Providence hopeful of more deals after landing partner

Tony O Reilly: Ireland is 'on the agenda of a lot of companies.'

Providence Resources and Europa Oil and Gas – two of the most active exploration companies in Irish waters – are confident of further deal activity after both landing development partners for assets they hold off the west coast of the country.

Scottish explorer Cairn Energy – through its Irish subsidiary Capricorn – has agreed to farm into assets held by both companies, who have been trying to attract development partners for some time.

Cairn will take a 30% stake in Frontier Licence 2/14 held by Providence in the southern Porcupine Basin. This licence holds the Druid prospect Providence is committed to drilling at in June, as well as the neighbouring Drombeg prospect.

It means that both prospects will be drilled in the summer – rather than just the one – meaning five billion barrels, rather than 3.2 billion will be drilled for.

As previously indicated, the cost of drilling both will be $50m, but 45% of that will now be covered by Cairn/Capricorn. Providence will pay for 80% of the remainder and will hold a 56% stake in the asset, with London-based partner Sosina holding 14%.

Providence boss Tony O’Reilly Jnr said the company followed through with its promise of farming down the asset. While he didn’t mention other assets where Providence is looking for partners – chiefly Spanish Point and Barryroe – he said the economic climate for exploration firms is good and people are investing in assets, adding Ireland is “on the agenda of a lot of companies.”

He added that Providence remains happy with the level of interaction it is having with potential farm-in partners for other assets.

Meanwhile, Cairn has also agreed to buy a 70% stake in one of the licences held by UK explorer Europa Oil and Gas in the south Porcupine Basin. The agreement will see Capricorn fund a $6m (€5.7m) work programme ahead of drilling decisions being taken sometime next year.

Europa will retain a 30% stake in the asset. Europa has seven licences off the west coast – holding an estimated combined four billion barrels of oil equivalent. It is actively looking for development partners for three more of them.

Europa chief executive Hugh Mackay said he is confident of getting more farm-outs away this year and yesterday’s activity should create a sense of urgency amongst investors interested in Irish waters.

Meanwhile, the UK government – in its spring Budget – yesterday said it will consider changing tax rules in order to make it easier to sell North Sea oil and gas fields by helping to keep them producing for longer.


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