Providence shares fall steeply on drilling failure

Providence Resources has hit a second major setback in the Porcupine Basin after summer drilling at the Drombeg well 220km off shore failed to hit oil and has been abandoned. The shares, which had one stage plunged by a third, ended the session 16.5% lower.

Chief executive Tony O’Reilly acknowledged “disappointment”, but cost-sharing at the failed well will help cushion the financial effects for Providence, as Cairn Energy and Total have shouldered a significant part of the drilling costs. For investors, the setback puts the focus back on Providence’s main prospect at Barryroe, in the North Celtic Sea Basin, where drilling could take place next year or in early 2019.

Analysts said that the failed programme turns the spotlight on the drilling plans.

“The drilling results significantly increase the pressure on the management team, as their ability to create value for shareholders is yet again at the forefront for investors.

“The importance of generating a return from Barryroe cannot be understated and we await to see management’s strategy over the coming weeks,” said Dylan Simmonds at Merrion Capital. Davy said: “The onus now shifts back to Barryroe”. The broker estimated Providence should nonetheless have about $30m (€25m) for any drilling programme next year.

“The latest indication is that an appraisal well will be drilled next year. To this end, a statement of interest with respect to tendering for the drilling of the 2018 Barryroe well was sent out recently, further underpinning the group’s resolve to drill the well,” the broker said.

Providence has drilled successfully at a number of Barryroe wells.


More in this Section

Is this the end for zero-hour contracts?

The European Union seeks tax rule action

Despite the ticking clock, some optimism over sterling

Tesco shares climb on green light for Booker deal


Breaking Stories

Brexit weighs on business sentiment

Lifestyle

A towering achievement: Exploring Irish castles and beautiful buildings

Books that belong on the gardener's bookshelf

The domestic flash of Francis Brennan

John Wilson touring with music made with Rory Gallagher in Taste

More From The Irish Examiner