Drilling for Success: While Providence Resources may be about to strike it rich at Hook Head, other Irish exploration companies are reporting successes across the globe, writes Claire Shoesmith.

Providence Resources, the Irish oil and gas group headed by Tony O'Reilly jnr, believes that it is about to hit the big time. The company, whose shares are listed in Dublin and London, last week announced that it had found better-than-expected hydrocarbon deposits at one of its wells in the Celtic Sea. These are now being tested, and if the assertion is found to be true, it could mark a turning point not only for Providence but also for the Irish oil and gas industry.

While there is no shortage of oil and gas companies here in Ireland - of the 72 companies listed on the Irish Stock Exchange, 12 are involved in some sort of mineral exploration or production, and many more Irish-based exploration companies are listed on London's AIM - successes in Ireland itself have been few and far between.

"The record is so poor here in Ireland - four commercial finds in more than 35 years of drilling - that people just aren't interested in exploring here," said one industry source, who agreed that things might change significantly if Providence were to make a discovery at Hook Head.

Still, that does not mean they are all sitting on their hands awaiting the outcome. In fact, rarely a week goes by without several announcements from one or more of the State's raft of oil and gas exploration companies. Lately, it has been the turn of Tullow Oil, one of the nation's bigger success stories.

While officially no longer an Irish company - it has moved its registered headquarters to London - Tullow has remained on the radar of analysts here thanks to its Irish origins and the substantial number of Irish shareholders. Last week it made history by becoming only the second Irish company to be admitted to the FTSE 100.

This is not the group's only recent achievement, however, and it comes hot on the heels of an announcement declaring Tullow's second oil discovery in Ghana, one of the group's biggest finds to date.

Following its takeover of Energy Africa at the end of 2004 and Hardman Resources at the end of 2006, Tullow has made no secret of its intentions to trim back spending on its North Sea assets and focus on Africa. It is now sitting on what appear to be two significant oil finds on the border of the Democratic Republic of Congo and Uganda, as well as many exploration assets in other African states, parts of Asia and South America and, of course, Europe.

In its most recent trading update in July Tullow said that it expected to produce on average 72,000-75,000 barrels of oil equivalent a day (boepd) this year. This compares with 64,720 boepd last year. As of the end of August its shares were up 25 per cent in Dublin since the start of the year.

According to Tom Hickey, Tullow's finance director, it is the company's willingness to think beyond the obvious that is the key to its success. "What we are looking at is places where the majors don't want to be," he says, "places that are considered to be too risky or too small."

This is music to the ears of David Horgan, chief executive of Dublin-based Petrel Resources. At the company's agm last month he said he expected to be able to move ahead with the group's Iraqi oil projects next month after changes to the country's oil legislation come into force.

AIM-listed Petrel, whose shares have more than doubled this year, has been operating in Iraq for 10 years and is well placed to benefit from what will be very favourable production terms. Horgan hopes to be producing oil from one of the fields by 2010 and has plans to develop several other projects in the country.

It is not all about danger zones though. Two relative newcomers, Petroceltic and Petroneft - both listed on Dublin's IEX, the index for smaller enterprises - between them have interests in Algeria, Italy, Ireland, Tunisia and Russia. While last year all eyes were on Petroceltic, the company headed by oil veteran John Craven has disappointed this year. Its shares are down more than 40 per cent in the eight months to the end of August, a decline analysts attribute in part to the weak markets, but mostly to the lack of new drilling news.

Since declaring a commercial gas find in Algeria in December, the company has revealed little to the market except to say that it has been awarded several new exploration licences in Italy and is making good progress on its existing projects.

"That can be an issue with these companies," said one Dublin-based analyst. "Their share prices are very sensitive to news flow."

Providence is a perfect example of this. Its shares jumped 10 per cent on August 8th after it announced that it had found gas at a second well in the Gulf of Mexico, a discovery that will double the group's overall production. Since then the stock has continued to climb amid frequent announcements regarding the group's activities in Ireland. A report by Davy, saying that the stock was trading at a significant discount to its market value, also helped to boost sentiment. Providence's shares were up 15 per cent as of the end of August.

Others to watch out for are Petroneft, which expects to start producing oil in western Siberia by 2009, and Dragon Oil, which is redeveloping producing fields in the Cheleken contract area offshore of Turkmenistan. While Petroneft's shares are down 17 per cent this year, Dragon's have gained 19 per cent.

The reason for this deviation is most likely the fact that Dragon is producing while Petroneft is still exploring.

So while all eyes will be on Providence's well at Hook Head - particularly those of Island Oil & Gas, which is also drilling in the Celtic Sea - with such scattered interests it is going to take a pretty big find to encourage any of the Irish players to start searching closer to home.