Providence Resources announces partner in Porcupine basin

Oil and gas explorer Providence Resources announced on Wednesday a partner for its well in the Porcupine basin. The stock rose by as much as 15 per cent in Dublin on Wednesday on the back of the news.

Cairn Energy, a Scottish headquartered oil and gas exploration company, will take a 30 per cent working interest in FEL 2/14, which contains the Druid, Drombeg and Diablo targets, via an Irish subsidiary, Capricorn Ireland Limited.

Tony O’Reilly, chief executive of Providence said that the addition of Cairn brings “additional technical capabilities to the JV partnership, whilst providing Providence with additional financial and operational flexibility”.

“ This licence has attracted considerable interest and we continue to discuss possible further equity divestment with other material industry players,” he said.

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Job Langbroek, analyst with Davy Stockbrokers, said the news is a “positive” for Providence.

“Cairn Energy is a pedigree explorer that is already familiar with the basin and its entry points to the quality of the Druid/Drombeg targets,” he wrote in a research note.

Cairn will pay 45 per cent of the costs of drilling the 53/6-A exploration well in June 2017, subject to a gross well cap of $42 million. The company will also make a cash payment of $2.82 million to PVR and Sosina on closing.

If the joint venture partners agree to drill an appraisal well in FEL 2/14 in the future, Cairn will pay 40 per cent of the appraisal well costs (subject to a gross well cap of $42 million) and Cairn will have the right to take over operatorship.

Providence will be the operator of the 53/6-A well, and will retain a 56 per cent equity stake in FEL 2/14. Capricorn will hold 30 per cent and Sosina 14 per cent.

Davy Stockbrokers valued the group at 35p per share after risking the various assets.

“The stock should perform better on the news,” it said.

Providence, led by Tony O’Reilly jnr, carried out a $70 million (€ 62.7 million) share sale during the summer to shore up its finances.