Providence Resources has hit a second major setback in the Porcupine Basin after summer drilling at the Drombeg well 220km off shore failed to hit oil and has been abandoned. The shares, which had one stage plunged by a third, ended the session 16.5% lower.
Chief executive Tony O’Reilly acknowledged “disappointment”, but cost-sharing at the failed well will help cushion the financial effects for Providence, as Cairn Energy and Total have shouldered a significant part of the drilling costs. For investors, the setback puts the focus back on Providence’s main prospect at Barryroe, in the North Celtic Sea Basin, where drilling could take place next year or in early 2019.
Analysts said that the failed programme turns the spotlight on the drilling plans.
“The drilling results significantly increase the pressure on the management team, as their ability to create value for shareholders is yet again at the forefront for investors.
“The importance of generating a return from Barryroe cannot be understated and we await to see management’s strategy over the coming weeks,” said Dylan Simmonds at Merrion Capital. Davy said: “The onus now shifts back to Barryroe”. The broker estimated Providence should nonetheless have about $30m (€25m) for any drilling programme next year.
“The latest indication is that an appraisal well will be drilled next year. To this end, a statement of interest with respect to tendering for the drilling of the 2018 Barryroe well was sent out recently, further underpinning the group’s resolve to drill the well,” the broker said.
Providence has drilled successfully at a number of Barryroe wells.
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