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Share Price: 17p
Market Cap: 102m
3 Reasons to Put Providence Resources on your Watchlist [Update]
1. The Spud Effect
In 4 months time Providence Resources (PVR) will start drilling their Druid Oil Prospect, located in the southern Porcupine Basin, off the south west coast of Ireland.
This is known as, “Spudding”. I’ve written about the spud effect (you can read it by clicking here) in my last blog post on Providence Resources.
Generally speaking, you can expect the share price of an oil and gas exploration company to rise, the closer it gets to the spud date.
Providence’s share price, at 17p, has already made a bit of a move from it’s lows of 9.3p. I’m 50% up on this investment but it currently seems to be consolidating. There’s no telling when the share price will start to move north again but given that oil prices seem to be stabilising above $50 and time is counting down towards the drill, I’d say now is probably good time to do some research on the Providence Resources before it does starts to make this move.
Druid is a BIG resource and any whiff of success on this drill will result in a serious re-rating of their share price BUT it’s the expectation on them achieving success on this drill, which will make the share price move, initially.
Druid is just one of several licenes Providence Resources hold offshore Ireland.
Druid possesses cumulative in-place un-risked prospective resources of 3.18 billion barrels of oil (PMean, which is the expected average value or risk-weighted average of all possible outcomes). As Providence own 80%, net to them is 2.544 billion barrels of oil.
There maybe significant news released before this drill. Even though they possess the finances to drill Druid on their own, Providence are in farm in talks for this asset and their Barryroe asset.
The Company holds an 80.0% working interest in SEL 1/11 which contains the Barryroe oil field. The licence is adjacent to the PETRONAS operated Kinsale Head gas field.
In the past, under different operators, five wells were successfully drilled on Barryroe. All of these wells successfully logged hydrocarbon-bearing reservoirs with three successfully flowing oil to surface.
In 2011, having acquired new 3D seismic over the field, the Company drilled a sixth well on this areally extensive field. In March 2012, the Barryroe partners announced the flow rates from this well, results which far exceeded pre-drill expectations with oil rates in excess of 3,500 BOPD from a 7-metre vertical section of reservoir.
Post-well analysis, in conjunction with the new 3D seismic data set, led to a substantial upgrade in the field size to over 1 billion barrels in place (2C). Subsequent work on multiple development concepts, together with detailed engineering studies on recovery factors, led to estimated 2C recoverable resources of over 300 million barrels of oil from the two main tested reservoir intervals.
Providence Resources have the largest licence holding, in Ireland’s Atlantic margin and quite a few of these oil fields have the potential to be world class producing assets.
Providence are fully funded to drill the first of these, Druid, in June of this year.
The share price is currently in consolidation mode but should start to rise again the closer we get to this spud, especially if they announce positive news regarding farm ins for this or Barryroe beforehand.
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The content of this podcast (or content associated with it) is not intended as investment advice and people featured may hold positions in the companies they talk about. Please do you own research.