The statement from Providence Resources came at 7am on Monday. It notified the stock markets in both Dublin and London that it intended to raise about $3 million (€2.77 million) by selling new shares to institutional investors as it pushes to finally develop Barryroe, a much heralded and long-awaited oil and gas field off the coast of Cork.

Providence said it had signed a non-binding deal with a British company backed by Norwegians called SpotOn Energy in relation to the farm out of its potentially huge oil and gas field in the Irish Sea.

Providence has consistently disappointed shareholders, collapsing in value by more than 90 per cent after a deal with a Chinese partner fell through last year. The move led to the ousting of then chief executive Tony O’Reilly Jr, and his replacement by industry veteran Alan Scott Linn.

By close of Monday, Providence was able to announce that it had conditionally raised the $3m it had asked for. The new shares were at prices of 1.5 pence each. About $2.63 million of the cash came from institutions and others, while a subscription by SpotOn will raise $370,000.

The statement nudged up Providence’s share price in London a little by 4 per cent, giving it a market cap of just £11.3 million.

But, as most other companies in the world are shaken in the wake of Covid-19, could a corner have finally been turned by Providence?

One thing is for certain – after so many false dawns, it appears to finally be making progress.

*****

“What we are looking for is a field ready to be developed.”

Ståle Fjelland is in Sandnes, Norway’s seventh largest city, when I call. The exploration veteran is in the offices of SpotOn Energy, the new partner of Providence Resources.

Like Ireland, Norway is in lockdown, and Fjelland finds himself one of just a handful of people bouncing around a large multi-business office building that normally houses almost 700 people. “It is a strange time,” he tells me. “But it will change by the summer I think.”

Fjelland worked for over 12 years with Schlumberger, an international oilfield services company that employs more than 100,000 people globally. He has many other years’ experience working in different aspects of exploration also. Fjelland is currently the chief executive of SpotOn, but as he explains later on, a new chief executive is due to replace him in that role soon.

SpotOn has a two-page website that reveals only the basics about the business. The motto is: “Offshore field development simplified.”

Fjelland is happy to talk openly about his firm’s plans for Barryroe, while holding back the exact make-up of the Norwegian consortium behind Spoton for just a little longer.

I begin by asking Fjelland, to tell me about SpotOn: “We developed this model more than a year ago when we invited various service companies to join us to see if we could target the UK and Ireland area with this model to share risk and to share profits,” he tells me.

“The best area to do so is outside of Norway because we can take advantage of key export credit facilities when there is willingness and cash behind us.”

Export Credit Norway was set up in 2012 to help Norwegian business. It offers state backed competitive financing to buyers of Norwegian capital goods and services globally as well as other supports.

Norway has been a world leader in oil and gas exploration for decades so there is no shortage of great companies there already hoping to export to other markets using this state support.

Fjelland said his team was focused on projects in the North Sea and Ireland region because they had most experience in exploration in these areas.

“We started to think about who could participate in this type of venture. We interviewed all the major service companies in the world, basically the big ones,” he says.

“Eventually we were able to find an offshore yard, engineering services, a wealth management company, duty holder etc. All that combined into a fairly effective and resourceful group of companies that could take on major mid-size projects or even smaller projects.”

I ask Fjelland who the backers are. “We will say that when we have all our formalities in order. We have an agreement with them, but we need to transfer that agreement across to Barryroe basically. We would like to have that signed before we go on [and name the members of the consortium],” he says.

Fjelland said SpotOn had already successfully tested its model on a project in Britain. He also said it was working with Pareto Securities, a respected Oslo headquartered investment bank with 500 employees that specialises in financing oil and exploration as well as shipping.

“We will use Pareto for any additional cash we may need in the market not covered by the consortium,” Fjelland said. He said he would be happy to discuss the members of the consortium when “every nitty gritty is signed off.”

Fjelland said he had looked at Barryroe previously in 2015.  “At that time, it was not really ready,” he said. “What we are looking for is a field ready to be developed. We consider Barryroe to be now ready to be developed.”

“There needs to be some appraisal wells, of course. Some work needs to be done, but it is close enough for us to be interested and big enough for sure.”

Tom Lyons (TL): Tell me about your own experience. You have worked in the exploration industry for over 30 years…

Ståle Fjelland (SF): It is closer to 40 years! Myself and Alec and my team have 30 to 40 years of experience. Alec who will be the future CEO, he has 40 years’ experience internationally mainly with BP at a very high management level. For the rest of us, we have built offshore units to Norwegian and UK safety standards, so we have a lot of experience.

TL: Who is Alec?

SF: Alec Svendsen. Alec is Norwegian with a British passport. His mother tongue is English but he is Norwegian in his heart even if his first language is British. A strange combination!

TL: Clearly you see this as an opportunity. Is it also an opportunity for Ireland which is facing a likely recession?

SF: Just forget about the present economic situation for the moment. This is big. Our team looks at this as an opportunity for Ireland for sure.

“We don’t think we have to be on defence mode or hide ourselves from the general public”

Alan Scott Linn, unlike his predecessor, was not exactly a household name in Ireland when he was appointed. His work, however, has given him a good reputation in his industry. Linn was country manager for Cairn Energy in India when it discovered the Mangala Field in Rajasthan, the largest oil discovery in the world in 2004. He was chief executive of Roc Oil in 2014 when it was sold to a Chinese investor. He has been around but is not jaded.

If he is successful with Providence, it could generate billions of dollars. But Linn is not one for getting overly excited. In conversation Linn is however engaging, and down-to-earth, as he outlines what is next for Providence.

