Providence shares near €6 as ExxonMobil moves in on shared field
SHARES in Providence Resources headed back toward the €6 mark yesterday, after ExxonMobil moved closer to drilling a field it shares with the Irish company.
The US super major effectively confirmed it will start drilling at the Dunquin site off the south-west coast next year after advertising for tenders to provide offshore drilling services for the next 12 months.
Exxon's only interest offshore of Ireland is Dunquin. A spokesman for the company confirmed the tender related to that field.
The tender covers as many as 23 contracts, including one to supply a rig to drill a deepwater exploration well at Dunquin in nearly 1,700m of water, as well as helicopter services for transporting crew between Dunquin and the mainland.
The news that Exxon is now moving in on Dunquin is a boost for Providence, and continues the strong run of news for the company. It is also well timed for the firm, which will hold its annual general meeting in Dublin this morning.
Dunquin, situated in the harsh Atlantic Margin area off the western seaboard, had long been considered Providence's prize asset, where it now has a 16pc share after a series of farm downs.
The spotlight has moved away from Dunquin in recent months, after the company found much larger quantities of oil than had been expected at its Barryroe discovery of the Cork coast.
Davy Stockbroker's Job Langbroek, however, emphasised that returns from Dunquin had the potential to dwarf anything that Providence might earn from Barryroe.
"[The drilling of Dunquin] will prove to be seminal event for Providence and has enormous value implications.
"We carry the well at £1.36 (€1.69) on a risked basis in our £14 valuation of Providence. However, the target is so large that a success case would, in our estimate, be worth over £20 per share to Providence.
"The well is high risk but returns are commensurate. While attention is rightly focused on Barryroe for now, there is considerably more to the group as the Dunquin well demonstrates," he said.
Shares in the company jumped as high as €6.19 in Dublin yesterday before falling back to close at €5.98, for a gain of 2.75pc.
The company has doubled in value in the last year.