Gateway to Ireland’s Providence

Initiating Coverage on Providence Resources Plc

RESEARCH ANALYST: Stephane G. Foucaud, P.Eng +44-207-448-0213 • [email protected]

AIM Listed: PVR Price: 3.43p

Opinion: OUTPERFORM 12 Month Target Price: 6.10p

28 April, 2010

London Office: +44-207-448-0200

REGULATORY DISCLOSURES - PAGE 25 www.firstenergy.com Initiating Coverage on Providence Resources Plc - PVR 28 April, 2010

Table of Contents Highlights

Highlights ...... 2 Providence Resources Plc is an AIM listed £105 MM Investment Thesis ...... 3 (US$160 MM) market cap E&P and gas storage com- Expanding on Investment Case ...... 3 - 4 pany with a focus on Ireland. The Exploration Luck of the Irish ...... 4 We are initiating coverage on Providence with an Assets in Brief: Balanced Portfolio ...... 4 - 6 Outperform rating and a target price of 6.10p per share Timeline of Activities ...... 6 based on a sum of the parts valuation. This represents A Valuation Discounting No Risked Upside ...... 6 - 7 an 86% upside to the current share price. The EIRGAS and Kinsale Energy: Leveraging a Monopoly Company’s base line assets include about 21 MMBoe 2P Position in Gas Storage in Ireland ...... 7 - 11 reserves (proforma basis) and 1,540 Boe/d oil and gas Game Changing Appraisal and Exploration production (2009 figure) onshore UK and in the Gulf of Mexico. Using a Special Purpose Vehicle (SPV), Offshore West Ireland ...... 11 - 12 EIRGAS, Providence exercised an option to acquire a Stable Production in the UK and the U.S. But 40% interest into an established gas production and Very Diverging Fortunes ...... 12 - 14 storage business in south east Ireland with 40 Bcf 2P Other Assets: Aje and EXOLA ...... 14 - 15 reserves and 8 Bcf per year working storage capacity. Detailed Valuation ...... 15 - 18 Sensitivities ...... 18 The current share price of 3.48p is below our core NAV of 3.69p per share, based on the Company’s cash Financial Framework: 2010 and 2011 are Fine, generative assets only. This suggests very limited Some Funds Will Be Required in 2012 ...... 18 downside risk. These assets provide a stable cash flow Board and Management (Extract) ...... 19 to pursue very high impact activities in Ireland. Albeit Company Timeline, Main Shareholders and each individual high impact asset is potentially a Shareholder Structure ...... 19 company maker, the current share price does not seem to discount any value for any of these projects. Our Appendix unrisked NAV stands at 24.75p per share, about eight times the current share price. Key re-rating opportuni- ties for Providence include: Providence Resources Detailed List of Assets ...... 24 1. Near term appraisal of the Burren oil field and the Fiscal Terms in Ireland, the U.S. and the UK ...... 24 multi Tcf Spanish Point gas condensate project with an unrisked value of 6.10p per share. PROVI DENCE AREAS OF I NTEREST IRELAND AND UNITED KINGDOM 2. Medium term exploration drilling at the 8.4 Tcf gas and 316 MMBbl (recoverable) condensate Dunquin asset operated by ExxonMobil offshore west Ireland with an unrisked value of 11.20p per share. 3. The gradual development of additional gas storage projects in Ireland over the next four years through EIRGAS with an unrisked value of 3.35p per share.

KI SH 4. The possible development of unconventional oil BANK

SPANISH POINT PEGASUS, and BURREN ORPHEUS, DRAGON fields in the Celtic Sea with farm in partners

HELVICK DUNMORE HOOK HEAD Kinsale Head CUCHULAI N DUNQUI N ARDMORE through EXOLA, the recently established Special Seven Heads BARRYROE SINGLETON PEDL 233 Purpose Vehicle, to invest and develop unconven- DROMBEG tional oil opportunities. No value has been as- NEWGRANGE

Source: Providence Resources PROVIDENCE signed to EXOLA at this stage. WWW.PROVIDENCERESOURCES.COM *Front cover photo credit: iStockphoto Sources for tabular data and charts are FirstEnergy Capital Corp. and Company Reports unless otherwise noted. This report has not been approved by FirstEnergy Capital LLP for the purposes of section 21 of the Financial Services and Markets Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied upon, by any other person. 3

Expanding on Investment Case at Spanish Point alone could add 5.60p to our 6.05p valuation. In the medium term, though the Dunquin project could potentially be larger (8.4 Tcf and 316 Providence Resources Plc (PVR) is a £105 MM (US$160 MMBbl condensate), we believe it is too early to play MM) market cap company with 21 MMBoe 2P WI this theme given that it is rank exploration, with the reserves (working interest) and 1,540 Boe/d WI produc- first exploration expected to be drilled in the next tion in the UK and the Gulf of Mexico. Importantly, couple of year. Our unrisked NAV assuming a success Providence is a vehicle to play the development of the at Dunquin, Spanish Point stands at 21.40p per share, Irish gas industry, as well as very high impact explora- about six times the current share price. The develop- tion and appraisal activities offshore west Ireland. We ment of the mid term gas storage project would add a rate Providence as Outperform (target price of 6.10p per further 3.35p to unrisked valuation (total unrisked share) for the following reasons: value of 24.75p).  Attractive valuation and limited downside to  Leading position for gas storage in Ireland: a busi- current level – Providence’s shares trade below our ness poorly understood, but already profitable with 3.69p core NAV (including only producing fields, plenty of further opportunities – Through its EIRGAS 2P reserves and cash generative projects). This subsidiary (100% owned), Providence has exercised implies a very limited downside. On a very conser- an option to acquire 40% of the Kinsale Heads Area vative basis, valuing exploration and appraisal gas production and storage projects from PETRONAS. assets on implied value from farm down deals, our The current gas storage working capacity of 8 Bcf is risked NAV stands at 6.05p per share, 86% above expected to be progressively extended to 38 Bcf by the current price. On the basis of a more aggressive 2014. As E&P investors acquire a better understanding valuation, valuing exploration on risked resources of the economics of gas storage, we anticipate the (North Sea transaction multiples) would yield a market to attribute a higher valuation to this activity. risked NAV of 7.90p per share.  The involvement of very credible players is a  Free option on hundreds of millions of barrels testimony to the quality of some of Providence’s contingent resources in Ireland – Offshore west of assets and the technical team – Providence’s partners Ireland has experienced little exploration given a include ExxonMobil and ENI on the Dunquin giant combination of difficult operating conditions in the prospect (8.4 Tcf and 300 MMBbl condensate) offshore late 1970s, low commodity prices in the 1990s and west Ireland and PETRONAS on the gas storage technological limitations at the time. Whilst this business in Ireland (60% WI and operator). means that infrastructure is limited, it also means  Shareholding structure and projects location could that there could still be giant fields to be found and mitigate the “Corrib Factor” – Every investor in developed. Successfully appraising 785 Bcf and 90 Ireland has in mind the difficulties faced by Shell at MMBbl contingent resources net to Providence at the Corrib project due to specific disagreement with Spanish Point and Burren (Burren’s resources have local communities. The location of Providence’s main not been disclosed yet and are not included in these projects with links (or links to be built) to onshore estimates) could be game changing to Providence. brown sites would mitigate concerns as would its role Near term farm down or drilling activities could as an Irish company with specific operational experi- provide an implied valuation to the plays. A success ence in Ireland. Investment Thesis Positives Negatives - Attractive valuation and limited downside - Share price is in line with core - The difficulties of Shell at the Corrib project is a concern to investors in Ireland NAV, which only includes cash generative projects with 21 MMBoe 2P - UK's Singleton and gas storage projects in Ireland are very profitable - Providence does not operate its high impact E&P projects. Newsflow slippage is possible. Drilling at Dunquin in the next couple of years - Large acreage position in a country underexplored with giant prospects - Offshore projects in Ireland are very expensive given limited infrastructure - Low government take - The Gulf of Mexico has proven to be a difficult place to operate given weather conditions and low gas prices - The only established gas storage business in Ireland: the Company has an - Potential convertible overhang in 2012 and large Capex programme. The edge versus competitors to develop new gas storage projects in Ireland Company may have to dilute interests in assets or raise further equity - Very credible partners (ExxonMobil, Chevron, Petronas, ENI, Vitol) - Post 2012-2013 WI production tails off significantly - Extensive experience in Ireland Source: FirstEnergy Capital 4 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

 Opportunistic value Providence Resources Map of Activity

Mississippi in EXOLA – Through PROVI DENCE AREAS OF I NTEREST Alabama its new SPV, EXOLA, I RELAND AND UNI TED KI NGDOM Florida Texas Louisiana

!( Providence is trying RI DGE MAIN PASS 89 to leverage off its past MAIN PASS 19 VERMILION 60 experiences in the WEST CAMERON 333

EAST CAMERON 257 Celtic Sea where HIGH ISLAND A268 SHIP SHOAL 252, 253, 267 there have been many GALVESTON A155 Canada

oil discoveries but no United States

Mexico

successful develop- PROVI DENCE AREAS OF I NTEREST LOCATION GULF OF MEXICO, USA AREA ments. Having spent PROVIDENCE WWW.PROVIDENCERESOURCES.COM

millions over the past KI SH BANK

years in this area, the SPANISH POINT PEGASUS, Benin Nigeria and BURREN ORPHEUS, DRAGON Togo

establishment of HELVICK DUNMORE HOOK HEAD Kinsale Head CUCHULAI N DUNQUI N ARDMORE EXOLA represents a Seven Heads BARRYROE SINGLETON PEDL 233 OML 113

Spain Turkey

Iran Iraq

Algeria new business Libya Egypt DROMBEG Saudi Arabia

Mali Niger Chad Sudan

Nigeria Ethiopia

Kenya Congo, DRC methodology by Tanzania Angola PROVI DENCE AREAS OF I NTEREST Zambia NEWGRANGE LOCATION trying to realise the OML 1 1 3 , NI GERI A AREA PROVIDENCE WWW.PROVIDENCERESOURCES.COM PROVIDENCE economics of uncon- WWW.PROVIDENCERESOURCES.COM ventional oil through Source: Providence Resources alignment with industry partners. Though we do not attribute any very low government take. Also, unlike Falklands and value to EXOLA at this stage, it is notable that they Greenland, Ireland is immediately adjacent to Europe have just signed their first farm out deal on one of with 500 MM potential consumers. their heavy oil assets, Baltimore, with Nautical 3. The Corrib gas project operated by Shell is suffering Petroleum, a UK based heavy oil specialist. from specific legal and environmental issues and should not be seen as a proxy for oil and gas develop- The Exploration Luck of the Irish ments in Ireland. Additionally, as an Irish managed company, Providence is well placed to understand and deal with any local issues that could arise. In the Oil and Gas industry, Ireland resonates with two images: abyssal exploration and appraisal performance With an established gas storage business in south east in the Celtic Sea until the 1990s and the plagued Corrib Ireland, high impact exploration and appraisal projects, project operated by Shell (delayed by seven years and and EXOLA’s plans in the Celtic Sea, we believe that still counting). We believe these two factors have deterred Providence Resources is in a unique position to capitalize international operators to return to Ireland, creating on the resurgence of hydrocarbon exploration and devel- opportunities for new entrants for the following reasons: opment opportunities in Ireland. 1. Commodity prices have been multiplied by a factor of three to four since the time of E&P activities in Ireland by Super Majors, Majors and Large Indepen- Assets in Brief: Balanced Portfolio dents (until the 1990s) and by almost 10 since the low point in 1998. No real gas market existed at this The Company was founded and listed on the Irish Enter- time in the UK and Ireland. The combination of a prise Exchange in 1997 and listed on AIM in 2005. The new paradigm of higher oil prices, the emergence of Company holds the following main assets: a vibrant gas market in the UK and Ireland and the  Ireland – Gas Production and Storage and High use of more modern technologies imply that past Impact Exploration and Appraisal: discoveries could now be deemed commercial.  Gas production and operating storage - 100% interest 2. The renewed appetite for frontier offshore explora- in EIRGAS, a Special Purpose Vehicle, with an tion (west of Shetlands, Brazil, Greenland, option to acquire up to 40% of the Kinsale Head Falklands) could attract operators to the west of Area with about 16 Bcf working interest (WI) Ireland offshore Atlantic margin, an area difficult to recoverable reserves, 12 MMcf WI production and operate but that could still offer multi billion barrels 3.2 Bcf per day gas storage WI working capacity. prospects benefiting from attractive fiscal terms with This is an acquisition expected to close in Q2 2010. 5