I start by asking him why he chose SpotOn, a company few had heard of, from the various companies that had looked under Providence’s hood in its data room. 

“Ståle (Fjelland)and I have both been in the industry for probably 35 years. Some very good acquaintances of mine put me in touch with these guys as being the genuine article with respect to looking to do field development work. They are all – and I have been accused of this too – they are all industry veterans,” he laughs.

“I come from the oil company side. They all come from the services sector.”

Linn said he had been impressed by the track-record and abilities of the Norwegians in areas like rig design and development, as well as their ability to complete difficult projects efficiently in places like China.

“A lot of their background is in innovative design and development of oil field equipment and its deployment,” Linn said. “They have done a lot of work with the Chinese over the years so they were somewhat sympathetic to some of the issues which Providence had had.”

“They were conscious it was not always easy to deal with them. Having said that it is not always to deal with Norwegians! But it is much more straightforward to deal with Norwegians. These are all Norwegian engineers and businessmen who are very successful actually.”

So, who are SpotOn? “SpotOn Energy is a vehicle. Part of their business model involves taking advantage of the Norwegian export credit facility which they can do as Norwegians. But they have got to have an overseas company which is buying Norwegian goods for export in order to avail of that facility. SpotOn is sort of a vehicle that has been set up to allow them to do that,” Linn says.

I ask Linn how close they are to being ready to go. “They’ve got most of it already in place actually. But what they will do now is customise it for Barryroe, they will bring in a consortium of service companies that they have worked with before and do work with now in many cases.”

“They will contract into this consortium so there will be a full contractual relationship. They will then work together with us to appraise and develop the Barryroe fields. Assuming that we get to final terms and come up with an agreement then fundamentally we will be doing a farm out of the Barryroe equity. SpotOn will farm in. It will be conventional in that respect. And SpotOn will eventually be – a large proportion – owned by the consortium.”

Brent crude oil is around $30 a barrel because of fears of a global economic downturn and issues around supply from Saudi Arabia and Russia. I ask Linn could lowish oil prices be an advantage to Providence, given it is in an early stage in the development cycle.

“When we run the economics of a phased development for Barryroe, your breaking even oil price is probably $26 of oil a barrel. The field itself is in 100 metres of water. It is 50 kilometres offshore of Cork,” Linn replied.

 “There is a ready market for both the gas and the oil that is in the field. There is even a green story. There is an opportunity here to do a carbon neutral gas development. We don’t think we have to be on defence mode or hide ourselves from the general public.”

“But you’re right it is a low cost development environment,” he continued. “If you can drop your development costs significantly by deploying contractors who haven’t got as much work as they normally would and who would have rigs that would otherwise be idle then you can drop your development costs quite significantly.”

How quickly can you get to production? “With a following wind the first phase of the Barryroe field could be producing oil in maybe three, three and a half years something like that.”

“By which time my expectation would be, I don’t think oil is ever going to go much above 60 bucks a barrel in the foreseeable future. But if you get back to between 50 and 60 then you end up with commercially a very attractive outcome.”

Linn said the oil in Barryroe was of good quality that would sell at a premium in any market. “This is the sort of oil you would want to use for making tyres, anoraks and boots and things rather than burning.”

“It is not like we have filthy, heavy, high sulphur oil. It is a really sweet waxy oil. We have got a lot going for us.”

Linn said his experience was in developing marginal fields and revitalising old fields which was what was needed in Barryroe. He said he also had experience in exploration and it was possible that there were more finds in the sands of the area.

“We could actually have twice as much oil there as we currently think,” he said. However, he said there was more than enough seismic data already to support the project as is without further exploration.

“Exploration is basically near field exploration and tie backs. I think there is a damn good business to be had. I think it is a business that Ireland will benefit greatly from,” he added.

Linn noted that Ireland faced fines from the European Commission because of its lack of energy security post Brexit. Linn said there could be substantial gas in Barryroe. “It is maybe not quite as big as Corrib but it is getting there,” he said.

“When you look at the economy post Corona, if you can produce your gas domestically rather than import it…your balance of payments is going to benefit greatly. You are going to generate a lot of revenue through taxes and that can all stay in the Irish economy rather than pouring money overseas for energy.”

Linn said the current fundraise would give Providence enough money to see it through the year and bring in a partner to help fund the next phase of appraisal and development. He said further down the road – all going to plan – Providence could borrow against its reserves to fund development.

Linn said in time the members of the consortium SpotOn was working with would emerge. “One of the reasons they are not all up there in headlights at the moment is: one they don’t have to be because they are private and two, they are in the process of closing out negotiations with their consortium.”

“They want to be in a position where they have firm commitments from their consortium to actively participate in the project and basically participate in the equity as well,”

“They are hoping to close it out probably by the end of April at which point we will be in a position where we can say these are the companies. In the oil and gas industry they are all well known names. We are not talking about some sort of cornerback, street bookie or something like that. We are talking about some of the really big industry players.”

*****

Alan Scott Linn took over as chief executive on January 9. Is he pleased with progress to-date? “I am pleased today. I had a few days where I was a bit worried, it was not so much because of the capital raise itself but just because of the way the markets were and whether we could achieve what we were trying to achieve. One of the things I would like to say is we have had incredibly good backing from our shareholders.”

“I see that as a real positive reinforcement of the business model we have introduced. They are beginning to get a flavour of what we could achieve with SpotOn energy if we can make it work. I think they are seeing some green shoots.”