Management at Lansdowne Oil and Gas has maintained the company still has a future, despite highly anticipated drilling at one of its assets in the Celtic Sea failing to find any commercial potential.
The Dublin-based exploration firm reported this week that drilling at the Midleton exploration well off the south coast had found some gas, but volumes were not considered commercial; which has resulted in the well being plugged and abandoned.
Lansdowne was a 20% stakeholder in the asset, with Kinsale Energy the operator and 80% majority shareholder taking on board 100% of the drilling costs. Kinsale Energy is the Irish subsidiary of Malaysian explorer Petronas.
This month’s Midleton drill marked the first new drilling work in Irish waters for two years. Drilling plans were only announced in June.
The poor result is a blow for the Irish oil and gas sector ahead of the pending closing date for acreage applications (though for prospects off the west coast) in the Government’s new licensing round.
For Lansdowne, the Midleton result makes the future even more uncertain than it was already.
The company recently reported a 32% widening in annual operating losses (to €1.8m) and, earlier this year, launched a strategic review of its business to include every option from asset farmouts and sales to a company merger or a complete sale of the business.
With oil prices below $50 per barrel and expected to remain depressed for months to come and merger and acquisition activity in the sector drying up, it’s difficult to see a positive outcome. However, the company is remaining bullish.
Lansdowne’s chief executive Steve Boldy yesterday said that management remains in talks with players regarding potential farmout deals on other assets and is looking at “a number of options”.
“The results from the Midleton exploration well are disappointing, but we retain substantial resources in the Celtic Sea,” he said.
The future of the company seems largely out of its own hands with Mr Boldy admitting that the main focus will now return to trying to successfully conclude farmout talks with a potential development partner for the highly-rated Barryroe field off the Cork coast.
With Lansdowne a junior partner, with a 20% stake in the asset; that task largely falls to 80% owner and operator Providence Resources.
Lansdowne’s share price plummeted by well over 30% on Thursday and was down another 17% yesterday.
“The target was deemed to be relatively low-risk, with good support from seismic amplitude effects.
“Midleton was also seen as the most attractive in the gas portfolio and, given that Lansdowne will be required to stick to the farm-out approach, it will likely struggle to get another one of its gas targets drilled in the current environment,” said Job Langbroek of Davy Stockbrokers.
Mr Langbroek said Barryroe looks the best immediate prospect for the company to boost shareholder value.
This week, the International Energy Agency suggested global oil markets are beginning to show signs of balancing, with demand rising and approaching a five-year high and supply falling.
However, it still expects the slump to be prolonged, with the supply overhang set to last through 2016. Brent crude was $49 to $50 a barrel yesterday.
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