 High Impact Ap- Providence Resources Plc praisal and Explora- 135 6 8 tion: 2 4 7  56% interest in the Spanish

Point and Burren Jan 2010 Feb 2010 March 2010 April 2010 May 2010 June 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 1 Results of seismic survey at Burren and Spanish Point - resources update on Spanish point and appraisal programme update. appraisal assets 2 EIRGAS - Closure of acquisition of 40% of Kinsale Energy - valued at US$233 MM at a cost of US$40 MM (net to PVR). offshore west 3 Further farm-down at Spanish point. This may provide and implied valuation. 4 Possible divesture of interest in Aje - proceeds will aliviate debt position (FCC). Ireland with a 5 FID - storage expansion. 6 Drilling Onshore UK. WI contingent 7 Possible drilling in Spanish Point (FCC). resources of 220 8 Possible Drilling of Dunquin (FCC) MMBoe (exclud- Source: FirstEnergy Capital Corp. & Company Reports ing Burren).  5% to 50% interest in various fields in the Gulf of  16% interest in the Dunquin field operated Mexico (shallow water and onshore) producing by ExxonMobil with 8.4 Tcf gas and 316 about 6.5 MMcf/d gas and 50 B/d liquid. MMBbl condensate gross prospective  Other Assets: resources offshore west of Ireland (272  100% interest in EXOLA, a Special Purpose Vehicle MMBoe net to Providence). created to develop unconventional discoveries in  UK and U.S. – Delivering Stable Production: the Celtic Sea in Ireland. The Baltimore licence  99.12% interest in the Singleton asset, onshore (Providence WI: 60%) awarded in February 2010 is UK producing about 625 B/d oil (2009). expected to contain 300 MMBbl heavy oil in place.  50% interest in the Baxter’s Copse field, adja- Commerciality is likely to depend on recovery cent to Singleton with first oil now targeted for factors. 2011 (2.7 MMBbl 2P reserves net to Providence).  6.7% interest in the Aje field in Nigeria. The technical advisor is Chevron. This field was Providence WI Production Profile deemed commercial in 2008 and is now undergo- 4,500 EIRGAS Kinsale Head Gas Storage (in operation) ing pre-FEED which is expected to lead to FID in US Gulf of Mexico Triangle - NPV 10 4,000 Singleton (UK) - NPV 10 late 2010.

3,500

3,000 Providence Resources has about 21 MMBoe WI 2P reserves in Ireland, the UK and the Gulf of Mexico (proforma at the 2,500 closure of the acquisition of the Kinsale group of assets). Boe/d 2,000 The Company also holds additional minor exploration 1,500 and appraisal interest in Ireland and the UK.

1,000

500 We estimate the Company’s production at 1,540 Boe/d in

0 2009 (WI) from its UK and U.S. assets. We anticipate this 2009 2010 2011 2012 2013 2014 will increase to 3,845 Boe/d by Q4 2010 from additional Q%`HV7 1` JV`$7 :]1 :C5 QI]:J7 V]Q` production in the UK and through EIRGAS, the contribu- tion of the Kinsale group of assets from Q2 2010. Near Term and Medium Term Resources Prosp Risked Reserves and Resources (MMBoe) 2P Conting. Res. GCoS Res. Note that the table to the left only includes assets Singleton (UK) - NPV 10 7.21 0.00 0 100% 7.2 with near term to medium term activities where Baxter's Copse (UK) 2.70 0.00 0 100% 3.7 US Gulf of Mexico Triangle - NPV 10 8.17 0.00 0 100% 8.2 we see the Company focusing its attention. This EIRGAS - Kinsale Heads Area Producing excludes resources estimates for assets in the Assets - NPV 10 2.64 0.00 0 100% 2.6 south Porcupine basin other than Dunquin that Nigeria - Aje 9.25 0 100% 9.3 Spanish Point 220.3 0 40% 88.1 have not been disclosed yet. Providence also Dunquin 0 272 10% 27.2 holds about 250 MMBoe additional contingent Exola - Baltimore Licence 30.00 10% 3.0 and prospective resources in the Celtic Sea Total Oil Liquid 11.91 124 48 10% 11.91 Total Gas 8.81 135 224 40% 44.73 (through EXOLA) that have been excluded given Total Oil and Gas 20.7 259.5 272 146.3 they are not associated to any near term de- EV/2P or P50 (US$/Boe) 13.12 1.9 risking activities (see appendix for details). Source: FirstEnergy Capital, Company Reports 6 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

Unrisked EMV exploration activities. This would imply an Asset Valuation (US$MM) (US$MM) £/Share % Total Net Cash -99 -99 -1.71 -28.2% asymmetric risk profile with very limited G&A -41 -41 -0.70 -11.6% downside, but a very large upside. Providence plc 201 201 3.45 57.0% Singleton (UK) - NPV 10 110 110 1.89 31.3% Baxter's Copse (UK) 41 41 0.71 11.7% Note that we have taken an extremely US Gulf of Mexico Triangle - NPV 10 49 49 0.85 14.0% conservative approach to value Providence’s 100% Interest in EIRGAS 155 155 2.66 43.9% appraisal and exploration assets and have EIRGAS - Kinsale Heads Area Producing Assets - NPV 10 50 50 0.86 14.2% EIRGAS Kinsale Head Gas Storage (in operation) 105 105 1.80 29.7% included in our valuation only assets with Total Core NAV (Cash Generative Assets) 215 215 3.69 61.1% de-risking activities (farm down or drilling) Providence plc Risked Exploration upside 1,029 79 1.36 22.5% in the next 12 months. To the exception of Nigeria - Aje 23 23 0.39 6.4% Aje, in Nigeria, we have also chosen to value Spanish Point 354 31 0.54 8.9% Dunquin 653 25 0.43 7.2% these assets according to the implied value 100% EIRGAS - Gas Storage and Development Upside 196 58 1.00 16.5% from recent farm-in deals. For Aje, given the EIRGAS - Kinsale Heads Near Term Gas Storage Project 194 56 0.96 15.9% Dragon 2 2 0.03 0.6% project appears to be near final investment EXOLA N/AN/AN/AN/Adecision we have valued Providence’s 4.9 Total Risked Exploration 1,225 137 2.36 38.9% MMBbl contingent oil resources in line with Total NAV 1,440 352 6.05 100.0% our estimates for Afren’s contingent re- Unrisked NAV 24.75 sources in Ebok at US$4.90/Boe. Should we P/Core NAV x 93.9% P/NAV x 57.3% value Spanish Point on a risked resources P/Unrisked NAV x 14.0% basis with unrisked 2C barrel value in line Note: Our core NAV considers a value of 3.69p per share with the price paid by RWE for Breagh 2P Source: FirstEnergy Capital, Company Reports reserves (about US$5.00/Boe) and a risked factor of 40%, Timeline of Activities our risked NAV would be increased by 1.90p per share to 7.90p per share. In the near term, we anticipate two high impact events Core NAV Risked Upside 6.00 for the Company: 5.50  EIRGAS’ closure of the acquisition of Kinsale Energy 5.00 4.50 at a cost of US$40 MM for an expected value of 4.00 3.50 US$233 MM. 3.00  Additional visibility on Spanish Point and Burren 2.50 2.00 with a resources update and perhaps an appraisal 1.50

re PriceContribution (p/share) 1.00 a programme following the analysis of the recently 0.50 Sh acquired seismic data. 0.00

 G&A Later in the year, Providence could divest its inter- Dragon Net Cash Core NAV Nigeria Aje Risked NAV

ests in Aje. Albeit not game changing, it will help -Singleton UK Dunquin -Dunquin Ireland Storage US Gulf of Mexico Production alleviate the Company’s debt position. (UK) Copse Baxter's Storage Projects Storage Spanish Point Point Spanish - Ireland Eirgas -Eirgas Gas Heads Kinsale Eirgas -Eirgas Gas Heads Kinsale Eirgas -Eirgas Area Heads Kinsale A Valuation Discounting No Source: FirstEnergy Capital, Company Reports Resources Valuation Risked Upside Company Region (MMBoe) (US$MM) Methodology Status Cairn Energy Greenland NA 1,600 Implied Up to four wells to be valuation in drilled in 2010 Our target price for Providence’s shares is share price 6.10p, broadly in line with our sum of the Falkland Oil and Gas Falklands 2232 332 Market cap Drilling Campaign in 2010 parts valuation (6.05p). This represents a Desire Petroleum Falklands 796 233 Market cap Drilling Campaign in 86% upside to the current share price. The 2010 Rockhopper Exloration Falklands 364 123 Market cap Drilling Campaign in current share price is broadly in line with 2010 our core NAV including only cash genera- Borders & Southern Falklands 2040 332 Market cap Drilling Campaign in tive assets (Singleton, Gulf of Mexico, Petroleum 2010 BPC Bahamas NA 50 Market cap Farm down EIRGAS operating gas storage and EIRGAS Providence Porcupine 492 56 Farm-in deals Farm down, production). This suggests that the market Basin (Dunquin, appraisal plan does not attribute any value to any of the Spanish Point)* * this does not include any value for Burren, Cuchulain, Drombeg, New grange high impact development, appraisal or Source: FirstEnergy Capital, Company Reports 7

Providence Share Price and NAV (p/share) Kinsale Energy Assets (40% EIRGAS/Providence, 60% PETRONAS) 30.00 Current Price Dunquin derisked 25.00 Development of storage project derisked Spanish Point derisked NAV 20.00

15.00 Ballycotton

10.00 KinsaleKinsale Head Head A ASand Sand

5.00

0.00 Kinsale Head B SWK Store Sand Core NAV Risked NAV Current Price Current Unrisked NAV Seven Heads Point valued on valued Point risked resources)

