Ensures it controls Barryroe structure
09 August 2012
FACTS: Providence Resources has announced that it has acquired a part interest in five blocks, equivalent to a 500km sq area, located to the north and west of the existing Barryroe licence in the North Celtic Sea offshore Ireland. Its holding in the blocks is the same as its Barryroe interest at 80%, with Lansdowne Oil & Gas similarly holding a 20% share. Providence will operate the licence (Licensing Option12/04), which has a two-year option period. At the end of this term it can be converted into a standard exploration licence with a one well commitment.
ANALYSIS: The combination of 3D seismic followed by the 48/24-10z well provided a new understanding of the Wealden sand package and its potential in surrounding areas. As seismic data suggest that some of the Barryroe structure could extend into the blocks being acquired, the licence option ensures that the group maximises its position and understanding of the Wealden package in the Celtic Sea.
The Barryroe well has demonstrated and confirmed that the central Celtic Sea contains a substantial source of oil in the upper Jurassic Purbeckian which, in all likelihood, will have expelled a large amount of oil. At Barryroe, this is juxtaposed with a very extensive sand at the base of the overlying Cretaceous (Wealden basal sand). A thick shale section in the lower Wealden provides a sand seal pair which completes the play. There may be similar situations elsewhere in the licence option area, apart from any extension of the Barryroe structure itself, which are now also within the group's control.
DAVY VIEW: The option makes perfect sense in the context of what Providence is trying to achieve offshore Ireland – namely a role and position in all of the prospective hydrocarbon targets and basins. It also provides a bigger footprint for interested parties that Providence will talk to with respect to farming into Barryroe and the surrounding licences. We value the group at £17.45 per share, with Barryroe at £9.54 per share, and the news today will help to ensure that this value can be realised.