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Providence hit as Apec misses $10m Irish backstop date

Dublin-based independent says funds have failed to reach bank account as promised, vows no new extension

Shares in Providence Resources took a hit early on Thursday after the Irish independent said an expected $10 million payment from a Chinese partner has failed to arrive.

The non-receipt of funds from private player Apec Energy before the agreed backstop date – the latest of numerous extensions – could further derail plans at the Barryroe oilfield off Ireland, with Providence insisting no further extensions beyond Friday will be given.

Providence was awaiting receipt of an initial $10 million payment from Apec – with which it agreed a farm-in deal at standard exploration licence 1/11 off Ireland’s south-west coast last year – with an expected arrival date of 9 July.

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The London-listed company had said on July 8 that it had received a HSBC remittance notification dated three days earlier that the funds would hit is account in Dublin on 9 July.

However, that date has passed, with no sign of the cash, $9 million of which was to cover front-end and pre-drill costs of SEL 1/11 operator Exola - a Providence subsidiary - with $1 million covering Apec costs.

As of the close of business on Wednesday, Providence had not received any additional paperwork from Apec's side to verify the actual transfer of funds, although it was given assurances that the transfer was under way.

"The Barryroe partners are seeking immediate clarification from Apec’s funders and its banks on the precise status of the transfer," 40% stakeholder Providence said. The company is also joined in SEL 1/11 by Irish junior Lansdowne Oil & Gas on 10%.

"Accordingly, to facilitate this, the Barryroe partners have agreed to extend the backstop date to close of business on Friday, July 12, 2019," Providence added.

"Should Exola and Lansdowne either not receive the required funds or adequate evidence that the transfer will be processed as a matter of urgency, the board do not envisage giving any further extensions to the backstop date."

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The partners had on June 17 extended the backstop date to "no later than 5 July".

On 5 June, Providence had said that it had agreed a series of amendments to its deal with Apec in the months before that, extending the backstop date at that time to 14 June, from a previous deadline of 31 May.

It said at that time that it understood the delay in payment to be in part due to "a change in the composition of Apec's funding mechanism".

Shares in Providence were down around 10% before 8:30am in London on Thursday, with Lansdowne's sinking 19%.

The initial farm-in deal with Apec, in March last year, called for the Chinese-backed player to pay 50% of costs related to the drilling of three lateral wells plus associated sidetracks and testing.

It was also to fund the remaining 50% of all costs of all field partners for the drilling programme, via a non-recourse loan facility, and was to provide the rig.

In February, Providence confirmed that China Oilfield Service Ltd’s (COSL) semi-submersible COSL Innovator had been selected for drilling. Apec has a strategic relationship with COSL.

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The partners' plans to drill at Barryroe have, however, been delayed on numerous occasions due to a legal challenge to a well site survey. In early June Providence said drilling operations on the field in the North Celtic Sea basin is set to begin in the fourth quarter, as against a previous estimate of the third quarter.

Providence has previously said it expects the first well in the campaign to be drilled about 4.3 kilometres west and about 25 metres at Base Wealden level to the previous 48/24-10z well, which flowed at a rate of about 4000 barrels of oil equivalent per day.

It then plans to sidetrack the well to drill and test a prognosed 200-metre Base Wealden section.

The Barryroe field sits in 100 metres of water about 50 kilometres off the Irish coast.

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