Q%`HV7 1` JV`$7 :]1 :C5 QI]:J7 V]Q` (Spanish NAV Risked *Subject to closing of option Source: Providence Resources Plc Comparables Valuation for Frontier Exploration Portfolio respectively 10.80p and 5.60p per share. If one adds in Our entire valuation for Providence’s interests in the EIRGAS’s attributable share of the planned expansion Porcupine basin (including Spanish Point and Dunquin) of gas storage (30 Bcf additional working capacity), a stands only at US$56 MM based on the implied valua- further 2.20p per share can be added. So, taken with our tion by farm-in deals (see valuation section for more risked NAV of 6.05p, we value Providence shares at details) and on the basis that it is still largely a frontier 24.75p on an unrisked basis. exploration area. Nothing has been included for Burren. This is very conservative because although the area is EIRGAS and Kinsale Energy: relatively underexplored, there have been a number of hydrocarbon discoveries (notably Spanish Point and Leveraging the Only Gas Storage in Burren). Ireland Other notable frontier exploration areas include the Falklands, Bahamas and Greenland. It is possible to Providence’s gas production and gas storage business draw implied valuation for interests in these regions is held through its EIRGAS 100% owned SPV, a busi- from recent deals or market caps. The figures for the ness established to invest in gas storage and CCS Falklands and Greenland stand well above what we opportunities. EIRGAS’ main interest consists of an have attributed to Providence. Providence’s interests in option to acquire up to 40% WI in Kinsale Enegy, the the Porcupine basin are valued broadly in line with company owning 100% in the Kinsale Head Area gas BPC’s interests in the Bahamas. The difference between production and storage facility. On this basis, EIRGAS the valuation of BPC’s interests and Cairn’s or the holds 16 Bcf net 2P reserves, 12 MMcf/d net production Falklands’ pure plays (Desire, Falkland, Rockhopper and 3.2 Bcf gas storage net working capacity. EIRGAS and Borders) could be explained by near term drilling exercised an option to acquire its 40% share in the activities and the presence of a Major (BHP) in the Kinsale Energy in H2 2009. The deal is expected to close Falklands. in Q2 2010. We value EIRGAS at 3.70p per share, representing the greater proportion of the Company’s The announcement of appraisal drilling activities at valuation. Spanish Point/Burren and/or exploration drilling at Dunquin would accordingly trigger a re-rating of Background to the Kinsale Energy Deal Providence’s shares in our view. We also note that Cairn, Following the acquisition of Star Energy’s interest in the BPC or the Falklands pure plays do not have partners as Singleton assets in the UK, Providence and Star had an prestigious as ExxonMobil; which highlight the materi- agreement to jointly (50/50) evaluate gas storage ality of Providence’s assets in the Porcupine basin. opportunities. The acquisition of Star by PETRONAS in 2008 provided additional financial credibility to the Unrisked Value Eight Times Above Current agreement. Later that same year, Providence and Share Price PETRONAS jointly agreed to bid for Marathon’s A success at Dunquin and Spanish Point could add Kinsale Head Area gas production and storage facility 8 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

assets. In exchange for a 10% interest, PETRONAS Storage in Europe agreed to bid for the asset; with Providence having a subsequent option to farm-in for up to 40% of the Total storage (bcm) @ end 07 Storage in % of annual demand Marathon assets at ground floor terms. This option was exercised in Q3 2009. The deal is expected to close in Q2 _ Sweden 2010 for a residual consideration of US$40 MM net to 1% Finland EIRGAS. This transaction is expected to be partly Norway financed from existing cash on the balance sheet, credit Estonia _ 2 1 Latvia Ireland facilities and the recent £14.4 MM placing. Denmark 163% 4% 4 20% Lithuania United Kingdom 4 5% Netherland Leading Position in Gas Storage in Ireland: A 11% 20 2 1 Germany Belgium Poland 22% 3% 3 11 Business Poorly Understood, but Already Luxembourg Czech Republic 12 33% 3 Slovakia 4 Profitable With Plenty of Further France __ 43% Austria 4 25% Switzerland 46% Hungary 2% 3 Slovenia 26% Opportunities Romania _ 27% Portugal 14 3 3% Italy 1 Spain Bulgaria Kinsale Energy 17% 33% 7%

_ The Kinsale Head Area assets are located in the Celtic Greece Sea, in shallow water off the south coast of Ireland and 3% consists of producing fields, gas storage operations, two Malta Cyprus offshore production platforms and onshore processing Source: SG Equity Research / Eurogas /GSE facilities and associated pipelines. This is Ireland’s only operating gas production and gas storage operations: comparable numbers for the U.S. (19%). However, the  Producing fields (mostly Kinsale Head A, with a EU imports on average about 60% of its gas demand small contribution from Ballycotton and Seven (2007 figures) versus about 20% for the U.S. This very Heads) with 46.2 Bcf producing Proven gross important difference supports the recent intention to put reserves (16 Bcf net to EIRGAS). Gas production was in place a new regulation forcing government to ensure approximately 30 MMcf/d (or 5,000 Boe/d) for the gas supplies cover 60 days of the highest demand first quarter of 2009 (or 2,000 Boe/d net to EIRGAS). experienced during the coldest period. The reserves are expected to be produced over four years. Realized prices are in line with UK NBP. We Increasing interest in gas storage – Gas storage in currently value these assets at 0.85p per share. Europe is mostly dominated by very large players  8 Bcf gross working capacity gas storage in South (utilities, major oil companies). Some companies have West Kinsale (SWK) – 3.2 Bcf net to EIRGAS. We accelerated investments in gas storage over the recent currently value these assets at 1.80p per share. years. According to Societe Generale, since 2007, Star  Portfolio of future gas storage including Ballycotton Energy was acquired by PETRONAS, Edgon and Encore field reconversion, South West Kinsale Expansion. demerged their gas storage business. In Continental This could take the overall gas storage working Europe, EON indicated it planned to expand its storage capacity to 38 Bcf (15 Bcf net to EIRGAS/Provi- capacity and Gazprom and OMV signed an agreement, dence). We currently value these assets at 0.95p per whereby Gazprom is to receive a 50% interest in share. We estimate their unrisked value at 3.35p per Baumgarten, the Central European gas hub. In the UK, share. Infrastrata has recently obtained the right to develop salt cavern gas storage in the Isle of Portland, Gas Storage: A Rare Commodity StatoilHydro and Scottish and Southern Energy are Gas security of supply is a serious issue in Europe – working on the Aldbrough salt caverns and Gas de The volatility of gas prices over the recent years com- France signed an agreement with INEOS for the com- bined with the Russian-Ukraine crisis has highlighted mercial development of a proposed salt cavern storage the importance of gas storage. It is actually interesting to in north-west England. The UK government granted notice that contrary to oil, there are hardly any gas Stag Energy approval in February 2010 for the develop- strategic stocks in Europe (except 5.1 Bcm in Italy). In ment of its £600 MM (US$942 MM) Gateway under- the EU-27 gas storage (including regulated, commercial ground natural gas storage facility, which could and seasonal storage) represents about 16% of total increase the country’s gas storage capacity by 30% if it demand (2007 figure). This figure is slightly below goes online in 2014. 9

Gas storage in Ireland – The map to the left highlights the volume of gas that is necessary to ensure the minimum existing gas storage as a percentage of demand. Ireland storage pressure necessary for optimal gas injection and and the UK, with 4% and 5% respectively, rank at the withdrawal. Working gas is the gas volume which can be bottom of European countries. stored or withdrawn at any time in addition to the cushion gas. Cushion gas represents about 50% of the total capac- According to Societe Generale, the decline in swing ity of a depleted oil field gas storage versus only 20% for a production in the North Sea should have triggered an salt cavern. increase in storage capacity; however this increase failed to materialise. The fall in North Sea output was Economics for gas storage projects can vary significantly initially underestimated, and companies found it more according to their locations and their use. In Continental attractive to invest in LNG regasification terminals with Europe, storage was built to help balance highly seasonal the hope of making lucrative U.S./UK arbitrages, demand and a base load supply secured through long viewing storage as a low return asset. With fierce local term ‘Take or Pay’ contracts which are not very flexible. opposition, storage was left on the back burner until it Storage tends to be used for seasonal modulation (often was too late. Today, the few lucky storage owners are regulated) or transit. making huge profits and companies are running to fast-  For regulated gas storage, tariffs tend to be set by an track any storage project they can find. Until recently, independent regulator. As an example, for the modula- the UK storage shortage has been partially addressed tion service, tariffs are set by the Italian Authority for due to Norwegian swing production. Thanks to the new Electricity and Gas and assume a 7.1% (pre-tax) rate of Langeled pipe, Norway has more flexibility in providing remuneration, with a premium of 4% (pre-tax) on new additional gas to the UK, which has diminished needs investments for a duration of eight years in the event for extra UK storage. However, the partial shutdown of of expansions and of 16 years for new fields. All ENI the Ormen Lange complex over the winter 2009/2010 storage therefore generates a very low EBIT margin. and the recent 25% reserve downgrade again raises  Negotiated access tariffs are set by storage operators storage concerns. and tend to be slightly more profitable than above.  Storage for transit appears to be more profitable than Ireland imports 93% of its gas requirements and the both previous categories. Kinsale Energy gas storage is the only gas storage  Additionally, salt cavern gas storage tend to be more facility in the country. It represents less than 3% of the profitable given the quicker withdrawal rate and the country’s demand and 9.2% of Ireland’s peak demand lower volume of cushion gas required. However, they that it can sustain for only 6.6 days (2.8 Mcm maximum are much more expensive to build and are more withdrawal rate). This situation is compounded by the technically challenging, especially if offshore. diminishing domestic gas production in Ireland (Kinsale Area has only a four year life of production and In the UK and Ireland and to some extent in Zeebruge, gas the Corrib project is still plagued with various issues trading and storage is de-regulated, allowing gas storage and could be years away). Alternative storage projects gas operators to capture the marginal cost. This corre- (LNG at Shannon and salt caverns in Northern Ireland) sponds to the difference between gas prices in the winter appear to be many years away. and the summer. In the case of Ireland, it corresponds to about 20.00p per term; which broadly corresponds to Gas storage in Ireland is seen as interlinked with the UK US$3.00 MM revenue per Bcf of working capacity. gas market through two gas interconnectors. Given the similarities between the UK and the Irish gas Gas Storage Economics – The Rough markets, we believe it is insightful to analyse the econom- Example (Source: Societe Generale, FCC) ics of the Rough projects operated by Centrica in the UK as On the backdrop of this environment, economics for gas a proxy for Kinsale Head operations. storage projects in Ireland appear very attractive. Centrica Storage consists of a 3.34 Bcm (117 Bcf) Rough Gas can be stored in salt caverns or in depleted oil/gas depleted oil field storage facility. The 3.34 Bcm Rough fields and aquifers. Withdrawing gas from salt caverns storage capacity is sold in Standard Bundled Units (SBU) takes less time than from depleted fields given reservoir of injectability, space and deliverability. Centrica ensures properties. The gas held in a gas storage facility is that Centrica Storage sells all Rough capacity on non- divided into cushion and working gas. Cushion gas is discriminatory terms. Additionally, Centrica ensures that 10 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

Centrica Storage offers for sale: Bcf net to Providence) and has been in operation for  At least 20% of minimum Rough capacity on annual nine years. contracts.  To third parties (TPA) at least: Expansion: It is envisaged to expand the gas storage facilities by 30 Bcf from 8 Bcf to 38 Bcf. Minimum amount of the 455Min imillionsmum am SBUoun tto o fbe th eoffered 455 m iforllio TPAns S B U to be offered for TP A

