The farm-out agreement, reached in December, was to provide Providence and Lansdowne with the capital to fund an early development programme at Barryroe, Ireland's largest oil discovery containing nearly 350mn barrels of oil equivalent. The deal was conditional on SpotOn securing at least $166mn of funding. The deadline for closure was later extended by two months until April 30, after SpotOn failed to cover 20% of the sum from the Norwegian Export Credit Agency as hoped.
"Due to non-performance by SpotOn Energy pertaining to the financing solution required under the farm-out, the Barryroe partners have elected to discontinue the agreement," the project partners said, noting that they would now lead project development and funding arrangements themselves. The pair expect to finalise a funding solution by the end of the third quarter, in time to drill in 2022.
This solution will likely include payment deferrals to service providers on equivalent or better terms than before. As part of the SpotOn deal, Schlumberger, Aker Solutions, AGR, Maersk Drilling, Keppel FELS and Aibe agreed to forgo some payment for project services in exchange for a cut of future revenues. The solution is also expected to involve a bond issue.
"Having actively supported SpotOn over the past year it is disappointing that it’s become necessary to terminate the farm-out process with them," Providence CEO Alan Linn commented. "However, we are looking forward and actively building a revised development partnership with key service providers and a financing package designed to meet the needs of the project. We have been encouraged by the support we are receiving from service providers and banks and the commitments being offered to work with us in progressing the project."
Work is underway with service providers to structure direct long-term partnerships on a risk/reward basis, and discussions are also taking place with brokers to raise a Nordic bond, according to Linn. Pageant Holdings, a leading Providence shareholder, has made a non-binding offer to underwrite up to $2.5mn of interim capital for project funding.
Providence has a 80% interest in Barryroe while Lansdowne has 20%. The pair have been struggling to secure a farm-in partner for some years. A previous agreement was with China's APEC, but collapsed in 2019 after the latter failed to come up with the necessary funds.