Providence finds partner for top asset Barryroe
Irish oil and gas explorer Providence Resources has reached agreement on a deal aimed at starting commercial drilling at its flagship asset, the Barryroe field off the Cork coast.
The company would not reveal who its partner is, saying the deal is contingent on the partner raising the necessary finance.
Providence also announced it has increased its stake in the Spanish Point field off the west coast by acquiring the Irish arm of UK-based explorer Chrysaor.
"Whilst the project is still at appraisal stage, the recent technical studies have highlighted the upside resource potential at Spanish Point, which, if realised, would confirm the field to be a major hydrocarbon accumulation," Providence chief executive Tony O'Reilly said.
Providence's search for a partner for Barryroe has been a protracted process. Davy analyst Job Langbroek attributed the delay in finding one to a combination of shareholders demanding fiscal discipline in oil companies, a large flow of capital into US fracking, and empty coffers at large State-owned oil firms in China and India.
"It's not stated but I suspect that there would be an expectation that an awful lot of the cost recovery capital involved (in the Barryroe farm-in) would suffice to meet the costs associated with Spanish Point, so it is important that Barryroe is consummated," Mr Langbroek told the Irish Independent.
He said this was important "partly from a delivery point of view, and partly because they'll be the first commercial oil project offshore Ireland.
"If Barryroe is to work it'll work really nicely. It's quite a substantial oil field in a benign fiscal environment, in a safe European first-world context. There's not many of those projects around," he added.
The recent drop in oil prices has seen shares in oil explorers come under a lot of pressure. Shares in Providence were trading at 77c each in Dublin yesterday, down from €2.70 a year ago. Mr Langbroek said the move to acquire Chrysaor and increase the stake in Spanish Point "says an awful lot" about the strain companies have been under.
"There's been a lot of pressure and cost overruns and I guess they couldn't absorb any extra cost, any more delay.
"I don't think it says anything about the quality or otherwise of Spanish Point," he added.