(MENAFN- ProactiveInvestors) () chief executive Tony O’Reilly is encouraged by the level of support from investors in an oversubscribed equity funding.
The Irish oil company is to raise US$31mln by selling new shares to investors including 25 institutions and existing shareholders.
New shares will be issued at 25p which is a relatively small discount to Tuesday’s closing price of 27.5p - but it is a long way from the 480p price of Providence’s last equity funding back in 2012.
It comes as the company awaits the completion of a confidential deal to bring in a partner to take forward the Barryroe oil field development off the Cork coast in the Celtic Sea.
O’Reilly acknowledges that the market has been uneasy due to the prolonged wait for a Barryroe deal and that has weighed on the share price.
But he highlights strong support for the new capital raising.
The Providence boss says investors can see the current “value proposition” and they understand there is currently a “big disconnect” in the market.
“I think it [the placing] puts us on a good solid foundation” he told Proactive Investors. “And I think investors see that.
“They see the enormous optionality value of things happening on the upside because I think everything has been priced on the downside.”
He says Providence can now focus on delivering its stated objectives - starting with the Barryroe farm-out.
A deal was signed with an unnamed company for a farm-out deal earlier in February though the closing of the transaction is subject to the incoming partner successfully arranging finance.
O’Reilly hopes it will be a matter of weeks or a month until Providence can open up to the market about the deal.
“We’ve been as transparent as we can” he said. “The farm-out is subject to the [partner] company closing their financial restructuring which they are working on.”
“We remain confident that people still see Barryroe as a world class asset even though the headwinds of capex curtailment in the market and lower oil prices have obviously delayed the process.
“But we do have a signed deal and we still have interest from others.”
The decision to raise funds at this time has no bearing on the status or Providence’s outlook on the Barryroe farm-out process O’Reilly confirms.
Instead he explains the timeline was dictated by a December court ruling in its case against rig contractor Transocean.
The UK Commercial court found in Providence’s favour and reduced a liability to Transocean to US$7mln versus Transocean’s original claim for US$25mln and the payment (US$6mln net from Providence) is due in March.
“If we didn’t have the Transocean payment to make in March then we wouldn’t have had to go out and raise equity at this time.
“We didn’t want to. So when we went to see our shareholders we said sorry we are just caught in a timing issue we explained everything and I think they understood.
“You can see the great support we’ve gotten from the market. It is a very big placing at any stage but particularly in this market.
“And I think it signals investor sentiment is changing in our sector and people are looking a bit more positively.”
The equity funding is subject to shareholder approval at an extraordinary general meeting which will be held in Dublin on March 20.
The company intends to raise US$25.75mln (£16.72mln) with the placing of 66.88mln new shares while a further 14.7mln shares will be sold to certain existing shareholders via a US$5.65mln (£3.65mln) open offer.
New shares issued in the placing will represent some 103.5% of Providence’s existing share capital while the open offer shares equate to 22.7% of the existing shares.
If approved it is anticipated that the new shares would begin trading on March 23.
** FIRST PUBLISHED FEBRUARY 25
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