If someone said, “let’s look for oil off the Irish coast”, you’d think they were mad.
Unlike the North Sea, the Irish Sea has no oil operations, meaning Ireland relies solely on imports for its energy.
But tiddly explorer Providence Resources plans to change all that.
The company says there are 350 million barrels in the Barryroe oilfield, just off Cork’s coast, making it one of the largest undeveloped discoveries in the region. The average finds in the North Sea now usually ranges from 50 million to 100 million barrels. And the field’s daily output could reach 100,000 barrels of the 140,000 barrels Ireland uses each day.
The trouble for Providence has been finding the finance to drill and refine the oil, but in March the company announced that China’s APEC had coughed up.
Under the deal, APEC takes a 50% stake in the project and will provide £250 million in early exploration costs. Should everything go according to plan the company believes it could start putting a rig in place by the second quarter next year.
So excited has the City become about the company’s prospects that Mirabaud analyst James Midgley has slapped a 50p target price on the shares which are presently 17.5p.
He said: “At under 20p per share, Providence shares are clearly trading at a substantial discount to where we consider fair value.
“Though we expect shares to trend towards the 100p to 140p-per-share mark, realistically we consider this a medium-term objective. Any progress in readying prospects for drilling could see the share price, and our target price, upgraded accordingly.”
The deal with the Chinese could not be better timed as oil prices have hit their highest levels for four years.
Chief executive Tony O’Reilly said: “It’s now a good time to invest in oil. Prices have gone up but costs haven’t. There’s been massive underinvestment and undersupply.”
O’Reilly added that the company had also been given all the necessary consents and permissions by the Irish government to allow drilling. Ireland has notoriously strict energy legislation, and it also performed checks on APEC as an overseas investor. The firm has beefed up its team, last week hiring industry veteran Angus McCoss, who has worked at Tullow and Shell in Africa.
Everything appears to be in place: now Providence must deliver.
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