2004/2005 80% The overall pipeline capacity at Kinsale stands at 450 2005/2006 81% 2006/2007 82% MMcf/d; which equates to about 50% of winter peak 2007/2008 83% demand in Ireland. 2008/2009 84% 2009/2010 and after 85% The entire Capex for the expansion project is estimated Source: SG Equity Research / Centrica at about US$600 MM (US$240 MM net to EIRGAS). It is not expected that a permit will be awarded before 2011, The rest as well as the incremental capacity, can be when spending would kick-off. EIRGAS plans to reserved to the Centrica Group. finance its share through a combination of project financing and cash resources, with the cash being Centrica Storage FY 2006 FY 2007 H1 2008 FY 2008 H1 2009 FY 2009 SBU price (sold 1 year generated from the existing EIRGAS gas production ahead) 57.4p 48.5p 43.8p 41.5p 44.2p and storage business. As such, we do not envisage any Revenue (£MM) 358 597 259 501 219 462 Operating Profit (£MM) 228 240 93 195 73 168 cash being released from EIRGAS to Providence but Revenue (US$MM/Bcf) 5.21 10.21 4.43 7.94 2.80 6.19 rather we see it being re-invested to expand operations. Operating Profit/working capacity (US$MM/Bcf) 3.32 4.11 1.59 3.09 0.93 2.25 Source: FirstEnergy Capital, Company Reports Other Assets EIRGAS also holds a 25% interest in the Dragon field At Rough, the revenue per working Bcf stood histori- and a 50% interest in Kish Bank. cally between US$5.21 MM and US$10.21 MM, well above the US$3.00 MM suggested in the simple case Dragon is a 100 Bcf gas in place offshore gas field lying above. We kept this last figure in our forecasts, but the across the UK and Irish border. The field was discov- case of Rough highlights some upside. ered by Marathon and flow tested 21 MMcf/d and 120 B/d. The area is under a drilling moratorium following Based on Rough operating profit of US$2.25 MM to an accident in 1996. Before any work can be done on US$4.11 MM per Bcf and applying 12.5% corporate tax this asset, a unitization agreement would have to be in Ireland yields US$15.75 MM to US$28.77 MM per crafted between the UK and Irish authorities. There is a year net profit for Kinsale Energy’s current 8 Bcf gas potential upside in deeper plays, including Orpheus storage operation. Based on the same metrics, an (estimated contingent resources of 290 Bcf) and Pe- expanded gas storage to 38 Bcf storage could generate gasus (estimated contingent resources: 890 Bcf). US$74.80 MM to US$136.70 MM net profit per year. The Kish Bank basin presents a longer term offshore Gas Storage at Kinsale Energy salt cavern gas storage opportunity, offshore Dublin. As explained above, Kinsale Energy runs the only gas Kish Bank has geological structures which are analo- storage facility in Ireland. Kinsale Head has been gous to projects in the east Irish Sea where the Gateway producing a total of 1.5 Tcf since 1978. Some parts of the project has given the go ahead. It could also be used as field (South West Kinsale) have since been re-converted a CO2 sequestration facility. Further geotechnical into gas storage. Near to medium term gas storage studies recently completed have confirmed published expansion includes adding 30 Bcf working gas by figures that the basin could host an effective carbon expanding South West Kinsale and combining this with storage capacity of c. 270 MM tonnes. the soon to be depleted Ballycotton field. Finally, the depleted main Kinsale Head A-Sand Current working capacity: 8 Bcf – The Kinsale South reservoir is an ideal candidate for a CO2 sequestration West Gas Storage has a working capacity of 8 Bcf (3.2 project. Whilst years away, it is interesting to note that 11

Providence Areas of Interest Offshore Ireland farm down high impact assets in order to reduce finan- cial exposure.

Spanish Point and Burren We value Providence’s 56% WI in the Spanish Point assets at 0.54p per share. Providence estimates the field could hold 14 Tcf and 160 MMBbl oil gross contingent resources (220 MMBoe contingent resources net to Providence).

The Spanish Point field is located 160 km from the coast in about 300m to 400m water depth. The Spanish Point structure was first drilled by Phillips Petroleum in 1981. Source: Providence Resources Plc The discovery, well 35/8-2, logged four hydrocarbon- bearing Upper Jurassic sandstone intervals over a gross the Irish government introduced a new carbon tax of 1,400-feet hydrocarbon interval. One of these four zones US$22/tonne for industrial players in Ireland. was subsequently tested and flowed at 925 Bbl/d of oil and 4.9 MMcf/d of gas. The measured permeability of Game Changing Appraisal and the reservoirs is low (0.1 mD), possibly given the fact the formation around the well was damaged. The well was Exploration Offshore West Ireland never fracced because of very bad weather for six weeks. Phillips decided at the time not to develop the field given Providence Resources holds a large portfolio of explora- the size of the field (assessed at 300 MMBoe at the time) tion and appraisal licences. Two particular assets was below the Company’s threshold of 500 MMBoe. offshore west of Ireland on the Atlantic margin are of particular materiality. Each could potentially be a Chevron and Statoil took over the licence in the 1990s company maker: and reviewed the resources potential upwards, having  Spanish Point – An appraisal asset with 1.4 Tcf carried out further seismic and field pre-development and 160 MMBbl contingent resources (Providence studies. The fall in commodity prices in the late 1990s WI: 56%). The licence also includes the Burren and the limited gas market at the time could have taken discovery. part in the decision of Chevron and Statoil not to take  Dunquin – An exploration asset with 8.4 Tcf forward the project. prospective resources and 316 MMBbl condensate (Providence WI: 16%) operated by ExxonMobil. In 2004, Providence licenced the area and immediately started on a process of project re-validation, using We value these assets based on implied value from industry experts such as Tracs, Schlumberger, Floatec farm-in deals at a total of 0.97p per share. Based on McDermott to carry out various field studies, productiv- risked resources multiples (US$5.00 per Boe de-risked ity and development planning. In August 2008, resources, 40% chance of success), our estimated Chrysaor farmed-into the licence for an initial 30% valuation for Spanish Point would be 2.40p per share. interest by funding a 3D seismic. Chrysaor has the Unrisked value for these two assets is estimated at option to increase its interest to 70% by funding two 17.30p per share. wells and paying a cash bonus of US$10 MM. Chrysaor is a privately owned company backed by Barclays Offshore west of Ireland has hardly been explored Capital. given a combination of difficult operating conditions, low commodity prices in the 1990s and technological The outline Spanish Point development plan envisages limitations at the time. Albeit this implies that infra- an estimated production rate of up to 120 MBoe/d. A structure is limited, it also means that there could still well would cost about US$60 MM and could be drilled be giant fields to be found. Providence’s strategy is to in 2011. 12 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

The recently completed 3D seismic survey suggests Stable Production in the UK and the minimal reservoir compartmentalization, as well as substantial reservoir up-dip from the original discovery U.S. But Very Diverging Fortunes well. Providence has also indicated that a survey of the separate Burren oil discovery had been very successful. We value Providence’s interests in the U.S. and the UK at The results of the survey have not been published yet a total of 3.44p per share, the UK assets representing 70% but are expected to be released in the near future as well of the overall valuation. as an indication of the forward programme. Following the acquisition of Triangle in the U.S. in 2008, South Porcupine Basin: Dunquin Providence produces a total of 1,540 Boe/d from its UK The main frontier exploration assets of Providence are and U.S. assets. Approximately half of this production is in the Porcupine basin, offshore west of Ireland, in hedged in 2010, reducing to a third in 2011 when the water depth ranging from 1,600m to 3,000m and 200 km hedges tail off. This provides Providence with a stable away from the coast. The basin has never been drilled. cash flow allowing the Company to pursue high impact Providence holds interest in four prospects: Dunquin, opportunities in Ireland. Providence’s 2P reserves in Newgrange, Drombeg and Cuchulain. Partners on the both countries are estimated at 18.10 MMBoe. Dunquin licences include ExxonMobil (40% and Operator – farmed in 2006) and ENI (40% – farmed in The Company plans to double production from its UK 2009). We value the Dunquin licence at 0.43p per share assets through a series of actions including monetizing based on the farm-in deal with ExxonMobil (US$70 MM gas production, fracturing, acidizing and drilling of a carry for 80% interest in the licence) but we do not new well in 2011. Production at the U.S. assets in the assign any value at this stage to the remainder of the Gulf of Mexico has been disappointing given a combina- portfolio. Providence has a 3.2% interest in the tion of extreme weather (hurricanes) and low gas prices Cuchulain licence with partners including ENI 60% - providing little incentives to Providence’s partners Operator), ExxonMobil 36% and Sosina 0.8%, a 16% (without gas hedges in place) to invest in the fields. interest in Drombeg and a 80% interest in Newgrange (which is the subject of a new licensing application). Production at Singleton (UK) to Double by 2011 The most advanced prospect, Dunquin is expected to Providence holds a 99.125% interest and operates the contain up to 8.4 Tcf gas and 316 MMBbl condensate Singleton field, with Noble Energy holding the remain- prospective gross resources (272 MMBoe net to Provi- ing 0.875%. The field was acquired by Providence in dence). Public data relating to the recent farm out to ENI November 2007. We value Providence’s interests at have highlighted the Dunquin South prospect has an Singleton at 1.90p per share. unrisked mean recoverable volume of 4.4 Tcf gas and 160 MMBbl of condensate. The Dunquin North prospect The Singleton oil field is located 7 km north of Chichester has 4.0 Tcf and 156 MMBbl. The corresponding esti- in onshore licence PL 240 in the Weald Basin, south of mated P10 volumes are 9.5 Tcf and 340 MMBbl of England. The field consists of two east-west trending condensate (Dunquin South) and 8.6 Tcf and 322 elongate horst blocks divided by a narrow graben. MMBbl of condensate (Dunquin North). A well commit- Providence Resources indicated the field could hold up ment (DHC$150 MM) was confirmed by ExxonMobil in to 107 MMBbl oil in place. Since production commenced August 2009 with drilling expected within the next two in 1986, the field has produced c. 3.7 MMBbl, which years. Importantly, Providence has a part carry on one represents a recovery factor to date of c. 3.5%. The field’s well and if two wells are drilled, it can elect to farm Proven reserves stand at 4.6 MMBbl oil and 1.6 Bcf gas. down to a net 8% interest with no exposure. 2P reserves are estimated at 7.21 MMBoe. The produced oil is a 37° API gravity crude and is trucked to the Holybourne rail terminal. Dunquin Prospective Resources Gross Recoverable Resources Prospects Tcf (P50) MMBbls (P50) Total (MMBoe P50) Total (MMBoe P10) Providence is focusing on optimizing the recov- Dunquin North 4.0 156 823 1,755 ery rate of the field that is being redeveloped Dunquin South 4.4 160 893 1,923 accordingly. The Company plans to increase Total 8.4 316 1,716 3,679 Source: FirstEnergy Capital, Company Reports sales volume from 645 Boe/d in Q4 2009e from seven wells to 1,390 Boe/d in Q3 2011. A facili- 13

ties de-bottlenecking, installation of gas to wire facili- MO861 GULF OF MEXICO ties, well stimulation, acid fracturing and the drilling of Houston New Orleans Mobil new production wells on the field is expected to cost Lake Charles Main PassV 89iosca Breton Lafayette Sound Ridge West MP Cameron Main US$16 MM. The Company has plans to take the overall Pass East East Additio High Cameron South Marsh Island Island field recovery levels to circa 10% over the coming years: Eugene Viosc Vermillion 60 West Island Sout a WC Vermilion Grand Delta Ship h West Isle Sout West Cameron 333 HI Shoal h  Additio Production Enhancement: Providence plans to run East WD Main Pass 19 Corpus South Galveston Additio Additio South Christi WC Verm SMI Timbalier a production enhancement programme including South Brazos South South Additio EC Additio EI SS ST HI East CameronAdditio 257 South South South South South HI Additio Additio Additio Additio acid stimulation aimed at increasing well produc- GA A155 South Additio South Ship Shoal 253 Matagorda Additio Extension Ewin Island South Mississippi tivity. Combined, the production enhancement Additio HI A268 g Mustang

