Providence strikes water in Atlantic Ocean

The stock exchange announcements had been coming thick and fast of late from Providence Resources as it breathlessly updated the market on its great hope, the Druid prospect 220km out in the Atlantic Ocean, expected to hold almost four billion barrels of oil.

On June 28th we were told that the drillship IceMaxx, hired to drill an exploration well, had been “mobilised” from its base in Las Palmas, Gran Canaria, and was heading towards the site. Two weeks’ later an announcement went out that drilling had commenced, a day after the Government had given its consent to start.

Even though analysts attributed little or no value to the high-risk project, investors lapped it up, with the stock rising as much as 25 per cent during the period, to 18.75p, its highest since late 2015 – albeit helped by a rebound in oil prices off their June lows. Wall Street giant Goldman Sachs, which had appeared on the share register in March with a 3 per cent stake, hiked its position to more than 4 per cent on July 21st.

Then, on Friday morning, Providence dropped a bombshell, revealing that preliminary data had shown up not so much a dry hole but a reservoir full of water.

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The company, which had only been through a rescue $70 million fundraising a little over a year ago, saw its stock tank.

While Providence has another shot in the coming weeks, as it drills 1,000m below Druid to its Drombeg prospect, which it has claimed could hold 1.9 billion barrels of black gold, pressure is mounting again on chief executive Tony O’Reilly jnr.

"We feel focus needs to be placed on management's ability to create value from the company's other assets," said Dylan Simmonds, an analyst with Merrion Capital in Dublin.

First up Barryroe, a well off the south coast of Ireland with more than 300 million barrels of oil. After years of stop-and-start talks on finding a buyer for a stake in the project, now is surely time for Providence’s chief executive to deliver.

The company has an estimated €30 million in cash on its balance sheet, so Providence has negotiating power for the moment at least in any talks on Barryroe. But for how long?