In case you missed it, Irish oil explorers Providence Resources PLC (LON:PVR) and Lansdowne Oil & Gas Plc (LON:LOGP) shares were boosted over the holiday period, as they appeared to move closer to a pivotal new partnership for the Barryroe oil field.
Barryroe is a significant oil project, with more than 1bn barrels of crude potentially present and production volumes projected at around 100,000 barrel per day but for several years the pre-development project has stalled.
READ: Providence Resources and Lansdowne Oil & Gas closer to Barryroe farm-out with signing of exclusivity deal
Put simply, the project would be too big and too expensive for Providence and Lansdowne to take forward into production alone.
They have been seeking larger partners, with deeper pockets, ever since the breakthrough well success back in 2012, though the initial optimism was dented by the collapse of crude prices from highs above US$100 per barrel.
As capital budgets tightened across the sector, the prospect of new commitments to new expensive growth projects became increasingly unlikely, and thus investors in companies such as Providence became increasingly frustrated.
Now, however, crude prices are looking healthier (with Brent now staying comfortably above US$60) and many of the ‘financially reset’ larger oil firms are again seen to be interested in taking new projects.
Exclusive farm-out talks now advancing
On Thursday, December 28, Providence revealed that it had signed an exclusivity agreement with an unnamed potential partner for Barryroe.
This was taken as particularly significant news, as Providence added that ‘key commercial terms’ had been agreed with the possible farminee and the exclusivity period would allow negotiations to advance in order to conclude contractual negotiations.
If sealed, the partnership deal would deliver a multi-well programme at Barryroe, according to Providence chief executive Tony O’Reilly.
The news lit a rocket beneath the share prices of Providence and Lansdowne.
Having risen a further 31% on the first trading day of January to change hands at 11.5p, Providence is now up almost 100% since Thursday’s announcement, whereas, Lansdowne is up some 130% in the same period, rising to trade at nearly 2p per share in early Tuesday deals.
New Barryroe drilling in the books potentially for 2018
Providence also updated on its preparations for new drilling at Barryroe. Thursday’s statement confirmed that “various work-scopes for the planned drilling” had now begun.
“These work-scopes include well planning and consenting, together with the preparation of the invitation to Tender (ITT) for the procurement of a drilling unit, which it is planned to issue in early Q1 2018,” Providence said.
Drilling itself could potentially start in late 2018 or early 2019.
Providence holds 80% of Barryroe and it is presently the operator of the project, while Lansdowne owns the other 20%.
As those that have followed the Barryroe story closely will know, we’ve been here before with this project – this is not the first time that a game changing Barryroe transaction has been understood to be ‘incoming’ – nonetheless, with new drilling already funded and being scheduled by Providence there is now a sense of renewed optimism among investors.