programme on Singleton is expected to yield up to c. East 100 Boe/d of increased production in the short Additio North Corpus Christi East Breaks Garden Banks Green Canyon Atwater term. This increase is however short lived. Padre Island East Additio  Triangle Assets Acid Fracturing: Working with industry fracture Port South Isab Providence Assets stimulation experts StrataGen (formerly Pinnacle Padr e East Islan Additio Alaminos Canyon Keathley Canyon Walker Ridge Lund Technologies), the Company carried out a study on d acid fracturing of the Singleton field. This study has Source: Providence Resources Plc yielded positive results and has led the Company to design a specific fracture stimulation in an existing ton field. The companies have identified a number of production well. Fracture stimulation could be exploration and development opportunities within the expected to dramatically increase oil production, block, principally the Baxter’s Copse oil discovery. RPS with suggestions that up to a 3 fold increase in Energy recently completed a third party reserve audit, initial oil rate per well may be possible. The Com- attributing 2P and 3P gross undeveloped reserves of c. 5.4 pany advises that if the results of this fracturing go MMBbl and 15 MMBbl respectively (2.7 MMBbl and 7.5 as expected, further wells will be included in the MMBbl respectively net to Providence). A forward plan of programme. activities has been agreed by the partners to advance the  New Well to Be Drilled: In February 2009, a new Baxter’s Copse discovery to first oil in 2011 via a third production well, SNX-10, was drilled to a measured party tie-back to the Providence operated Singleton oil depth of 13,001 ft and commenced production in field facilities. We value Providence’s interests at Baxter’s April. This new well was highly successful as it Copse at 0.70p per share. tested at rates of c. 250 Boe/d, compared to the pre- drill expectations of 150 Boe/d. Further technical Burton Down studies, post the successful SNX-10 well, revealed a Also contained within PEDL 223 is a further significant number of further infill drilling opportunities un-drilled Jurassic prospect known as Burton Down, which would further significantly enhance both the which lies on trend between the Singleton and production rates and ultimate reserve potential of Storrington oil fields has also been identified with a P50 the Singleton field. The Company has high-graded oil in place resource potential of c. 25 MMBbl. a location in the western part of the south fault block for a new development well. Planning U.S. Gulf of Mexico: Production Impacted by operations for drilling this new well have now Hurricane and Low Commodity Prices commenced. The planned well will be longer than In June 2008, Providence Resources acquired Triangle, the SNX-10 well, with an objective to intersect twice holding various interests in a portfolio of producing as much reservoir section as the SNX-10 well. fields, development assets and a package of exploration Studies indicate that initial flow-rates of up to c. assets in the U.S. Gulf of Mexico for a consideration of 400 Boe/d could be achievable due to the extra US$67.5 MM. Providence currently has an interest in reservoir exposure, together with the higher reser- eight producing blocks in federal waters and one onshore voir pressures expected in this area. property in Louisiana. We value Providence’s interests in the U.S. at 0.85p per share. 2.7 MMBbl 2P Reserves in Baxter’s Copse (UK) WI production in Q1 2010 is estimated at 50 B/d liquid The Company and Northern Petroleum Plc are 50/50 and 6.5 MMcf/d. Liquid production could increase to 180 partners in PEDL 223, which is adjacent to the Single- B/d by Q2 2010 with the return to service of Ship Goal 14 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

Assets WI High Island A 268 5.00% Galveston A 155 10.80% Ship Shoal 50.00% Main Pass 19 45.00% East Cameron 257 12.50% West Cameron 333 32.50% Vermilion 60 50.00% Ridge 30.00% Main Pass 89 17.50% Source: FirstEnergy Capital, Company Reports

253. The Company holds 8.17 MMBoe WI 2P reserves including 1.7 MMBbl oil and 23.2 Bcf gas. The combina- tion of extreme weather (hurricane) and low gas prices have negatively impacted production growth. These Source: Providence Resources Plc difficult operating conditions have been compounded gas producing, Suezmax-sized floating production, by the fact that Providence is not the operator in its U.S. storage and offloading unit. We value Providence’s licences. Any further investments in the U.S. assets have interest in the field at 0.39p per share based on our therefore to be sanctioned by Providence’s partners. If estimates of the valuation of Afren’s oil contingent Providence’s economics on the U.S. projects have been resources at the Ebok field. Given the uncertainty on gas partly sheltered from lower commodity prices due to prices in Nigeria, we have decided to not attribute value hedging, it is perhaps not the case for all the partners. It to gas resources yet. therefore could prove very difficult for them to justify investing in the area. Providence is consequently The gas from the field could be sold in Lagos or ex- reducing its Capex programme in the area. We have ported to Ghana through the West African Gas Pipeline. only factored a total of US$3 MM net Capex for 2010 and 2011. Given the limited WI of Providence in the Aje, this asset is an obvious candidate for divesture. The evolution of Other Assets: Aje and Exola the political environment in Nigeria and the timing of the decision to develop the field will dictate the timeline of a possible divesture. Providence holds a large portfolio of exploration and appraisal assets in Ireland and Nigeria. For various EXOLA and Unconventional Oil reasons (small working interest or limited near term activities), we believe these assets are of limited materi- Historically, Providence operated a number of explora- ality at the current stage of development. Of noticeable tion and appraisal projects in the Celtic Sea, where a difference, the potential monetization of Providence’s number of successful discoveries have been made. interest in the Aje field in Nigeria could alleviate the Unfortunately, due to a number of factors, unsuccessful Company’s debt. We value this group of assets at 0.39p appraisal, economics, compartmentalisation, oil per share. This valuation is underpinned by quality, etc.), no projects have advanced to production. Providence’s interest in the Aje field. Following the drilling of two unsuccessful appraisal Exola Areas of Interst Offshore Ireland 6.7% WI in the Aje Field in Nigeria: Possible Near Term Monetization The Aje field (OML 113 licence) is a discovery. The technical advisor is Chevron. The field is estimated to hold about 185 MMBoe contingent resources (C2), half condensate, half gas. It is located in 3,000 feet water depth, 15 miles offshore Lagos, Nigeria. Providence Resources holds 6.7% WI, but only 5% revenue interest. The Aje field is deemed commercial, pre-FEED work is well underway, but the final investment decision has not been taken yet. However, Chevron has issued pre- qualification tenders to fabrication yards for a natural Source: Providence Resources 15

wells in 2008, the Company decided to review its future the presence of a large undrilled structural closure at strategy for the region, with an emphasis on how one Lower Triassic level situated c. 10 km offshore Dublin. develops unconventional oil plays. This has led to the This feature, known as the Dalkey Island exploration creation of EXOLA, a SPV to focus on the development prospect, may be prospective for oil, as there are prolific of unconventional oil assets in the Celtic Sea. With a oil productive Lower Triassic reservoirs nearby in the portfolio of some six projects, and working interests eastern Irish Sea offshore Liverpool. Whilst the Dalkey ranging from 30% to 100%, EXOLA is in discussion Island exploration prospect could contain c. 870 MMBbl with a number of industry players on future potential in place, this undrilled prospect still has significant risk working arrangements which will see EXOLA leverage and the partners are currently advancing a focused work its unparalled knowledge of the area, its high equity programme in order to better understand and hopefully stakes and tax loss carry forwards. However, pending mitigate these risks. The prospect is held in partnership further details on the potential commerciality of the with PETRONAS. assets, we have not attributed yet any value to EXOLA. In the Kish Bank Basin, offshore Eastern Ireland, Provi- EXOLA holds a range of interests (30% to 100% WI) in dence indicated that the Dalkey Island prospect (Provi- the Celtic Sea including the Hook Head (with about 100 dence WI: 50%) could contain 870 MMBbl in place. The MMBbl oil in place), Dunmore, Helvick, Ardmore and prospect is in shallow water and is at close proximity to Baltimore discoveries in the Celtic Sea. Of particular shore. interest is the Baltimore licence awarded in February holds 300 MMBbl heavy oil in place in a reservoir with Detailed Valuation very high permeability and porosity. Providence announced on Monday it had farmed down 40% of this asset (from 100% to 60% WI) to Nautical. EXOLA just Our target price for Providence shares is 6.10p broadly in announced a farm out of a 40% interest in Baltimore to line with our sum of the parts valuation (6.05p). This Nautical Petroleum, a UK based specialist heavy oil represents an 86% upside to the current share price. The player. current share price is below our core NAV including only cash generative assets (Singleton, Gulf of Mexico, Heavy and viscous oil assets have attracted a lot of EIRGAS operating gas storage and EIRGAS production). interest in the UK North Sea over the last few years. This suggests that the market does not attribute any Fields with oil of similar API to Baltimore include value to any of the high impact development, appraisal Bentley, Bressay, Kraken and Mariner. The most similar or exploration activities (Dunquin, Spanish Point, Aje, to Baltimore appear to be Mariner and Kraken. Dalkey Island or EXOLA). This would imply an asym- metric risk profile with very limited downside, but a very large upside. Our unrisked NAV stands at 24.75p per Contingent Permeability STOIIP Resources/ Recovery share, almost eight times above the current share price. Field Name API (mD) (MMBbls) Reserves Factor Bentley 11-12 7500 689 123 18% Bressay 11-12 10000 700 Our risked upside only includes assets with near term Kraken 15 3000 900 83 9% activities (next 12 months) or implied valuation from a Mariner (Maureen+Heimdal) 11-15 3000-5000 1400 369 26% farm-in deal. Baltimore 3000 300 30-100 10-30% Source: FirstEnergy Capital, Nautical, Xcite Producing Assets FDP submission at the Nautical and Statoil’s Mariner Singleton, Gulf of Mexico and EIRGAS producing assets project is expected in 2011 with first oil in 2015. Gross (Kinsale Heads Area) have been valued with a DCF with contingent (C2) resources for the field stand at 369 a 10% discount rate (in line with discount rate we use for MMBbl. The commerciality of Baltimore will certainly North American and Western Europe assets) and the be heavily dependent on recovery factor. With a 30% FCC Commodity Price Deck. Baxter’s Copse 2P reserves recovery factor, the field would hold a larger amount of have been valued at the same level as Singleton’s. contingent resources (C2) than Kraken (100 MMBbl Baxter’s Copse is indeed expected to be developed from versus 83 MMBbl at Kraken). Singleton.

50% interest in Dalkey Island EIRGAS’s operating gas storage has been valued at New analysis of vintage 2D seismic data has revealed US$36.2 MM per Bcf working gas. This is based on 16 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

Unrisked EMV operating gas storage (at US$36.2 MM/ Asset Valuation (US$MM) (US$MM) £/Share % Total Bcf working gas). The residual value Net Cash -99 -99 -1.71 -28.2% G&A -41 -41 -0.70 -11.6% has been divided by the total working Providence plc 201 201 3.45 57.0% gas capacity of the portfolio of near Singleton (UK) - NPV 10 110 110 1.89 31.3% term gas storage projects owned by Star Baxter's Copse (UK) 41 41 0.71 11.7% US Gulf of Mexico Triangle - NPV 10 49 49 0.85 14.0% Energy at the time of the acquisition. 100% Interest in EIRGAS 155 155 2.66 43.9% Working gas capacity for near term EIRGAS - Kinsale Heads Area Producing Assets - NPV 10 50 50 0.86 14.2% EIRGAS Kinsale Head Gas Storage (in operation) 105 105 1.80 29.7% projects is accordingly valued at Total Core NAV (Cash Generative Assets) 215 215 3.69 61.1% US$5.2 MM/Bcf. This would appear Providence plc Risked Exploration upside 1,029 79 1.36 22.5% above market valuation of junior early Nigeria - Aje 23 23 0.39 6.4% stage gas storage players in the UK Spanish Point 354 31 0.54 8.9% such as Infrastrata with a proposed net Dunquin 653 25 0.43 7.2% 100% EIRGAS - Gas Storage and Development Upside 196 58 1.00 16.5% working gas capacity of 47 Bcf and a EIRGAS - Kinsale Heads Near Term gas Storage Project 194 56 0.96 15.9% market cap of £65 MM. However, the Dragon 2 2 0.03 0.6% EXOLA N/A N/A N/A N/A project has been facing financial Total Risked Exploration 1,225 137 2.36 38.9% difficulties; which we do not expect Total NAV 1,440 352 6.05 100.0% with Kinsale given that it has Unrisked NAV 24.75 PETRONAS’ back-up and that it is also P/Core NAV x 93.9% an established and operational busi- P/NAV x 57.3% ness model (seasonal gas storage). P/Unrisked NAV x 14.0% Additionally, corporate tax in Ireland Note: Our core NAV considers a value of 3.69p per share Source: FirstEnergy Capital, Company Reports stands only 12.5% (gas storage busi- ness) versus 30% in the UK.

