UPDATE 30 SEP 14 7:15AM – The following statement is all I needed to see from Tony O’Reilly –
“Negotiations are now at an advanced stage and we are working hard to satisfactorily conclude this with the objective to return cash to the business and obtain capital funding, whilst also ensuring that Providence retains a material stake in Barryroe, with a clearly defined road map for the timely drilling (2015) and development of the field.”
From the conference call – “We expect to conclude the deal in the VERY near future and and are at an ADVANCED stage”.
Together with comments about drilling to commence on Spanish Point next year and conservative cash management, this is the next best thing bulls could hope for after the actual farm-in news.
I last wrote about Southern Ireland oil E&P posterchild Providence Resources in early September and I laid out the valuation case for a stock price multiples of the current price should the BoD finally get the farm in partner for their key Barryroe field and on which much of the valuation basis rests HERE.
I had the pleasure of meeting CEO Tony O’Reilly several weeks ago and took him to be a thoroughly honest and decent chap aswell as very charismatic. His line at the AGM that they are “nearing completion (of the Barryroe farmout process)” is, in my opinion, a clear statement that they are down to the last 2 or 3 serious players and resolution of this process is likely in the 4th quarter. The clock is now ticking…
News flow from the company since the AGM has been very much “business as usual” with a number of RNS’ detailing continued appraisals and activity in their extensive Southern Ireland portfolio.
As we can see from the chart below, the stock price has basically tread water and formed a new base in the mid 120’s this last 4 weeks and there are, for chartists, continuing positive developments highlighted in this chart.
PROVIDENCE RESOURCES 6 MONTHS DAILY CHART
It is interesting that while much of the oil E&P small cap sector has, once more, confounded the bulls and prices have edged lower in recent weeks, PVR has held its own with minimal amounts of purchasing of the stock ticking the price higher – an indication that the market makers are now running flat books and do not have a ready seller (contrary to the situation for much of the summer where the stock price halved on a persistent seller offloading).
What has emboldened me in my bull stance on the stock is the following information that was brought to my attention regarding statements made at San Leon Energy’s AGM on Friday (San Leon have a 4.5% interest in PVR’s Barryroe field). The statement that the “operator expects near term development deal closing” is perhaps the biggest smoke signal yet that the light shareholders can see at the end of the tunnel is, finally, the much vaunted farm-in.
I remind readers of broker Liberum’s view of the value of Barryroe to PVR if Tony O’Reilly can conclude this deal – “The focus will now be on the Barryroe farmout process which, with the consequent development of the field, should support our valuation of 811p per share”.
With interim results due out on Tuesday morning and an analyst conference call at 9am, this is likely to be a key opportunity for a comprehensive update of where the company now is in the final stages of this process.
CLEAR DISCLOSURE – EXPOSURE TO PROVIDENCE RESOURCES IS HELD WITHIN TITAN’S FUNDS AND PERSONALLY BY RICHARD JENNINGS.