Providence Resources, the oil and gas arm of Arcon International, should go into profits this year if the improvement in oil prices continues. Interim results show a cut in the pre-tax loss from £481,000 (€611,000) to £18,000 (€23,000) in the six months ended June 30th, 1999. The recovery is less than indicated by these figures, as the first half of 1998 had to contend with an additional depreciation of £301,000. Nevertheless, the results show a considerable underlying improvement.

"The imposition of very tight financial controls and the continuing improvement in oil prices has helped Providence to almost break even in the first half," said the chairman, Dr Brian Hillery. "If the improvement in oil prices is maintained, this will have a considerable impact on Providence's profitability in the second half of 1999."

The oil price remained depressed for most of the first half, but rose towards the end of this period to an average of $13.36 per barrel, from $12.55 in 1998. At the same time, however, production from the group's interest in the Claymore and Singleton oil fields fell from 54,147 barrels to 49,062 barrels. That downturn, and the depressed oil price, is reflected in the drop in revenue from £530,000 to £435,000. The loss per share of 0.002p compares with a loss of 0.17p previously. The group is in a strong financial position, with cash of £3.4 million reflecting an equity injection.

This is also reflected in the rise in shareholders' funds from £6.3 million to £9.7 million. However, the deficit in the revenue reserves amounts to £1.9 million compared with a deficit of £0.5 million. Providence, at the time of the rights issue last November, said it planned to buy hydrocarbon producing assets because the weakness in oil prices at the time was seen as an "excellent opportunity" for the purchase of producing assets.

However, while various opportunities were screened, and an offer was made for one production asset, the company was unable to agree terms. Providence said it will continue to try and buy suitable assets.

Nevertheless, the group's main hope is its 100 per cent interest in a petroleum lease for the Helvick field in Block 49/9 in the Celtic Sea, which flowed 9,900 barrels of oil per day when tested in 1983. It has started a tendering process for the development of this discovery, and its other Celtic Sea acreage.