Providence Share Price and NAV (p/share) 30.00 Current Price A more representative approach to the valuation of gas Dunquin derisked 25.00 Development of storage project derisked storage projects usually involves consideration of a Spanish Point derisked NAV portfolio of projects (as for EIRGAS) involving a 20.00 specific gas capacity where transaction multiples can

15.00 be applied to yield a representative value. Applying this methodology to a single gas storage project may 10.00 not adequately reflect the value, as historical data

5.00 would suggest that such a single project risks being postponed or cancelled and thus subsequently the 0.00 expected value based on transaction multiples for a

Core NAV single project would be lower. Risked NAV Current Price Current Unrisked NAV Point valued on valued Point risked resources) Q%`HV7 1` JV`$7 :]1 :C5 QI]:J7 V]Q` (Spanish NAV Risked Valuation Metrics Storage Business Bcf Capacity (US$MM) (US$MM/Bcf) Societe Generale’s methodology to value Rough future Rough 116.90 4,230.55 36.19 Star Energy Portfolio Project 35.00 181.07 5.17 discounted cash flow divided by working gas capacity Source: FirstEnergy Capital, Societe Generale (3.34 Bcm or 117 Bcf). It is expected that the sales of the cushion gas would cover any decommissioning costs The unrisked value of EIRGAS near term gas storage (US$100 MM gross (US$40 MM net to EIRGAS), assum- project corresponds to the planned additional working ing that the platforms are not used for future gas capacity (12 Bcf net to EIRGAS) valued at US$36.20 MM storage operations or CCS developments. per Bcf minus expected Capex for the project (US$240 MM) implying a total value of US$194 MM. Gas Storage The gas storage’s near term projects have also been G&A valued according to Societe Generale’s methodology. The G&A valuation corresponds to perpetuity of We have taken out from the price paid for by Providence 2009 G&A discounted at 10% (discount rate PETRONAS to acquire Star Energy the value of the used for Providence’s assets). 17

Exploration and Appraisal Resources Valuation Company Region (MMBoe) (US$MM) Methodology Status We took a very conservative view with Cairn Energy Greenland NA 1,600 Implied Up to four wells to be regards to valuing exploration and ap- valuation in drilled in 2010 praisal assets. Even on that basis, the share price Falkland Oil and Gas Falklands 2232 332 Market cap Drilling Campaign in Company’s sum of the parts offers a signifi- 2010 cant upside to current price. Any explora- Desire Petroleum Falklands 796 233 Market cap Drilling Campaign in 2010 tion or appraisal should generate a signifi- Rockhopper Exloration Falklands 364 123 Market cap Drilling Campaign in cant re-rating of the shares. 2010 Borders & Southern Falklands 2040 332 Market cap Drilling Campaign in Petroleum 2010 Dragon, Spanish Point and Dunquin have BPC Bahamas NA 50 Market cap Farm down been valued according to deal prices. Providence Porcupine 492 56 Farm-in deals Farm down,  Dragon: US$2 MM paid to Marathon for Basin (Dunquin, appraisal plan Spanish Point)* 48% WI. * this does not include any value for Burren, Cuchulain, Drombeg, New grange  Spanish Point: US$12 MM carry for Source: FirstEnergy Capital, Company Reports seismic in exchange of 30% WI in the field (farm-in deal with Chrysaor) providing a unrisked). This figure assumes that Providence would valuation for Providence’s 56% interest in the field farm down further its interest in the asset with a 40% of US$31 MM. No value has been attributed to additional dilution. Burren. Our unrisked value for Spanish Point is US$354 MM. Comparables Valuation for Frontier  Dunquin: US$70 MM carry for initial work in Exploration Portfolio exchange of 80% WI interest in the field (farm-in Our entire valuation for Providence’s position in the deal with ExxonMobil and ENI). Our unrisked Porcupine basin (including Spanish Point and Dunquin) valuation for Providence’s interest in Dunquin stands only at US$56 MM. Other frontier exploration stands at US$653 MM. areas include the Falklands, Bahamas and Greenland. It is possible to draw implied valuation for interests in Aje in Nigeria has been valued according to resources these regions from recent deals or market caps. The multiples Given the Aje field in Nigeria appears close to figures for the Falklands and Greenland stand well final investment decision, we decided to value above what we have attributed to Providence. Providence’s 4.6 MMBbl oil C2 resources interest in line Providence’s interests in the Porcupine basin are valued with our estimate of oil C2 reserves at Afren’s Ebok field broadly in line with BPC’s interests in the Bahamas. The (US$4.90/Bbl) for a total valuation of US$23 MM. Given difference between the valuation of BPC’s interests and the current uncertainty with regards to gas market in Cairn’s, or the Falklands’ pure plays (Desire, Falkland, Nigeria, we have decided to attribute no value to Rockhopper and Borders) could be explained by near Providence’s gas interests in the asset. term drilling activities and the presence of a major (BHP) in the Falklands. It is worth repeating that we have taken an extremely conservative view with regards to valuing Providence’s The announcement of appraisal drilling activities at portfolio of exploration and appraisal assets offshore Spanish Point/Burren and/or exploration drilling at west of Ireland. Should we value Spanish Point on a Dunquin would accordingly trigger a re-rating of risked resources basis with unrisked 2C barrel value in Providence’s shares in our view. We also note that Cairn, line with the price paid by RWE for Breagh 2P reserves BPC or the Falklands pure plays do not have partners as (about US$5.00/Boe) and a risked factor of 40%, our prestigious as ExxonMobil; which highlight the materi- risked NAV would stand at US$141 MM (US$354 MM ality of Providence’s assets in the Porcupine Basin.

Gross Resources Fundamental Unrisked Value Resources Net Resources Multiples Valuation Farm Down of PVR Interest Assets (MMBoe) WI (MMBoe) (US$/Boe) (US$MM) Dilution (US$MM) 30% WI in Spanish Point (post 393.33 30% post 2nd 118.00 5.00 590.00 40% 354.00 further farm down to Chrysaor) round of farm down with Chrysaor 18% in Dunquin 1,716.00 16% 274.56 4.00 1,098.24 40% 653.00 5% in Aje 185.00 5% 4.63 4.90 22.66 22.66 Source: FirstEnergy Capital, Company Reports 18 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

Brent Price Post 2012 US$60/Bbl US$70/Bbl US$80/Bbl US$100/Bbl FCC Price Deck US$120/Bbl US$150/Bbl DCF - 8% 4.70 5.10 5.50 6.15 6.40 6.60 7.00 DCF - 10% 4.60 4.90 5.30 5.80 6.04 6.20 6.50 DCF - 12.5% 4.40 4.70 5.00 5.40 5.65 5.80 6.00 Source: FirstEnergy Capital Number of Shares also exercise a put option with ExxonMobil in the case of Our valuation per share is based upon 3,317 MM the Dunquin project. shares fully diluted. The Company has just announced a 1 for 100 share consolidation which will be put to From 2012, Providence will have to fund its share of the shareholders at its Annual General meeting next gas storage projects at Kinsale Energy (through EIRGAS) month. and reimburse the EUR42 MM convertible (maturity 27/ 07/2012). We anticipate that the debt facilities with BNP Sensitivities will be rolled over. The gross Capex for the gas storage project is US$600 MM; US$240 MM net to EIRGAS (100% Providence). Assuming 60% of that amount will be We present in the table above a sensitivity analysis for covered by additional debt, US$96 MM will have to be Providence in £p per share according to Brent pricing funded by EIRGAS. We have assumed that EIRGAS assumptions and discount rates in Western Europe. equity contribution to the project will be EUR37 MM per year in 2012 and 2013. Based on Providence’s 100% WI Financial Framework: 2010 and 2011 in EIRGAS, our model points towards a further equity are Fine, Some Funds Will Be requirement of EUR20 MM to fund 40% of EIRGAS equity cash call and the repayment of the convertible. Required in 2012 This shortfall can be met by:  Diluting Providence’s interest in EIRGAS through an With EIRGAS’ closure of the acquisition of Kinsale IPO reducing accordingly the US$96 MM equity cash Energy, we anticipate Providence to carry a total debt of calls from EIRGAS to Providence. EUR102 MM composed of EUR42 MM convertible and  Reducing EIRGAS’s equity interest in Kinsale EUR60 MM from the BNP loan. We have also assumed Energy to the benefit of PETRONAS. that Providence will have sold its interests in Aje by the  Divesting assets – Gulf of Mexico; EXOLA assets. end of the year (generating US$23 MM proceeds).  Capital raising. Given operating cash flow, interest payment and G&A, we do not anticipate the Company to require additional We have assumed in our model a EUR20 MM cash funding before 2012, except in the case of cash calls on injection over 2012 and 2013, assuming Providence does some of its exploration/appraisal assets (Dunquin/ not dilute through an IPO/other its interests in EIRGAS. Spanish Point/Burren) due to a positive development. The Company is however likely to further farm down Note that with an 80% project finance gearing (rather its interests to cover any cash call. The Company could than 60%), we do not estimate that any equity contribu- tion from EIRGAS to Kinsale Energy. We Cash Flow Balance note that the EIB bank could be inter- EUR MM 2010 2011 2012 2013 2014 Brent Price (US$/Bbl) 82.14 86.78 96.01 112.03 120.00 ested in funding such a project in Opening cash Position 1 25 42 -5 -9 Ireland. The EIB can lend up to 50% of a Capex -6 -6 -46 -46 -10 total project cost at a cost of 1% over Capex E&P -9 -10 -10 -10 -9 LIBOR. Providence believes it could be Capex Gas Storage 3 4 -36 -36 -1 Divesture/Acquisition -18 0 0 0 0 possible that the Irish government could Net Operating Cash Flow (including 40% share in fund the cost of some of the gas storage EIRGAS) 1724293229project cushion gas (US$160 MM) and Net Financing Cash Flow (incl US$20 MM process for the sales of PVR interest in the Aje field) 30 0 -31 10 -15 thereby retain this cushion gas as the Debt Change 15 0 -42 0 -15 government’s own strategic gas re- Cash Injection (Divesture/Placement) 16 0 11 10 0 serves. Closing Cash Position 52 52 5 1 4 Closing Net Debt 87 66 71 82 60 Note: Assuming RBL can be postponed, 70% gearing on Eirgas capex, convertible repaid in July 2012 It could well be a combination of all Source: FirstEnergy Capital, Company Reports three options. 19

