There is now more weight behind Providence Resources (LON:PVR) belief that there is a significant source of recoverable hydrocarbons off the west coast of Ireland, according to Ambrian Capital.
This morning the Dublin-based oil firm gave investors a positive update on the Spanish Point and Burren hydrocarbon discoveries, which are hosted on the Frontier Exploration Licence 2/04 & 4/08, in the porcupine basin off the south west coast of Ireland.
Providence has a 56 percent stake in the assets and alongside its partners - Chrysaor (with 30 percent) and Sosina Exploration (14 percent) - it will now take the next steps to explore the basin.
Consequently Providence has now formally notified the Irish Department of the Communications, Energy and Natural Resources that it has elected to enter the second phase of FEL 2/04, which carries a firm well commitment and will form part of Providence's previously announced multi-year, multi-basin drilling programme offshore Ireland.
Additionally it also reported that a competent persons report (CPR), carried out by Senergy, on the resource potential of its assets in the porcupine basin - FEL 2/04 and FEL 4/08 - put gross un-risked recoverable prospective resources at 750 million barrels of oil equivalent.
The CPR also confirmed that the Spanish Point contingent resource potential was inline with the previously reported volumes - at 200 million barrels of oil equivalent recoverable.
Werner Riding, oil and gas analyst at Ambrian Capital, described the update as ‘welcome news’.
“Although the timing remains uncertain, we welcome the news of a firm drilling commitment from the JV over two of its highly prospective licence areas,” Riding said in a note to clients.
“Confirmation of the resource potential from an independent reserves and resource auditor is also encouraging and serves to add weight to management expectations that the west coast of Ireland contains a significant volume of recoverable hydrocarbons.”
Ambrian rates Providence Resources as a ‘buy’ with a 890 pence target - which implies a massive 220 percent upside from the current price of 277.5 pence.
Meanwhile Caren Crowley at Irish broker Davy reckons a well at Spanish Point will now be integrated into the upcoming drill programme.
“The announcement should be welcomed by shareholders as concrete evidence that a well will be drilled on the Spanish Point discovery,” Crowley said in a note to clients.
“The appraisal of this discovery is an important part of the ten-well programme slated for the Irish offshore over the next two years.”
The analyst adds: “Providence is the leading independent exploration group working offshore Ireland and the announcement today further confirms its pole position.”