As part of a new section of Oil & Gas Middle East exploring the ways in which oil and gas professionals can invest in the industry they know best, Dan Dowding from stockbrokers and wealth managers Killik & Co takes a look at Providence Resources.
Providence Resources is an Ireland-based upstream oil and gas company which has production (onshore UK) at its Singleton facility, in West Sussex.
However, the real excitement lies offshore Ireland, where Providence is leading the most comprehensive drilling program in the history of the Irish Republic. The program represents investment of at least $500m by Providence and its partners in a number of exploration and development wells in six different basins offshore Ireland.
In terms of appraisal activities, investor attention is focused on the Barryroe prospect in the North Celtic Sea Basin, in 100 metres of water, some 50kms offshore Ireland.
Having acquired and processed 240km2 of 3D seismic survey, the GSF Arctic III semi-submersible rig is currently drilling the 48/24-10 appraisal well.
Providence owns 80% of the prospect and is the operator. Barryroe was actually discovered by Esso in 1973, however flow rates of 1,500-1,600 bpd were deemed to be not commercially viable.
Technological advances mean this is no longer seen as problematic. The company’s balance sheet is relatively strong, given management raised $65.7m at 255p in a placing in February of last year. It also sold its Gulf of Mexico offshore interests for up to $22m last March 2011 ($15m in cash plus potential for a further deferred $7m dependent
on production levels).
We believe the company to be fully funded for the immediate term. The fiscal regime in Ireland is very attractive: there is no state participation or royalties payable. We believe Providence, aided by powerful international majors, is very well positioned to be the prime beneficiary of this.