Board and Management (Extract) Dublin. He is a Fellow of the Geological Society and a member of the Petroleum Exploration Society of Great Britain. Brian Hillery – Non-Executive Chairman Brian Hillery served as Chairman on the Providence Board since the incorporation of the Company. He is Company Timeline, Main Shareholders Non-executive Chairman of Independent News & Media and Shareholder Structure PLC and is a Director of the Central Bank of Ireland. A former Professor at the Graduate School of Business, Providence Resources was founded in 1997, but with University College Dublin, he has also served as a roots going back to 1981 when its predecessor company, member of the Irish Parliament as a TD and Senator Atlantic Resources plc, was formed by a group of inves- (1977 to 1994). He was an Executive Director of the tors led by Sir Anthony O’Reilly. European Bank for Reconstruction and Development (EBRD) London (1994-1997) and was Non-executive In 1991, Conroy Petroleum & Natural Resources P.l.c. Chairman of UniCredit Bank (Ireland) Plc. acquired Atlantic Resources PLC, and on completion of the acquisition, the new enlarged entity changed its name Tony O’Reilly – Chief Executive Officer to Arcon International Resources P.l.c. In 1997, Arcon de- Tony O’Reilly is the founder of Providence and has merged its hydrocarbon assets into a new company, served on the Board since incorporation. He has previ- Providence Resources P.l.c. and listed on the Exploration ously worked in mergers and acquisitions at Dillon Read Securities Market (ESM) of the Irish Stock Exchange. In and in corporate finance at Coopers and Lybrand, 2005, Providence switched from ESM to the Irish Enter- advising natural resource companies. He served as prise Exchange (IEX) and was also admitted to the Chairman of Arcon International Resources P.l.c. (having Alternative Investment Market (AIM) in London. been Chief Executive from 1996 to 2000) until April 2005 when Arcon merged with Lundin Mining Corporation. Providence has 16 employees (includes senior manage- He joined Wedgwood in 2001 becoming Chief Executive ment, technical, accounts, and administration). (2002 to 2005), following which he became Chief Execu- tive of Providence. He is a non executive director of The management owns 126 MM stock options in Provi- Lundin Mining Corporation, Fitzwilton Limited and dence. Zenergy Power Plc. Ownership (MM Philip O’Quigley – Chief Financial Officer Institutions Shares) % of Capital Sir Anthony O'Reilly 996.17 29.6% Philip O’Quigley is a Fellow of the Institute of Chartered JP Morgan Asset Mgt UK Limited 286.09 8.5% Accountants in Ireland. Having trained with Ernst & Hargreave Hale 35.41 1.1% Young, Dublin, he moved into finance positions within Gartmore 21.47 0.6% Generali 11.99 0.4% the oil and gas industry in the early 1990s. He joined O'Reilly Jnr 11.71 0.3% Glencar Mining plc, the IEX and AIM quoted gold 2008 Fully Diluted Shares Outstanding 3,371 mining company in 1997 as Finance Director. In 2002 he Source: FirstEnergy Capital, Bloomberg left Glencar Mining plc as an Executive Director and Corporate Structure since that time has been involved in a number of private and public companies in the oil and gas industry, including Petroceltic International plc where he was 100%

Finance Director. He continues to serve as a non-execu- 100% 16% 56% tive director on the board of Glencar Mining plc. 6.7%

Ireland - Dunquin Ireland - Spanish and Others Point and Burren John O’Sullivan – Technical Director -18 Tcfe -1.4 Tcf and 160 Prospecve MMbbls C2 John O’Sullivan is a geology graduate of University Aje Field - Nigeria College, Cork and holds a Masters in Applied Geophys- -185 MMboe C2 40% 50% 50% Kinsale Head – 40% ics from the National University of Ireland, Galway. He Barryroe – 30% Helvick – 72.5% also holds a Masters in Technology Management from Hook Head – 72.5% Kinsale Energy Kish Bank Baltimore – 100% -300 MMBbls 40 bcf 2P reserves Dragon Field the Smurfit Graduate School of Business at University 8bcf working gas in Place Porolio of gas Ardmore – 72.5% College, Dublin and is presently completing a disserta- storage projects tion leading to a Ph.D in Geology at Trinity College, Source: Providence Resources Plc 20 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

Notes Year end Dec 31, 2008a 2009e 2010e 2011e 2012e

Production Oil & Liquids Bbl/d 788 804 948 1,136 1,292 Gas Mmcf/d 3.8 4.4 11.8 16.6 14.5 Total Boe/d 1,414 1,539 2,911 3,902 3,709 Production per Share Boe/Share (000's) 0.2 0.2 0.3 0.4 0.3 % N/A -3.9% 60.8% 34.0% -12.0% Production per D.A. Share Boe/Share (000's) 0.1 0.1 0.2 0.3 0.2 % N/A -9.0% 69.0% 51.5% -7.2%

Cash flow US$Mm 16.6 3.6 20.8 28.3 34.6 CFPS Basic $0.01 $0.00 $0.01 $0.01 $0.01 Diluted $0.01 $0.00 $0.01 $0.01 $0.01 P/CF Basic 9.7 42.4 8.6 6.3 5.6 Diluted 10.8 47.7 9.5 6.9 6.1

Earnings US$Mm -60.7 -11.2 1.2 2.0 9.7 EPS Basic -$0.02 $0.00 $0.00 $0.00 $0.00 Diluted -$0.02 $0.00 $0.00 $0.00 $0.00 P/E Basic -2.6 -13.6 150.8 88.1 20.0 Diluted -3.0 -15.3 166.5 97.2 21.9

Capital Data Capex US$Mm 114.4 13.8 7.1 7.2 56.4 Capex vs. Cash Flow % 689.9% 384.6% 34.1% 25.5% 162.7% Exit Net Debt US$Mm 96.0 94.3 87.4 66.3 69.9 Entry Debt/CF Years N/A 26.7 4.5 3.1 1.9 Market Cap. US$Mm 134 178 178 178 178

Share Data Basic shares Mm 2,485.4 2,917.3 3,366.1 3,366.1 3,666.1 Options Mm 302.9 350.0 350.0 350.0 350.0 Warrants Mm 0.0 0.0 0.0 0.0 0.0 Convertible debentures Mm 0.0 0.0 0.0 0.0 0.0 Diluted shares Mm 2,788.3 3,267.3 3,716.1 3,716.1 4,016.1 Fully diluted shares Mm 2,788.3 3,267.3 3,716.1 3,716.1 4,016.1

Year end Dec 31, 2008a 2009e 2010e 2011e 2012e

Share Price Y/E GB£/Share £0.03 £0.04 $0.03 $0.03 $0.03 Net Asset Value GB£/Share NA £3.69 Price / NAV x 0.0

Valuation Data DACFM x 12.2 20.0 10.2 6.5 6.4 Target DACFM x 18.4 30.0 15.6 10.2 10.0

EV/BOED US$/Boed 162,983 176,610 91,007 62,495 66,714 Target EV/BOED US$/Boed 287,288 260,705 147,006 103,639 117,514

EBITDA US$Mm 32.2 7.2 32.0 47.3 55.0 EV/EBITDA x 7.2 37.6 8.3 5.2 4.5

Cash Flow Netback US$/Boed $34.64 $8.01 $22.20 $16.55 $21.33

Pricing Brent $US 98.37 62.61 82.14 86.78 96.01 Oil $US w ellhd 91.96 89.65 82.36 88.35 96.02 Gas $US w ellhd 6.23 6.03 5.17 6.02 6.67 Exchange Rate US$ / GB£ 1.85 1.57 1.53 1.52 1.52 Exchange Rate US$ / Eur 1.25 1.15 1.20 1.20 1.20 Source: FirstEnergy Capital Corp. and Company Reports 21

Notes 22 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

THIS PAGE INTENTIONALLY LEFT BLANK. 23

Appendix 24 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

Providence Resources Detailed List of Assets

Providence Detailed List of Assets Gross 2P Gross C2 Gross P50 Net 2P Net P50/C2 Reserves Resources Resources Reserves resources Well cost Producing Assets Location PVR WI Operators Partners (MMBoe) (MMBoe) (MMBoe) % Gas (MMBoe) (MMBoe) (US$MM) Next Activity Singleton UK 99.13% Providence 7 8% 7 NA Fracc and Drilling over 2010 Gulf of Mexico Gulf of Mexico 5%-50% SPN/Petsec/ SPN/Petsec/P 68% 8 NA Drilling Ship Goal Peregrine/Mariner/Br eregrine ammer/Beryl Kinsale Head Area Producing (Eirgas) Ireland 40.00% Petronas 7 100% 3 NA

Appraisal Assets Spanish Point Ireland 56.00% Providence Chrysaor, 393 59% 220 60 3D seismic results Sosina announcement Q2 2010 Burren Ireland 56.00% Providence Chrysaor, NA 60 3D seismic results Sosina announcement Q2 2011 Celtic Sea (Exola): Dunmore, Hook Head, Ireland 72.50% Providence Atlantic 21 0% 15 Helvick, Ardmore, Blackrock* Petroleum, Sosina Celtic Sea (Exola): Barryroe Ireland 30.00% Landsdowne Island Gas NA Celtic Sea ( Exola): Baltimore* Ireland 100.00% Providence 30 0% 30

NE Celtic Sea (Exola): Pegasus, Ireland 100.00% Providence 197 100% 197 Orpheus, Dionysus)

Dragon (Eirgas) Ireland 50.00% Marathon 12 100% 6 Baxter's Copse* UK 50.00% Providence Northern 3 10 Aje Nigeria 5-6.7% Providence Northern 185 50% 9 NA FDP in 2010

Exploration Assets Dunquin Ireland 16.00% ExxonMobil Eni, Sosina 1,716 17% 275 150 Newgrange Ireland 16.00% Providence Sosina NA Drombeg Ireland 16.00% ExxonMobil Sosina NA Cuchulain Ireland 3.20% Eni ExxonMobil, NA Burton Down UK 50.00% Providence Northern 25 0% 0 7 * based on 10% recovery factor Source: FirstEnergy Capital, Company Reports

Fiscal Terms in Ireland, the U.S. and the UK

Fiscal Terms Associated to Providence's Assets Country Corporate Tax Royalty Profit Oil Ireland E&P 25% Ireland Gas Storage 13% UK E&P 30%+20% U.S. 35% 16% Source: FirstEnergy Capital, Company Reports 25

Disclosure Requirements Issuer Industry Is this an issuer related or industry related publication? X

Does the analyst, a member of the analyst’s household, associate or employee who prepared this Yes X No research report have a financial interest in securities of the subject issuer? If yes, nature of the interest and name:

Is FirstEnergy a market maker in the issuer’s securities at the date of this report? Yes X No Does FirstEnergy beneficially own more than 1% of any class of common equity of the issuer? Yes X No Does FirstEnergy or the analyst have any actual material conflicts of interest with the issuer? Yes X No Explanation: Does any director, officer, employee of FirstEnergy or member of their household serve as a Yes X No director or officer or advisory capacity of the issuer? (if so, list name) Did the analyst and/or associate who prepared this research report receive compensation based Yes X No solely upon investment banking revenues? Did the analyst receive any payment or reimbursement of travel expenses by the issuer? Yes X No Since July 9, 2002, has the analyst received any compensation based on a specific investment Yes X No banking transaction relative to this issuer? Has any director, officer or employee who prepared this research report received any Yes X No compensation from the subject company in the past 12 months? Has FirstEnergy provided the issuer or its predecessor with non-investment banking securities- YesX No related services in the past 12 months? Has FirstEnergy managed or co-managed an offering of securities by the issuer or its predecessor YesX No in the past 12 months? Has FirstEnergy received compensation for investment banking and related services from the X Yes No issuer or its predecessor in the past 12 months? Ranking System

Providence Rescources Plc (LN: PVR) FirstEnergy’s rating system reflects our outlook for expected Ranking and Target Changes 2007 - 2010 performance of an issuer’s equity securities relative to its £0.20 Closing Price peer group over the next 12 months. Ranking Change •A Top Pick (Buy) rating represents a security expected to provide a Target Price Change £0.15

e return materially higher than the peer group average. •An Outperform (Buy) rating represents a security expected to

£0.10 provide a return greater than the peer group average.

