Shares in Irish oil firm surge on discovery

INVESTORS PILED into Irish exploration group Providence yesterday after it announced it had discovered oil during drilling in the Celtic Sea off Ireland’s south coast.

Providence said yesterday drilling in the Barryroe area of the north Celtic Sea confirmed the presence of high-quality, light crude oil. The company has found similar evidence in five wells drilled in an area about 20km across and covering a total of 300sq km.

Providence intends to begin testing the possible rate of oil flows from the well, a key stage on the road to establishing whether the find may be commercial.

The company’s shares surged in Dublin following the announcement, jumping from just under €3.43 to a high of €4.2873, more than 25 per cent ahead of its opening quote, by lunchtime. It slipped back slightly during the afternoon but still closed 77.04 cent, or 22.4 per cent, up on the day at €4.20.

Providence had already indicated it expected positive results from drilling the appraisal well, known as 48/24-10z, but yesterday’s statement and an explanatory note said that the results were better than it had hoped.

Technical director John O’Sullivan explained that the oil-bearing sands the company encountered during drilling “sit directly on a proven mature and oil prone source rock”. He said the confirmation of the presence of light oil in the sandstone rock system that the company had been drilling was “extremely encouraging”.

Oil from the reservoir would need to flow at 1,800 barrels a-day and it would need to produce at least 59 million barrels to be commercial. Davy analyst Job Langbroek said yesterday existing estimates of what the field does contain could be conservative in light of the information released by Providence.

The company has 80 per cent of the Barryroe licence and has been responsible for the drilling operations there. Its partner in the project, Lansdowne Oil and Gas, holds the remaining 20 per cent.

In December, Providence took over San Leon’s 30 per cent stake in Barryroe to bring its holding up to 80 per cent. This is likely to bring the company’s capital spending on the well to around $48 million, according to a note issued by London brokers, Cenkos, yesterday. In return, it gave San Leon a 4.5 per cent net profit interest in the licence. Cenkos suggested this left Providence with scope to bring new partners into the licence.