The Dublin-based exploration firm said yesterday that a drilling proposal “from an alliance of contractors, under a risk-sharing cost model” is under consideration.
It added that the alliance includes a major rig operator, drilling management and a well-service company.
It also estimated the cost of such a project to be at £16m (€21m) — roughly half of what it would have been when oil was $100 a barrel in mid-2014.
Ultimately, Providence said it remains confident of achieving farm-out deals for its two largest assets, despite ongoing market uncertainty.
In an update regarding its Celtic Sea asset portfolio, the company said that farm-out discussions on Barryroe are continuing and that new data has broadened the highly-anticipated asset’s potential appeal from an oil prospect to a dual oil/gas play.
The fresh data has highlighted “significant productivity and resource potential” in the eastern portion of Barryroe, where it intersects an oil prospecting licence (OPL) partially-controlled by Petronas-owned Kinsale Energy.
Providence also owns 60% of that OPL and could avail of development synergies with Kinsale Energy, which has existing gas production infrastructure at its disposal.
Four firms are understood to still be in the frame to partner Providence on Barryroe.
The company’s technical director John O’Sullivan said that each party remains interested and engaged on a technical level but are slow to move, commercially, due to the volatile oil price environment; suggesting some sustained levelling or recovery in prices could prompt a deal.
Providence will also launch a farm-out process, next month, for its ‘Silverback’ prospect in the south Celtic Sea Basin.
A high risk/high reward target, currently 100% owned by Providence, the prospect is in an undrilled basin but is viewed as an attractive asset.
Outside of the Celtic Sea, Providence is still working at nailing down a farm-out for its near 60% stake in acreage it co-owns with Scottish explorer, Cairn Energy, at Spanish Point off the west coast. In order for planned appraisal drilling to take place next year, Providence needs to agree a farm-out deal by this summer.
Mr O’Sullivan said that remains the target and that financially capable parties are interested.
Elsewhere, Tullow Oil saw its share price fall by nearly 11%, at one stage yesterday, after it identified “a potential issue” with a production vessel being used at its key asset, the Jubilee field off the coast of Ghana.
In a brief statement, Tullow said that a recent inspection of the turret area of the Jubilee Floating Production Storage and Offtake vessel (FPSO), by the turret maker, SOFEC found the issue with the turret bearing.
“As a precautionary measure, additional operating procedures to monitor the turret bearing and reduce the degree of rotation of the vessel are being put in place,” Tullow said.
Commentators suggested the vessel may require maintenance and could lead to a suspension of production.
However, Tullow said that it will be working with SOFEC to determine what further measures will be required; adding that oil production and gas export is continuing as normal.
Tullow is gearing up for first oil flow from its much-anticipated TEN oil field, also off the coast of Ghana, during the summer.
That project will boost the company’s production from western African assets to 100,000 barrels of oil per day by next year.
Meanwhile, Petroceltic International — which is in the midst of a strategic review, expected to lead to the sale of the company— has completed the sale of its Egyptian exploration assets to US utility group, Edison International, which already partners the Irish company in Egypt.
The two firms first announced their sale agreement in December. Edison is buying Petroceltic’s shares of three Egyptian licences for a total cash consideration of $9.5m.
Petroceltic has said, since early last year, that its main focus would increasingly be on the development of the Ain Tsila gas field in Algeria.
Oil, yesterday, pared gains after a government report showed US crude inventories advanced to an 86-year high as imports surged.
Crude stockpiles rose 2.15m barrels to 504.1m last week, according to the Energy Information Administration.
Imports climbed 11%, the biggest gain since April. Prices climbed earlier (Brent was trading around $35 per barrel) as Iran cautiously supported a proposal by Saudi Arabia and Russia to freeze production at near-record levels.
However, Norway’s central bank governor stepped up his warning on excessive use of the nation’s oil income as he predicted the government may need to withdraw almost $10bn from its massive wealth fund this year.