Providence shares sink as water found in well
Shares in Providence Resources fell as much as 34pc in Dublin yesterday after the company announced it would plug and abandon a deep sea well drilled 220km off the Irish coast.
In a statement, the company said that the 53/6-1 well in the Drombeg Prospect contained water, making it commercially unviable.
Yesterday's share tumble was exaggerated by a surge in the stock only last week - which meant there was further to fall.
"The 53/6-1 well results at the Drombeg level are disappointing and we will now assess these well data in order to understand what implications they have for prospectivity within the licence," said Providence CEO Tony O'Reilly Jnr.
The well, drilled from the deepwater drill ship the Stena IceMAX was the deepest yet in Irish waters, and was sunk in tough offshore conditions.
Fortunately for the Irish company French giant Total had signed an exclusive option for a stake in the well last June, and along with farm-in partner Cairn, will carry much of the cost.
Total is required to make the final payment of $6.5m to its partners in the well three days after it is abandoned, and has an option then to walk away entirely.
Davy's Job Langbroek said the failed drill won't threaten Providence's viability.
"It's in the R&D business, sometimes it works, sometimes it doesn't, they are financially strong enough to move on to the next phase," he said.
"We remain well-funded for our forward drilling operations offshore Ireland, with Barryroe being planned as our next well," Tony O'Reilly said.
Through the pre-drill deals with Cairn and TOTAL, the company's financial exposure to the well was "significantly reduced," he said.
Shares fell as much as 34pc to 5.10 cent initially in Dublin, but clawed their way back to 6.50 cent by late afternoon.