Skip to main content

Providence Resources in talks with Shell over future production from Celtic Sea

Jamie Ashcroft - ProActive Investors

Providence Resources (LON:PVR) told investors that it has signed a preliminary agreement with Shell (LON:RDSB) regarding the Barryroe and Hook Head oil discoveries offshore Ireland.

It is now negotiating the terms of an off-take deal to sell the future production to the major international oil company.

Barryroe, which lies directly below the Seven Heads gas field, is thought to host between 373 and 893 million barrels of oil-in-place (P90 - P10). Meanwhile the latest estimates for Hook Head, which was originally discovered in the early seventies, put oil-in-place of up to 120 million barrels.

Providence has a 50 percent stake in Barryroe - alongside San Leon Energy (LON:SLE) and Lansdowne Oil & Gas (LON:LOGP)- and it has a 72.5 percent stake in Hook Head, with privately held partners Atlantic Petroleum (18.5 percent) and Sosina Exploration (9 percent) owning the remaining equity.

Werner Riding, oil and gas analyst at Ambrian Capital, reckons the deal is a sign that things are about to pick up in the Celtic Sea.

“This morning’s agreement between Providence and Shell regarding the negotiation of an oil off-take contract for Barryroe and Hookhead crudes we suggest represents the initial foundations being laid for a more active phase of development in the North Celtic Basin,” Riding said.

The analyst ascribes 30 pence per share for both assets. Riding rates Providence as a ‘buy’ with an 890 pence target, which implies a massive 249 percent upside to its current price of 255 pence a share.

Meanwhile Dublin-based broker Davy also featured the stock as part of its morning note to clients.

“Both Barryroe and Hook Head are former discoveries that will be re-drilled or re-entered this year by Providence Resources. The oil in the reservoirs is waxy and light in the case of Barryroe and waxy and mid gravity in the case of Hook Head,” said Davy analyst Job Lanbroek. 

“The presence of Shell will facilitate in the marketing of these crudes.”

Langbroek adds: “Providence intends to conduct a comprehensive drilling programme around offshore Ireland in the next two years. This effort will include the drilling of a well on the Barryroe oil discovery ... and a short radius side track from the former 50/11-3 well on the Hook Head structure.”