Providence Resources, the oil and gas exploration group headed by Tony O'Reilly jnr, is trading at a significant discount to its market value, according to analysts at Davy.

In a note to investors, the brokerage said that on a risked basis the company, which has production assets in the UK and the Gulf of Mexico and exploration licences off the Irish coast, is worth 21 cent a share. This compares with the group's current price of 8 cent a share and more than doubles its market value to over €500 million from the current €211 million.

While the 21-cent figure is not a share-price target, it is what the brokerage believes the company and all its current and future projects are worth based on a long-term oil and gas price of $50 a barrel and 35 pence a therm.

Providence, which already generates production income from its assets in the UK, last week announced the discovery of gas at a second well in the Gulf of Mexico. Later this month it is due to start drilling an appraisal well at Hook Head in the Celtic Sea, a project that is being particularly closely watched by analysts and investors. Success here would be the first step towards developing the company's portfolio of assets in the region.

"Providence already has three high-impact deep-water exploration targets off the west coast of Ireland which should become more valuable as interest in the area increases," Davy said in the note. "Success at any of these targets would transform the scale and value of the company."

Separately Providence has said that UK group Sosina Exploration will take a 5 per cent stake in two of its exploration licences in the Celtic Sea, Hook Head and Blackrock. Providence will retain its 40 per cent interest, with the remaining stake being shared between four other companies.