Big news elsewhere somewhat overshadowed what was in its own right the very significant announcement that drilling had begun on the Druid-Drombeg exploration well, off Ireland’s west coast.
By the afternoon, as news broke of Shell’s US$1.23bn exit from the Corrib gas field, Providence wasn’t even the day’s biggest oil and story in Ireland, let alone the broader market.
Nonetheless, the Druid-Drombeg has the potential to be five times bigger than Premier’s Zama find and successes in the deep waters of the Atlantic Margin may well in time displace Corrib as Ireland’s most significant offshore project.
The well is a major catalyst for Providence Resources, and plainly the project has spoken to the AIM-firm’s larger partners Cairn Energy and Total.
It is a very big opportunity
First and foremost Druid-Drombeg represents a very big opportunity, more than 5bn barrels across two targets.
Secondly, unlike at still-undeveloped Barryroe, Providence has already convinced larger companies to join it at an early stage. Not only does that mean the exploration costs are shared, it also means that, in the event of a success, the transition into development is less likely to stall.
Perhaps, most significant is the fact that the Providence well is likely the first in a number of wells in region.
Several major oil firms took up new exploration ground in the area, off Ireland’s west coast, a new 3D seismic exploration programme has this month begun and it has been rumoured that the a broader phase of exploration drilling could begin as soon as next year.
A somewhat less obvious thing to consider is that this new exploration programme has provided a window of goodwill in the market, one in which the company may perhaps break the Barryroe deadlock at long last.
With all the excitement of new exploration, it is fairly easy to forget that Providence already has a major oil project on its books, albeit one that was kicked deep into the long grass as the chances of a farm-out deal fizzled out around the time that crude prices retreated back in 2014.
Potential partners backed away during the sector-wide readjustments and new capex became taboo in ‘Big Oil’ boardrooms, but, the Irish oil firm also had its own financial matters to straighten out.
Last year's funding rekindled Providence
The dilutive funding deal, when it inevitably came, was no doubt painful for shareholders that had been in Providence long enough to remember the Barryroe post-appraisal highs, back when PVR changed hands for nearly 700p on AIM.
As painful as it may have been for existing shareholders at the time, the US$76.6mln funding just over a year ago was the pivotal reboot moment that has effectively set up this new exploration opportunity.
It told the market and potential new partners that Providence had weathered the oil price storm, it was still standing and it had enough backers to actively move its Irish oil business forward.
Pragmatically, the funds meant Providence could advance its West Coast exploration plans at a time, coincidently, when there was suddenly a lot more industry interest in Ireland’s Atlantic Margin.
Whilst it was able to pay for drilling by itself, the subsequent introduction of Cairn and the potential introduction of Total (via its exclusive option deal) meant that the scope of the well could be expanded.
Drilling kicked off in the second week of July, and the programme ought to last some 45-60 days.
Excitement ahead of the Druid-Drombeg has been the driver of Providence’s resurgent share price surge, the stock is up around 20% in recent weeks.
Such is the nature of oil exploration punts, it is more than likely that Providence is setting up into a somewhat binary phase now that drilling is underway. A success could see a transformational impact on the share price whereas the disappointment of a ‘dry’ well would be harshly penalised in the market.
For punters, it is high risk and high reward proposition.
Barryroe remains an elephant in the room
That being said, Barryroe remains the elephant in the room. The perennial possibility of a Barryroe deal presents something of a caveat to the binary - an unexpected third option in an otherwise binary story.
Now, admittedly, the idea that a Barryroe transaction could be suddenly come to fruition has been a long hoped for panacea for long term Providence shareholders, many of whom have had their hopes raised and then dashed more than once by this stage.
This week’s second RNS from the Irish oil firm, on Thursday, was tacit reminder that the Barryroe issue is never far from the Providence story.
Providence and partner Lansdowne, which own 80% and 20% respectively, were granted a licence extension for Barryroe, in the Celtic Sea, where the company wants to develop an oilfield able to produce up to 100,000 bopd.
Extending the licence period will, presumably, be a positive for talks that are said to be ongoing.
The first phase of the licence has been extended to July 2019, meanwhile, the overall term of the licence now lasts until July 2021. The extension is subject to the partners completing a work programme, including analysis of new 3D seismic data, and that they provide an assessment of the Jurassic and Triassic potential in the area.
O’Reilly, in a statement, said: "We are very pleased to be granted these extensions to the Barryroe licence, which provides additional security of tenure whilst we continue the farm-out process.
“The Barryroe partners are in dialogue with a number of parties regarding advancing the appraisal of Barryroe through to first oil. The extension work programme includes evaluating the deeper exploration potential of the licence, which offers exciting upside, over and above the substantial resources already identified in Barryroe."
There can be no doubt that the excitement and positivity surrounding Providence at the moment is all about west coast exploration, but, for those that have followed the company over the longer term Barryroe is a question that needs an answer.
Given the present goodwill in the market, if a Barryroe deal is a real possibility, what better time is there to strike it than now?