Davy Research |
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Providence Resources
(PRP ID)
Building up the Barryroe case
10 May 2012
Job Langbroek
| Closing Price: | 620c |
FACTS: Providence has announced that it has completed the first instalment of the follow-on work on the Barryroe well data located in the south-western end of the Celtic Sea Basin offshore Ireland. Analysis carried out by external consultants (Geokinetics) has demonstrated that the basal sandstone has a predictable seismic trace which can be tied into the 3D seismic programme completed at the end of 2011. The evidence so far demonstrates that the basal Wealden package is widely developed and is evident in the 240 sq km of 3D survey (80% of the 300 sq km mapped structure). Providence has an 80% stake in the licence, which it operates, and Lansdowne Oil & Gas holds the balancing 20%.
ANALYSIS: This is the completion of the first part of a comprehensive review of the data from the 48/24-10z well drilled on the eastern end of the Barryroe structure. The fact that the well and the seismic can be correlated through a process known as seismic inversion will enable a picture to be built up of the scale of the field. Once the volume of rock in the lower Wealden basal sand package across all parts of the Wealden structure (including areas in the western and central parts of the structure) is calculated, an oil in place number can be generated. This should be published by the end of the summer.
Before the recent Barryroe well, five wells had penetrated the Lower Cretaceous Wealden aged rocks and a mid-case oil in place number of 373m barrels was estimated. This estimate included both the lower Wealden and the middle Wealden – in fact, it was made up mostly by the middle Wealden. The seismic inversion work, which will focus on the Lower Wealden, will be used to update this oil in place estimate.
DAVY VIEW: The news is part of the programme to establish the extent of the Barryroe reservoir and its commercial potential. The oil in place estimate will be followed by a review of the oil recovery that can be expected from the in place estimate. This in turn should lead to a full commercial working model for Barryroe by the end of the year. Recent work by us estimated that each barrel in the Barryroe location can be valued at $15.5 per barrel based on an output of 30,000 barrels per day and a field start-up in 2016. This correlates to a valuation of £13.48p per share for Providence which, unsurprisingly, we carry as an 'outperform' rating.