Investors punish Providence after drilling disappointment

Providence Resources's share price was halved yesterday following an announcement that drilling results from its Celtic Sea oil and gas prospect were inconclusive.

The Dublin-listed company, in which Sir Anthony O'Reilly has a 45.4 per cent stake, said yesterday it had completed drilling in the southern section of its Blackrock exploration block, off the south coast.

In a statement, Providence said that data it obtained from the well, called IRL49/26-1A, indicated that the central and northern areas of the block were likely to be more productive. Providence has a 41.5 per cent interest in the block, which it said last year could potentially produce 600 million barrels of oil.

The drilling exercise discovered a major fault that partly isolates the southern section of the block. The company said it considered that the fault exercised regional control on hydrocarbon development and migration.

Providence said preliminary interpretation of the information suggested that at least one further well would be required to assess the potential of Blackrock to the north of IRL49/26-1A.

"While an immediate second well has been considered, it has been decided to fully evaluate the current well results in order to better optimise the forward programme and location of future wells on the Blackrock structure," a statement said.

Commenting on the results, Providence chairman Dr Brian Hillery said, "while the well results are inconclusive and require further evaluation, it is known that large structures such as Blackrock require a number of wells to determine commerciality". He added that the company believed Blackrock had significant potential.

However, market sources yesterday described the results as disappointing and investors reacted by selling Providence shares in Dublin. Over 20 million shares were sold and the stock closed at two cents, a 50 per cent fall on its opening quote of four cents. Less than two weeks ago, Providence dropped from six cents to four cents after 10 million shares changed hands.

Two months ago, Providence raised €10 million through an institutional placing that valued the stock at three cents a share. The placing was designed to pay for the Blackrock drilling project.