Providence oil prospect may hold 12bn barrels

An assessment of one of the Irish exploration prospects in which French oil ‘super-major’ Total has invested has returned an initial resource estimate of around 12bn barrels of oil equivalent.

Irish explorer Providence Resources last month sold a 50% working interest in the Avalon prospect off the west coast to Total E&P Ireland, the French oil major’s Irish subsidiary. Scottish firm Cairn Energy has also agreed a 20% stake option at Avalon, with Providence’s interest set to fall from 40% to 24%.

Both Total and Cairn have also invested in Providence’s Druid-Drombeg prospect, also off the west coast, which holds an estimated 5bn barrels and at which drilling activity began last week.

Despite being up nearly 7% since the turn of the year, the latest news did little to help Providence’s share price, with it falling 4.6% in Dublin yesterday. However, Davy Stockbrokers’ resources team of Job Langbroek and Caren Crowley said the Avalon update should be seen as merely an early stage assessment of the licence.

“We believe the resources scale is not really the most relevant take-away; instead, the update should be seen as an indicator of the breadth of Providence’s presence along the western margin and the optionality that provides.

“The real point to take away from the news is that Providence has a suite of targets and that this is not just a Druid/Drombeg story,” they said.

Providence’s technical director John O’Sullivan said the resource estimate confirms the company’s view “as to the significant hydrocarbon resource potential of the Avalon prospect”.

Avalon and Druid/Drombeg are the first two of five assets Providence is aiming to farm-out to development partners.

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