Providence under pressure after Porcupine failure
Friday, Aug 11, 2017
Irish explorer Providence Resources is under pressure after its long-awaited drilling of the Druid prospect in FEL 2/14 the southern Porcupine Basin encountered a water-bearing reservoir.

Providence said on August 4 that probe 53/6-1 drilled with the StenaIceMAX rig had reached Druid as anticipated at a target depth of around 1,750 metres. However, early petrophysical analysis of logging data showed that it was a porous water-bearing reservoir.

Providence owns a 56% operative stake in FEL 2/14, with Sosina Exploration holding 14% and new partner Cairn Energy controlling a 30% interest after it purchased a stake in March.

Druid was the first of two prospects Providence’s 53/6-1 well was targeting, with operations now poised to target Drombeg around 1,000 metres deeper.

Pre-drill estimates indicated Druid and Drombeg held as much as 3.18 billion barrels and 1.915 billion barrels of oil respectively. As such, 64% of the area’s pre-drill resource base has now evaporated.

The news deals a heavy blow to Providence, whose momentum had grown alongside the improved sentiment surrounding Irish offshore drilling since a record-breaking licence round in 2015-2016.

Majors have rekindled their interest by conducting Irish seismic shoots in anticipation of higher oil prices, probing a region less explored than its North Atlantic neighbours in the UK and Norway.

Providence’s Irish portfolio was estimated to hold 300 million boe of 2C contingent resources, and the firm secured farm-out and option agreements with Cairn and Total respectively earlier this year.

It must now prove hydrocarbons in the deeper Drombeg reservoir or concede that its first major target since the industry crash is a failure.
However, outside investment has allowed Providence to fund its US$50 million exploration probe without eating into its cash stocks of around 31.4 million euros (US$36.9 million).

Cairn paid US$2.8 million upfront to take its 30% position in FEL 2/14 from Providence and Sosina Exploration. It also agreed to carry 45% of the drilling costs for the well, up to a cap of around US$42 million.

Total, meanwhile, is committed to paying US$27 million for its option on FEL 2/14, including US$20.25 million that was split between Providence and Sosina during June. The French super-major will pay another US$6.75 million once probe 53/6-1 is plugged and abandoned.

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