Providence hits high as potential oil yield revised


SHARES IN exploration company Providence Resources reached their highest levels in three years yesterday after the company upped its estimates of the amount of oil present at its Barryroe site off the coast of Cork.

Providence hit a high of €8.95 before closing at €8.41 in Dublin yesterday, less than 1 per cent stronger. The shares have jumped by more than 250 per cent this year.

In an update to the market yesterday, the company said it expected to find between one and 1.6 billion barrels of oil – up to four times initial estimates. The update follows a four-month assessment of two of the hydrocarbon-bearing zones at the 300sq km site.

In addition, the analysis identified further resource potential at other reservoir intervals at the site. The company has begun work on mapping these zones.

Providence chief executive Tony O’Reilly jnr described the find as “hugely significant by North Sea standards”, though he said the issue was how much oil would actually be recovered.

While an earlier report assumed a 16 per cent recovery rate, more recent North Sea discoveries have had a recovery rate of 38 per cent. Mr O’Reilly said yesterday the outcome was likely to be “somewhere in between”: “We will define the recovery rates over the next few months, which will be predicated on how we develop this field. The 16 per cent estimate was based on older data, and old vertical wells.”

Providence, which has an 80 per cent interest in the venture, will actively go out into the market to seek partners for the next stage of the project by the end of the year. The company has already received informal approaches from potential partners.

Analysts predict Providence will most likely halve its stake to 40 per cent in exchange for a carry-through development, with production unlikely to start before 2015. According to Mr O’Reilly, the existing energy infrastructure in Cork, including pipelines, refineries such as Whitegate, as well as Ireland’s benign climate and good tax rate, makes the Barryroe site an attractive investment location for international oil companies.

Barryroe’s gas resource – which would be less valuable than any oil recovered – was not included in the latest assessment.

Barryroe is one of six sites being developed by Providence around Ireland as part of a two-year drilling plan. The company expects to begin exploratory drilling in its Dalkey Island licence area in the Irish Sea by early 2013.

It has applied for a foreshore permit for the controversial development 10km from Dalkey Island off the coast of south Dublin.