As Providence Resources investors stared into the abyss in April, when shares in the oil explorer were suspended as it struggled to pay a legal bill and refinance a costly loan, a Texan company was putting the final touches to a report with the company that would underpin its rescue.
After thousands of man-hours poring over 3D seismic data and all kinds of geology and petroleum systems models with Providence, the world's largest oilfield services company Schlumberger concluded that the Irish company's Druid prospect 354km (220 miles) into the Atlantic ocean held 3.2 billion barrels of oil.
A further 1,000m below, the company’s Drombeg field was deemed to contain a further 1.9 billion barrels.
“The results didn’t come as a surprise to us,” said Tony O’Reilly jnr, Providence’s chief executive, “although we didn’t know the results would be as categorical as they were. Schlumberger has incredible analytical tools and resources that a small company like Providence didn’t necessarily have.”
The findings helped Providence raise about $70 million of equity to pay off its debts and leave cash besides to start drilling an exploratory well next June in the Druid field. The company is in talks with various parties about selling a stake in the prospect.
It has also given Providence more negotiating power in securing a “farm-out” deal on its most advanced prospect, Barryroe, off the Cork coast.
Barryroe was found in 2012 to have 311 million barrels of recoverable oil. However, the company had been struggling for years to find a joint venture partner. Earlier this year, potential investors were holding out hopes the company would collapse so they could snap up the asset for cents on the dollar. Backing by heavyweight overseas investors, including Capital Group, Hargreave Hale and River and Mercantile, in the massive share sale in July has given Providence another roll of the dice.
“I don’t want to be tied down to which [farm-out deal] might come first,” said O’Reilly. “But hopefully in the weeks and months ahead, we’ll be able to say something more about our commercial negotiations.”
Exploration off Ireland’s costs over the past four and a half decades hasn’t yielded a drop of oil. However, analysts and industry players are now more hopeful than ever – helped in the past week by a first global deal in a decade and a half between the Organisation of Petroleum Exporting Countries (Opec) and non-Opec members to cut oversupply.
They point to the fact that the State awarded 14 options in February for exploration licences off the west coast of Ireland, attracting some of the biggest names in the business – including ExxonMobil, Statoil, Eni, BP and Woodside Petroleum. They're hopeful that massive finds off the eastern cost of Canada in recent years can be mirrored on this side of the Atlantic.
“Industry perspectives as to the potential of the Irish offshore have been transformed in recent years,” according to Seán Kyne, Minister of State for Gaeltacht Affairs and Natural Resources. “Research on the Newfoundland-Ireland conjugate margins has demonstrated the potential for Ireland to replicate the oil and gas success of Newfoundland-Labrador exploration.”
Sceptics, however, point to how “black gold” headlines in the past have given way to a more pitiful reality.
Some 159 exploration and appraisal wells have been drilled in the Irish offshore since 1970. All told, they’ve only delivered the Kinsale and Corrib gas fields.
"Over the years, we've had false dawns, but we currently have a critical mass of big global players that have participated in the auction of licensing options," said Pat Shannon, a professor of geology at University College Dublin and chairman of the Irish Offshore Operators Association.
“I also think that recent discoveries off the eastern coast of Canada give confidence from a geological point of view . . . that there are petroleum systems out there.”
“I would have more confidence that there are petroleum systems in place [to deliver working oil fields off Ireland’s coasts] than I would have been a few years ago – even when oil prices were much higher. We’ve a better handle on the geology and the technology has improved. All we need is an element of luck, but I would be optimistic.”
Earlier this year, it didn’t appear that fortune was on the side of oil and gas explorers.
Even as the State awarded the first round of new options out in the Atlantic, oil prices hovered about $30 a barrel – the lowest in more than a decade – and the industry was in the middle of slashing hundreds of billions of dollars of planned exploration and development.
The US’s fledgling shale oil industry, which had fuelled a massive global oversupply, was in the middle of a crisis that would see a third of companies go bankrupt or become seriously financially distressed.
Closer to home, Irish-based Petroceltic, behind fields in Africa and southern Europe, succumbed to examinership in March. It ended up being taken over in May by Swiss-Cayman hedge fund Worldview.
While it was originally envisaged that four explorers would drill wells off Irish coasts in 2016, “none of these wells were spud”, according to 1Derrick, an oil and gas research firm.
But as the price of oil, currently about $54 a barrel, is tipped by many analysts to return to $60 in the near term for the first time since mid-2015 – with some voices, including Bank of America, talking about $70 by the middle of next year – the bulls are out in force.
"The severe and rapid contraction of drilling activity across the globe over the last number of years, especially in offshore areas, resulted in a collapse of offshore drilling charges and rates," said Davy analyst Job Langbroek in a report on Providence this week.
Providence recently hired a drill ship to start drilling a well in Druid in June. Langbroeks said it is “also quite likely” it will drill further down into the Drombeg prospect as he placed a 35p target on Providence’s stock – almost three times the price at which the company sold shares during the summer.
In Langbroek’s view, “2017 will be a pivotal year.”
Investors in Providence and the major oil groups swarming off Ireland’s shores are counting on 2017 finally being the year when reality trumps hyperbole.