Providence history: a fruitless search for Irish oil
Decades drilling off Irish coast and millions spent but not a drop of oil extracted
A rig at Providence’s Barryroe prospect. Photograph: Finbarr O’Rourke
The news that Tony O’Reilly jnr is moving on from Providence Resources marks the end of his 14-year relationship with the company and a 22-year relationship his family has had. Much like its predecessors, Providence’s search for a big commercial oil find has so far been fruitless, but the hope of one day finding hydrocarbons is likely remain for some time.
Providence traces its roots back to 1981 when O’Reilly jnr’s father, Sir Anthony O’Reilly, and a group of investors set up Atlantic Resources to explore for oil in Irish waters.
The company was subsequently acquired by Conroy Petroleum & Natural Resources in 1991 and renamed as Arcon International Resources.
In 1997, Arcon spun out its hydrocarbon assets into a new company – called Providence – and listed it on the Exploration Securities Market of the Irish Stock Exchange. It would join the junior stock market in London eight years later.
Providence was granted its first petroleum lease for its Helvick oilfield in May 1998. It estimated that Helvick had seven million barrels of recoverable oil which could come into production by 2001. Not so much as a drop would ever be recovered for commercial use from Helvick.
Higher oil prices pushed Providence into profitability for the first time in May 2000. Its €419,000 profit was generated from sales related to the company’s producing interests, namely the onshore UK Singleton oil field and offshore UK Claymore oil field. By 2001, that position had reversed and the company reported a pretax loss of €20.7 million after it wrote down the value of its underdeveloped assets. It would return to minor profitability in the years to follow.
June 2000: drilling at Helvick begins
Providence’s chief executive, Phil Tracy, said the development of the Helvick field could generate up to €315 million. It didn’t.
By 2001, Providence had begun to scope out asset sales as part of a strategic review including what had then been its key asset, Helvick.
New chief executive
Tony O’Reilly jnr, at the age of 38, was appointed as the chief executive of Providence, having left Waterford Wedgwood.
Providence signed up its first big fish in 2006 in the form of US oil major ExxonMobil, then the world’s largest oil and gas company. The agreement related to the Dunquin prospect off the west coast of Ireland. O’Reilly jnr said the company would continue to focus on its other Irish, UK and Nigerian prospects.
Just two years later, Exxon would seek bids for part of its share in the Dunquin prospect.
In April 2007, Providence raised €25.8 million to help with the appraisal of assets. The plan was timely, given that just three months later, more than €2 billion would be wiped off the value of the Irish market in a single day over concerns about a problem brewing in the US – the subprime mortgage market.
In November 2008, Providence told shareholders of its plans to increase production in the gulf of Mexico in an “aggressive manner”. In the same week, O’Reilly jnr admitted the company had been forced to plug and abandon its drilling operations at Hook Head and the Celtic Sea.
A pattern of new licence announcements, new partners and shaky finances emerged. In 2011, Providence offloaded its Nigerian interest, the same year it started drilling at Barryroe – now its key prospect. The following year, which was billed as “transformational” by O’Reilly jnr, it sold its UK interests to deal with rising losses.
August 4th, 2017
Providence shares tanked 46 per cent after the company said preliminary analysis of its then key prospect, Druid, indicated that the reservoir contained water.
Only a month later, another licence was found to contain a “porous water-bearing reservoir interval”, pushing shares down almost 29 per cent on the day. In a results update that followed, the company said it remained “very optimistic”.
Providence entered exclusive talks to sell a stake in its Barryroe oil prospect off the Cork coast to an unnamed partner. That partner turned out to be Chinese-backer Apec which would end up giving Providence the runaround.
Apec repeatedly missed deadlines to transfer $9 million (€8.1 million) to Providence to advance exploration of the company’s key Barryroe prospect. By September 2019 the company was forced to turn to shareholders for fresh funding. At a meeting that month, O’Reilly jnr told journalists that his position would come up for discussion if Apec missed the final September 30th deadline set by the company. The deadline was missed.
The end for O’Reilly
O’Reilly jnr announced he was moving on from Providence, a week after the company lost its partner, French oil major Total, on another licence. His replacement has yet to be found.