Ireland-based Providence Resources plc has sold its US oil and gas portfolio in the Gulf of Mexico to Dynamic Offshore Resources LLC for $15 million in cash up front and an additional $7 million deferred cash payment. The deferred cash payment is dependent on Dynamic reaching certain production levels from any new wells drilled on Ship Shoal 252, 253 and 267 prior to January 2013.
The acquisition adds eight fields to Dynamic’s asset base, the most prominent of which includes a 100% interest in Vermillion Block 272 Field and a 50% interest in High Island Block 52 Field. Current net production from the properties is approximately 4,500 boe/d, 60% of which is oil. Dynamic will operate over 67% of the newly acquired reserves. The acquired properties comprise interests in 16 federal and state blocks encompassing over 22,000 net acres, the majority of which is held by production. The acquisition includes interests in 32 producing wells and nine platforms in water depths ranging from 30’ to 175’ and with typical Shelf infrastructure consistent with the rest of Dynamic’s assets.
Houston-based Dynamic Offshore recently ranked No. 35 in the January installment of the OGFJ100P, a list of the top privately held companies by production.
The proceeds of the sale, which closed on March 31, 2011, are to be applied to a reduction of the company's Reserve Backed Lending Facility with BNP Paribas. The sale will result in the impairment of the carrying value of the assets, and will necessitate a non-cash write-off to be taken in Providence's 2010 accounts. CIBC World Markets Plc acted as exclusive financial adviser to Providence on this transaction.
Commenting, Tony O'Reilly, chief executive of Providence said, "With our major multi-year, multi-basin drilling program offshore Ireland starting, combined with our ongoing investment program at Singleton, the investment focus for the company is now very clear. As such, the opportunity to realize cash from the Gulf of Mexico portfolio, and to deleverage the core business, made sense."
