The mood music around Irish offshore exploration is as positive as it has been since the early 1980s writes Kyran Fitzgerald, but John Teeling, of Petrel Resources, says it is ‘too early to be counting eggs’
THE positive news flow out of Tony O’Reilly’s Providence Resources appears to be boosting smaller satellites.
It is also re-igniting an old debate over whether the terms on offer to overseas investors are simply too generous and are in need of restructuring.
Excitement over exploration prospects at the Porcupine Basin spread this week, with the share price in Irish exploration firm Petrel Resources jumping three fold on Monday last following the release of a media statement to coincide with an oil industry conference in Dublin. On Monday alone, there were 4,000 deals put through.
Certainly, the punters are beginning to flash the cash again. At home, a mood of gloom persists, but overseas interest in Ireland is on the up, with ESB, Bank of Ireland, and NTMA bond issues all attracting plenty of support and expats fuelling a mini surge in the price of high grade properties.
UK investors appear to have been driving the share price surge at Petrel. This, at least, is the view of the company’s chairman, industry veteran, John Teeling, who says that he was as surprised as anyone when the Petrel share price took off. Normally, Petrel is run on a day to day basis by David Horgan, but Horgan has been in Peru tending to another company in the Teeling-Horgan stable, Pan Andean.
The chairman had to fill the gap. “I was shocked at the price rise. I looked for the technical work behind the press release. What it says is that structures have been identified which could have a potential for 1bn barrels. This is really quite significant.”
He says the men behind the paper, academics Dave Naylor, Trinity College Dublin, and Pat Shannon, University College Dublin, are leaders in their fields.
They have reinterpreted data gathered over a 17 year period from about 50 wells.
“Old data has been reinterpreted giving us fresh information.”
Mr Teeling accepts, however, that some media reports about a major oil find are overcooked — to put it mildly. He reckons there could be a one in 10, maybe one in 15 chance of a major find in the Porcupine Basin (where Petrel’s prospect is located).
“Such odds are actually good. To get a gold, or zinc discovery on a greenfield site, you are talking about odds of 100 to one.”
In other words, it would be way too premature to start counting chickens. As he puts it: “The only lie detector is a drill hole.”
Analysts certainly advise investors to err on the side of caution. They stress that the gap between an early assessment of potential and the actuality of commercial discovery and extraction is huge in terms of time, and expenditures committed.
They point out that small players in the game can be expected to talk things up. They also point to the website of the petrol affairs division of the Department of Energy where a similar effort is made to put the best foot forward, so to speak. Add in the natural media impulse to splash a story and well, you get the picture.
BUT what cannot be denied is that the mood music around Irish offshore exploration is as positive as it has been since the early 1980s. “We are years too early to be counting eggs”, says Mr Teeling, before adding that should a commercial discovery be made in the Porcupine Basin, it would be a big one. “The geology is completely different to that in the Celtic Sea [where Providence’s Barryroe prospect is located].”
The Atlantic margin encompasses West Africa and the coast off Brazil, where huge finds have helped to re-ignite interest in offshore Ireland, following a near 30 year period of dormancy.
A revival in interest has also been spurred by technological breakthroughs and a surge in the oil price.
Mr Teeling believes a commercial discovery in the Porcupine Basin would be transformative from an Irish perspective. “Ireland could be self sufficient in oil.”
We could get some indication in 2014 with some real information out of the Dunquin well where Exxon Mobil is the operator and where Providence has a 16% stake.
Revived expectation has brought more people into the field such as broadcaster-commentator, Eddie Hobbs, who argues the current terms on offer to the industry are too generous. Mr Teeling takes issue with this view.
He believes the Department of Energy acted shrewdly in offering a two year option to companies to allow them to assess the situation before committing to a full licence. He argues that the State is currently in a position to take 50c in every euro of revenue generated in corporation tax — 25% rising to 40% — together with Vat on services and income tax.
Sceptics insist the companies will pay much less, once allowances on capital expenditure are claimed. This debate should run and run. In parallel, a ‘Shell to Sea’ style barny is developing over plans from Providence to prospect off the coast of Dalkey, with Deputy Richard Boyd-Barrett leading the way. Mr Teeling recalls that Petrels’s direct predecessor, Kish Resources, once sought out natural gas in the Bay back in the 1980s.
At the time, the former UCD commerce lecturer had set up shop on Clontarf Rd, having put his academic life behind him.
HE recalls going up the Hill of Howth to look for signs of gas flaring at the company’s well. Since then, he has clocked up the air miles in search of exploration lucre.
He has founded nine stock exchange listed companies and his team have been all over the globe, with both Petrel and Persian Gold active in Iraq and with African Diamond developing a large gemstone mine in partnership with De Beers.
However, it was much closer to home that Mr Teeling engineered his most famous coup, with the sale of Cooley Distillery in January to the US spirits company, Beam for around $95m (€74.4m). The Teeling family scooped €26m from the sale — the case of an ‘overnight success story’ after 25 years.
It was back in 1988 that Mr Teeling acquired the site for the distillery along with local businessman, Donal Kinsella.
Many thought Mr Teeling was insane when he took on the might of Irish Distillers, the then monopoly producer.
Cooley almost went under in the early 1990s. It was not a great time for Mr Teeling as his acquisition and then sale of Countyglen, a property shell company, resulted in a takeover by a businessman John Carway, followed by a lengthy High Court inspectorate. The upshot was that shareholders, some of them long established stakeholders, lost out.
Mr Teeling stayed well clear of property investments, once the boom got under way.
The development of Cooley has occupied much of his energies and its eventual sale is a real vindication, though he insists that Beam has also done well out of the deal.
He believes that whiskey is a great business from an Irish perspective: “The value added is 15 times. It costs €600 to produce €8,000 in sales. Most of the value added stays in Ireland.”
The market is booming, with demand for Irish whiskey soaring in the US, Russia and Asia. Mr Teeling credits Pernod Ricard for driving Jameson sales forward, with Cooley travelling in its slipstream.
Sales of Irish whiskey in the US have risen from 300,000 cases in 1999 to 4m this year, The average drinker is not a retired parish priest, but rather a person between 25 and 39. 45% are female. Ironically, Mr Teeling is teetotal while suggesting that three or four glasses a day can ward off strokes.
It remains a family business. Son, Stephen, is now a senior executive with Beam, while another son, Jack, is planning a new distillery investment in Dublin.
At 66, Mr Teeling shows few signs of slowing down. A regular on the speaking circuit, he maintains the recession could have several years to run and is pressing for a restructuring of the national debt along with mortgage debt forgiveness.
He is a sceptic about ‘peak oil’ theory, arguing fracking technologies have changed the game, in North America, but is enthusiastic about tidal energy, while hopeful that new storage technologies could release the potential of the wind sector.
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