Providence Resources ‘very optimistic’ despite setbacks

Oil and gas explorer Providence Resources remains "very optimistic" about its prospects and those of the sector despite recent setbacks, the company has said.

Shares in the company slumped by more than a third earlier this month after it delivered “disappointing” news that its exploration activity of the Druid and Drombeg deepwater exploration well contained water.

In its interim results, published on Thursday, the company said it had a “high quality portfolio of assets with significant partners” and that it was “very optimistic” about the prospects both for the company and the Irish oil and gas sector.

“We remain both determined and uniquely positioned to continue to lead the industry in identifying and realising Ireland’s significant offshore potential,” it said.

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Providence recorded an operating loss of €3.9 million during the first half of 2017, which was up from €2.2 million during the same period last year.

As of June 30th, 2017, total cash and cash equivalents were €36.4 million, which was up significantly on the €522,000 at the same point in 2016. It is also due a further payment of $5.4 million from French multinational TOTAL.

The company cleared its debts entirely over the course of a 12 month period, after owing €19.5 million as of June 30th, 2016.

Providence chief executive Tony O’Reilly said the first half of 2017 was “an exceptionally busy period” for the company as it completed logistical processes for the drilling of the Druid and Drombeg well.

The drilling site is located in the southern Porcupine Basin around 220km off the south-west coast of Ireland. The well is operated by Providence on behalf of its partner Capricorn Ireland, a wholly owned subsidiary of Cairn Energy.

“The commercial transactions with Cairn and TOTAL provided incremental capital in excess of $45 million to be used for the drilling programme,” said Mr O’Reilly.

“This not only allowed for the deepening of the exploration well to test the Drombeg prospect, but it also significantly reduced our financial exposure to the drilling costs.”

Mr O’Reilly said the results from the drill were “disappointing” for the company.

"The drilling of the Druid/Drombeg exploration well was a major operational undertaking for Providence, being situated in the deepest water depth ever drilled offshore north-west Europe, " he said.

“This is a real credit to the Providence operational team and sub-contractors who worked so diligently to ensure its safe and environmentally benign delivery.

“The results from the well were disappointing as, while both reservoir sections were encountered within the pre-drill depth prognosis, both were water bearing.”

Mr O’Reilly also said Providence would advance drilling at Barryroe, which is an oil and gas field in the Celtic Sea south of Cork.

“We have continued farm-in discussions but to date, no deal has been consummated,” he said. “Whilst discussions continue, the board has taken a decision to advance drilling at Barryroe.

“Noting the significant value attributable to Barryroe and prevailing low rates for rigs and associated offshore services, we have moved forward with planning for drilling.”

Mr O’Reilly was bullish about the company’s position in the market despite recent disappointments.

“Providence remains the most active explorer offshore Ireland, with over 20 years’ operational experience generally and specifically some 13 years since it first licenced acreage in the Porcupine Basin,” he said.

“Looking ahead, we will continue to seek to capitalise on the significant and unrealised value of our portfolio for the benefit of our shareholders.”