Providence Resources has taken up its option to buy a 40% stake in the Kinsale Head assets from the Malaysian oil giant Petronas.
The assets include the Kinsale Head, South West Kinsale and Ballycotton gas fields offshore Ireland. As part of the same deal, Providence’s Eirgas subsidiary has also exercised an option to acquire a 40% interest in the 86.5% operated adjacent producing Seven Heads gas field.
The option agreements were originally put in place in June this year and followed Petronas’s US$180 million acquisition of the assets from Marathon Oil in April.
Under the terms of the option agreement, Eirgas will purchase its stakes in the Kinsale Head Area assets on the same pro-rata terms by which Petronas acquired its stake from Marathon. Providence has made an initial cash payment of $3.8 million to Petronas with the balance due at closing expected in Q1 2010.
It is planned that the financing for the balance of the transaction will be met through existing cash resources and banking facilities.
Tony O’Reilly, the chief executive of Providence, said: “This transaction allows Providence to capitalise on our extensive operational experience offshore Ireland in combination with Petronas’ proven track record in gas production, storage and trading.”
O’Reilly said the deal would double the daily production attributable to the company to over 4,000 BOEPD and see it gain exposure to existing and new gas storage and trading opportunities. He said the deal would also provide Eirgas with an opportunity to potentially monetise gas from some of Providence’s adjacent gas discoveries in the Celtic Sea, as well as from third party fields.