Providence farms out 25% stake in Celtic Sea discovery

PROVIDENCE Resources has farmed out an initial 25% stake in its Nemo “heavy oil” discovery in the Celtic Sea to London-based company Nautical, with an option for the British company to increase that share to 65% and assume operator status, by the end of next year.

In return for the initial stake Nautical will fund and undertake a focused work programme on the development feasibility of the Nemo discovery, of which Providence currently controls 72.5%.

Nautical is rapidly becoming one of the leading “heavy oil” producers in western Europe and owns 40% of Providence’s total Baltimore heavy oil discovery in the Celtic Sea.

Heavy oil is defined as crude oil which doesn’t flow as freely as lighter oil, due to its density.

At the end of last week, Providence announced that it had discovered a significant gas prospect off the Cork coast which forms part of the Baltimore discovery.

The Nemo discovery forms part of the Ardmore gas accumulation. If Nautical exercises its full option, Providence will be left with a 25.3% stake in the asset, with Sosina Exploration and Atlantic Petroleum the other partners.

Providence’s chief executive Tony O’Reilly Jnr said that the company’s work with Nautical “will help unlock the potential of the Nemo discovery and other heavy oil discoveries in the Celtic Sea”.

Analyst reaction was also upbeat yesterday with the feeling being that the latest deal with Nautical is practical for Providence to progress its portfolio of assets without incurring large operational costs.

“With nearly 30 years of experience, Providence knows the Celtic Sea better than any other company. The deal reflects Providence’s efforts to eke value from the Celtic Sea. A higher oil price scenario enables the development of previously sub-commercial heavy oil accumulations that wouldn’t have been considered,” said Job Langbroek of Davy Stockbrokers.