Initiated Coverage Apr- •A Market Perform (Hold) rating represents a security expected to 28-10 (O)

Daily Closing Price provide a return in line with the peer group average. £0.05 •An Underperform (Sell) rating represents a security expected to provide a return less than the peer group average. £0.00 … … … … … … … … … … … … … … … … … … … … •A Speculative Buy (Buy) rating represents a security where the return Mar Mar Mar Mar Sep Sep Sep Sep Nov Nov Nov Nov May May May May Jan- Jan- Jan- Jan-

Jul-07 Jul-08 Jul-09 Jul-10 potential is high, but the risk of a significant loss is material.

RATING SYSTEM: T = Top Pick (Buy); O = Outperform (Buy); M = Market Perform (Hold); U = Underperform (Sell); SB = Speculative Buy (Buy); •A Tender (X) represents a security where investors are guided to R = Under Review; * = Restricted; As of April 15, 2009 X = Tender; NR = Not Rated Source: FirstEnergy Capital Corp. & Bloomberg tender to the terms of the takeover offer. The author of this report hereby certifies that the views expressed in Opinion: OUTPERFORM this report accurately reflect his/her personal views about the subject 12 MONTH TARGET PRICE: 6.10p security and issuer.

The author of this reports further certifies that no part of his/her Ranking % Investment compensation was, is, or will be directly or indirectly related to the Distribution Banking Clients specific recommendations or views contained in this research report. Top Picks 7% 3% Outperforms 52% 31% FirstEnergy Capital may receive or intends to seek compensation for Market Performs 31% 15% investment banking services from all issuers under research coverage Underperforms 3% 1% within the next three months. Speculative Buys 6% 0% This report has not been approved by FirstEnergy Capital LLP for the Under Review 2% 1% Restricted Companies 0% 0% purposes of section 21 of the Financial Services and Markets Act 2000 as Tenders 1% 0% it is being distributed only to persons who are investment professionals Not Rated 0% 0% within the meaning of article 19 of the Financial Services and Markets Total 100% Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied upon, by any other person. 26 FirstFocus  Initiating Coverage on Providence Resources Plc - PVR  28 April, 2010

FirstEnergy Capital Corp. . 1100, 311 . 6th Avenue S.W., Calgary, Alberta, Canada T2P 3H2 Tel: 403.262.0600 Fax: 403.262.0633 Research Title Direct [email protected] Jill T. Angevine Vice President & Director, Institutional Research 403.262.0668 jtangevine Michael P. Dunn Research Analyst, Exploration & Production 403.262.0643 mpdunn Darren B. Engels Research Analyst, International 403.262.0689 dbengels Robert J. Fitzmartyn Vice President & Director, Institutional Research 403.262.0648 rjfitzmartyn Ian B. Gillies Research Associate 403.444.4886 ibgillies Katrina L. Karkkainen Research Associate 403.262.0624 klkarkkainen Martin King Vice President, Institutional Research 403.262.0625 mking Cody R. Kwong Research Analyst, Exploration & Production 403.262.0638 crkwong William J. Lacey Managing Director, Institutional Research 403.262.0659 wjlacey Blair A. Lawson Research Associate 403.262.0661 balawson Kevin C.H. Lo Vice President & Director, Institutional Research 403.262.0626 klo Alex Ljubojevic Research Associate 403.444.4888 aljubojevic Martin P. Molyneaux Managing Director, Institutional Research 403.262.0629 mpmolyneaux Steven I. Paget Vice President, Energy Infrastructure 403.262.0662 sipaget Tim S. Schultes Research Associate 403.262.0609 tsschultes Elaine C. Williams Research Associate 403.262.0622 ecwilliams

Sales & Trading Title Direct [email protected] Trent D. Boehm Managing Director, Institutional Sales 403.262.0673 tdboehm Ben J. Cohos Sales Associate 403.444.4278 bjcohos Daniel J. Dorland Private Client Sales 403.262.0652 djdorland Matt E. Dunn Vice President, Institutional Sales 403.262.0674 medunn David J. Evans Retail Trader 403.262.0663 djevans David G. Fenwick Managing Director, Institutional Trading 403.262.0676 dgfenwick Jai Hawker Vice President, Private Client Sales 403.262.0650 jhawker Peter J. Henry Private Client Sales 403.444.4890 pjhenry Justin J. Ikebuchi Vice President, Institutional Trading 403.262.0687 jjikebuchi Andrew G. Judson Managing Director, Institutional Sales 403.262.0620 agjudson David M. La Rocque Private Client Sales 403.262.0694 dmlarocque Bryan E. Lopushinsky Vice President, Institutional Trading 403.262.0632 belopushinsky David W. Lovsin Institutional Equity Trader 403.262.0685 dwlovsin John F. Prins Private Client Sales 403.262.0695 jfprins Kenneth W. Rowan Managing Director, Institutional & Retail Sales 403.262.0686 kwrowan Tyler L. Stuart Institutional Sales 403.262.0657 tlstuart Derek R. Stuart Institutional Sales 403.262.0692 drstuart Michael E. Wampler Institutional Equity Trader 403.262.0681 mewampler

Corporate Finance Title Direct [email protected] Erik B. Bakke Vice President & Director, Corporate Finance 403.262.0649 ebbakke M. Scott Bratt Managing Director, Corporate Finance 403.262.0645 msbratt John S. Chambers Managing Director & President 403.262.0664 jschambers Vincent L. Chahley Managing Director, Corporate Finance 403.262.0613 vlchahley James W. Davidson Chairman & Chief Executive Officer 403.262.0672 jwdavidson Anthony M. De Nino Analyst, Corporate Finance 403.444.8274 amdenino Jamie N. Ha Vice President & Director, Corporate Finance 403.262.0608 jnha Robyn T. Hemminger Vice President, Corporate Finance 403.262.0665 rthemminger Shane A. Helwer Associate, Corporate Finance 403.262.0618 sahelwer Nicholas J. Johnson Managing Director, Corporate Finance 403.262.0617 njjohnson Andrew E. Osborne Analyst, Corporate Finance 403.444.8269 aeosborne R. Scott Robertson Analyst, Corporate Finance 403.444.4896 rsrobertson Kyle B. Rookes Analyst, Corporate Finance 403.262.0660 kbrookes Hugh R. Sanderson Managing Director, Corporate Finance 403.262.0658 hrsanderson Troy T. Talkkari Associate, Corporate Finance 403.262.0616 ttalkkari Matthew M. Turner Analyst, Corporate Finance 403.444.8266 mmturner Dean M. Willner Vice President, Corporate Finance 403.444.8275 dmwillner

Acquisitions & Divestitures Title Direct [email protected] Brian F. Dunn Managing Director, Acquisitions & Divestitures 403.262.0602 bfdunn Anastasia D. Epp Analyst, Acquisitions & Divestitures 403.444.4897 adepp Derek T. Kreba Associate, Acquisitions & Divestitures 403.262.0660 dtkreba Peter C. Lundberg Vice President, Acquisitions & Divestitures 403.444.4892 pclundberg Richard J. Matthews Vice President & Director, Acquisitions & Divestitures 403.262.0677 rjmatthews

Administration Title Direct [email protected] Marina Dantsiguer Controller 403.262.0679 mdantsiguer Christina Gracey Manager, Conferences & Community 403.262.0656 cgracey Chandra A. Henry Chief Financial Officer 403.262.0623 cahenry Bridget G. Mahoney Vice President, Syndication 403.262.0627 bgmahoney Hinson Ng Vice President, Compliance 403.262.0658 hng Rita S. Sivadas Senior Operations Specialist 403.262.0607 rssivadas Ruby F. Wallis Chief Operating Officer 403.262.0631 rfwallis Robert Q. Wood Vice President, Information Technology 403.262.0619 rqwood 27

FirstEnergy Capital LLP . 85 London Wall, London, United Kingdom EC2M 7AD Tel: +44.0.207.448.0200 Fax: +44.0.207.448.0244 Research Title Direct [email protected] Stephane G. Foucaud Vice President & Director, Institutional Research +44.0.207.448.0213 sgfoucaud Gerry F. Donnelly Vice President, Institutional Research +44.0.207.448.0214 gfdonnelly Kingsley O. Jibunoh Research Associate +44.0.207.448.0227 kojibunoh

Sales & Trading Title Direct [email protected] Richard Downard Sales Trader, Institutional Sales & Trading +44.0.207.448.0209 rdownard John P. Gilbert Institutional Sales +44.0.207.448.0206 jpgilbert Rupert Holdsworth Hunt Vice President & Director, Institutional Sales & Trading +44.0.207.448.0212 rhhunt Jason D. Knowles Sales Trader, Institutional Sales & Trading +44.0.207.448.0208 jdknowles John R. Manison Settlements, Institutional Sales & Trading +44.0.207.448.0210 jrmanison

Corporate Finance Title Direct [email protected] Khalid Ahmed Analyst, Corporate Finance +44.0.207.448.0221 kahmed Richard A. Hail Managing Director and President +44.0.207.448.0201 rahail Travis K. Inlow Associate, Corporate Finance +44.0.207.448.0215 tkinlow Hugh R. Sanderson Managing Director, Corporate Finance +44.0.207.448.0202 hrsanderson Majid Shafiq Managing Director, Corporate Finance +44.0.207.448.0226 mshafiq Derek A. Smith Associate, Corporate Finance +44.0.207.448.0203 dasmith

Acquisitions & Divestitures Title Direct [email protected] Rolf E.G. Bakker Vice President & Director, Acquisitions and Divestitures +44.0.207.448.0225 rebakker Mark W. Llamas Managing Director, Acquisitions and Divestitures +44.0.207.448.2224 mwllamas Scott Urquhart Associate, Acquisitions and Divestitures +44.0.207.448.0223 saurquhart

Administration Title Direct [email protected] Marcia C. Manarin Financial Controller +44.0.207.448.0229 mcmanarin Adrian Penny Chief Operating Officer (UK) +44.0.207.448.0207 apenny Moya C. Wooder Office Manager +44.0.207.448.0204 mcwooder Calgary Office: 1100, 311 - 6th Avenue SW Calgary, Alberta T2P 3H2 Tel: 403.262.0600 London Office: 85 London Wall, London, EC2M 7AD Tel: +44.207.448.0200 www.firstenergy.com The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. While the accuracy or completeness of the information contained in this document cannot be guaranteed by FirstEnergy Capital, it was obtained from sources believed to be reliable. FirstEnergy Capital and/or its officers, directors and employees may from time to time acquire, hold or sell positions in the securities mentioned herein as principal or agent. FirstEnergy Capital (USA) Corp., a member of the Financial Industry Regulatory Authority, is a wholly owned subsidiary of FirstEnergy Capital Holdings Corp. and operates as a Broker-Dealer in the United States.