For Europa Oil & Gas and its investors, hope springs eternal
Cantillon: Explorer still positive on Irish prospects despite Providence drilling setback
Providence Resources struck water yet again last week at Drombeg in the Porcupine Basin, but that hasn’t dampened Europa’s enthusiasm. Photograph: Finbarr O’Rourke
Irrepressible enthusiasm is clearly de rigueur in an exploration sector that has yet to deliver a single barrel of oil from off the Irish coast. As is a certain degree of bouncebackability.
The news from Providence Resources last week that it had struck water yet again in what it had seen as a promising prospect at Drombeg in the Porcupine Basin was a body blow. It was the second high-profile failure for the explorer in the space of just over a month.
One would expect that the subsequent market shockwaves would have rattled rival explorers planning their own drilling. But not Europa Oil & Gas, which has four licences in the area.
Hugh Mackay and his team issued a remarkably bullish newsletter to shareholders on Monday following approaches from understandably worried investors.
Far from being despondent, Europa says Providence’s results have actually “de-risked” the question of whether there are or have been reservoirs of oil trapped in the subsea rock – mid-Cretaceous fans – in which Drombeg was located.
Europa has two similar formations in its licence areas.
Mackay found further cause for comfort in the mention of bitumen in Providence’s findings. That, Europa says, de-risks the possibility that source rock – rock formations that yield oil – is present in the area.
All in all, Europa says the Providence bust has done nothing to diminish its belief in the technical and commercial potential of the area, and the prospects for its licences.
Providence’s shares are now worth less than a third of the already muted level at which they were trading before the initial drilling setback at Druid in August. They have risen just a half cent from the low to which they plunged in the wake of the dry Drombeg drilling.
None of that has put off Europa’s redoubtable investors. Its shares jumped over 8 per cent yesterday following the note. False dawn or well-founded investment? Only time will tell.