Providence Resources primed ahead of Irish licence awards

(MENAFN- ProactiveInvestors)Providence Resources (LON:PVR) rollercoaster shares have in the past few years been driven by the potential of the undeveloped Barryroe oil field but increasingly the focus has switched to Ireland's west coast in the Atlantic margins. In September the Irish government's Petroleum Affairs Division closed the books on the country's most successful offshore licensing round to date. Providence currently has the largest licence holding in Ireland's Atlantic margin and it is understood to have applied for new acreage in the most recent round. A total of 43 licence applications were submitted by oil companies to the Irish government and reportedly these included some very large players (uncorroborated name checks included the likes of ExxonMobil and China's CNOOC). It marked a notable change in fortunes from previous round. For context Providence and its partners were the sole applicants in Ireland's prior licensing in 2011. Oil companies were advised last year by the Irish authorities that the first wave of new licence awards would be announced in February. Ireland's general election which takes place on February 26 represents a possible stumbling block to the guided timeline (though news at the end of the month shouldn't be ruled out). Should Ireland's licence awards live up to the hype and rumour and if major oil companies have indeed committed to the new phase of exploration offshore Ireland it should mark a significant catalyst for Providence. Regardless of whether or not the AIM quoted company is given more licences the entry of 'Big Oil' and/or National Oil Companies (NOCs) would represent considerable validation in a jurisdiction that remains the subject of scepticism among investors. Here we take a closer look at Providence's assets: Spanish Point and the Atlantic margin The Spanish Point project an appraisal of a 225mln barrel discovery is currently Providence's focus off the west coast. Spanish Point is located in the Porcupine basin it is operated by Cairn Energy and a pivotal well is planned for next year. A farm-out process to bring in a new partner is currently underway and a number of interested parties are already participating in a 'data room' process. Providence could benefit from the heightened interest as the new licence awards are announced; as either new parties could be drawn to the region or companies that miss out on licences may look to alternative options. As a more mature drill ready venture it could be seen as an attractive opener for new entrants. In addition to Spanish Point Providence has other exploration ventures in the area Notably it has the licence to the north of the Spanish Point as well as the acreage to the south where the Ruadhan prospect is located. Recently shot 3D seismic data has given greater insight to Ruadhan (pronounced Roo-awn) now thought to be similar and potentially larger than Spanish Point. It is seen as a potential follow on to Spanish Point though the reservoirs still have to be confirmed by drilling and exploration well in the future. Providence also has a sizeable stake In the Dunquin South project located in the vicinity of the 2013 Dunquin well and that is estimated to host as much as 1.4bn barrels oil equivalent. Then there are the Newgrange Drombeg Druid and Diablo Ridge prospects which have also been the subject of modern 3D seismic in the past year. Much of the industry interest in the region has been sparked by exploration successes in an area offshore Canada on the other side of the Atlantic which is believed to be geologically similar - as hundreds of millions of years ago before the continents separated they would have been located reasonably close together. In November 2015 oil companies committed to some US$1.2bn of exploration work in Canada's Atlantic margin as part of its latest licensing. Back in Irish waters the stand-out successes have yet to materialise though an Exxon and Providence well in 2013 did confirm an oil column and thus confirmed there's an active petroleum system in the region. It will also be worth noting when the licence awards are unveiled that the record number of applications in 2015 came despite a tightening in Ireland's fiscal terms for new oil projects and at a time when crude prices were at their lowest for a decade. Barryroe and the Celtic Sea Barryroe on paper remains a valuable opportunity. It is host to some 346mln barrels of recoverable oil and in a better market it could be deemed the bona fide 'company maker' in the Providence portfolio. But given the current oil price Providence is swimming against the tide in its necessary pursuit of a development partner to carry the project's quite substantial capital costs. Based on the findings of Providence's successful well and testing programme in 2012 the company envisages an initial 30000 barrel per day development at peak production. Investors have been waiting for a Barryroe deal for a number of years and it appears they may have to wait at least a little longer for news.