Providence says Barryroe oil field could be four times bigger than first estimated

The Barryroe oil field could be four times larger than initially thought and contain anything between 1bn and 1.6bn barrels of oil.

The results of the much-anticipated “oil-in-place” survey, published yesterday, were even better than Providence Resources expected. The company owns 80% of the field, which lies 50km off the Cork coast in the Celtic Sea.

The company will now map newly prospective zones that the survey has outlined to gauge how much oil can be retrieved.

It is thought 35% to 40% of oil will be recoverable from Barryroe. That figure depends on how many wells are drilled and how much money is spent. Some analysts are still, however, assuming a smaller percentage — around 16%, but London-based brokerage Liberum Capital has raised its estimate for recoverable amounts from 160m barrels to 200m.

Providence plans to halve its stakeholding in Barryroe to 40% by selling that percentage to a development partner in order to soak up some of the development costs, which are likely to amount to several billion euro.

It is also likely to take anything between one and five years to start bringing oil ashore from Barryroe.

In terms of a timeline for Providence farming down its Barryroe stake, the company has previously suggested a window towards the end of this year, or the beginning of 2013.

Chief executive Tony O’Reilly Jr recently said early interest has been shown by rival operators, but no serious talks have taken place. Speaking yesterday, Mr O’Reilly did suggest the process could speed up on the back of the results.

“It is clear from these studies that Barryroe is a substantial oil accumulation across multiple stacked horizons, with much running room for further resource growth,” he said.

Providence said it will provide an additional resource update relating to recoverable reserves later in the year, with analysts suggesting those figures could be announced by October.

“The announcement is a very important step in the commercialisation of the Barryroe prospect. The next phase will determine how much oil can be recovered,” noted Job Langbroek, exploration analyst with Davy Stockbrokers.

Investor reaction to Providence’s news was rather muted, however. After an initial rise of 8%, the share price only closed the day up by 0.77% at €8.41.

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