Providence reports €41.6m loss but hopes high for Irish sites
PROVIDENCE Resources said losses mounted after it sold its operations in the Gulf of Mexico but remains optimistic as it girds itself for the biggest ever exploration programme in Irish waters.
The oil and gas company yesterday reported a net loss of €41.6m for 2010 after selling its Gulf of Mexico portfolio at a loss following the collapse of gas prices, which reduced the portfolio's value by almost two-thirds.
New techniques for extracting shale gas from the ground have pushed down prices, which is good for consumers but bad for companies that own traditional gas reserves.
"This has transformed the gas market in America," said Providence chief executive Tony O'Reilly.
"It was a tough decision to sell. Nobody likes a write-off."
Providence, which was now focused on Ireland and the UK, had been doing "very well" so far this year, Mr O'Reilly added.
Rigs for the exploration programme have been hired and drilling starts later in the summer. Further exploration is planned for 2012 and 2013.
"The whole focus of the group, rightly in our opinion, is on delivering value through the drill-bit," Davy Stockbrokers said in a note to clients.
"If it can demonstrate it is possible to deliver oil and gas value from offshore Ireland, it is in a first-mover position in most areas. This is what the next two years can deliver and is the primary investor attraction of the stock."
The company sold €11.1m worth of oil in 2011 compared with €11.8m in 2009 as prices dipped last year and production was halted at the Singleton on-shore oil field in the UK in the final quarter to allow for further exploration.
The sale of the Gulf of Mexico operations comes as the company prepares to drill for oil in three sites off the Irish coast this year.
Two of the sites, Barryroe and Hook Head, are known to have oil reserves; while the third, located east of Dublin, is an exploration site where the company may or may not strike oil.
"The company believes recent advances in technology, infrastructure and commodity pricing combine to present a unique opportunity to test the commercial potential of a number of these assets," Mr O'Reilly added.
Providence was unlikely to tap investors in a share placing after the sale of the Gulf of Mexico assets and a share placement that raised $66m (€46.5m) in March, he said.
Future exploration would also be financed by farming out parts of the fields to other companies, he added.
Shares in Providence closed up 0.7pc at €3 in Dublin.