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Two problems in 2014 for Providence were the share price crash and the court case with Transocean which O'Reilly kept quiet about for about two years.
In the drill for Barryroe in 2012 it was agreed that they would also do a sidetrack but the equipment from Transocean failed and they were unable to do it. This was a problem because the sidetrack would have proven if compartmentalisation existed or not.
There was a court case between Providence and Transocean in 2014 which Providence won but it was appealed and in 2016 the High Court found both were at fault and Providence had to raise capital to pay off its debts to Melody and to pay the cost the courts ordered them to pay Transocean.
So during that time there was no chance anybody was going to join Providence in drilling Barryroe. In fact, the suspicion was that the "dogs" were waiting to chew Providence up if it went bust.
That is not the situation now. Providence is "clean". No debt, no court cases and history has shown that the oil price may fall but it recovers and a possible oil price of $40 a barrel could be a godsend as it will totally kibosh American fracking which needs at least $50 a barrel and in some cases it is estimated at $70 a barrel. Producing 10m barrels a day at that level will kill huge numbers of them in short time and America will have to go back to importing oil and gas again.
So a good time for somebody to do a deal but perhaps not at the level of APEC. But then, any deal worth more than say 25p a share would be a bonus for most of us.
Hope to Jaysus ur wrong and potential partners take a long term view. This one has been a bit unlucky down the years ....I have to agree, to my cost.
Barryroe has been on the cusp of a glorious farmout more times than you could shake a stick at. I feel a repeat of 2014 coming on. All the stars aligning ... and then the oil price crashes. I think a hit on oil prices due to coronavirus is already baked into this year no matter what happens from here on. But it definitely has the potential to get much worse. The oil price tends to move with the general economic outlook even without the specific hit on transport and tourism that we are likely to see. Batten down the hatches ... I can see WTI in the 40s by the end of this week.
I don't think we are about to be diluted out of existence.
If Barryroe is developed, even people who bought a few years ago - including institutions at 25 p - should get a return.
New investors would obviously fare much better.
First of all corrections to PS200306 statements.
He talks about Providence share price. It was never "eight quid back in the day". The highest share price Providence reached was £6.65 on September 27th 2012 so it never got to £8.
Furthermore, he is totally misleading when he mentions his figure but he is also wrong if you accept £6.65 as the highest share price. At the time there were only 60m shares in Providence. There are now 600M which means, prorata, the highest share price, based on 600m shares was 66.5p.
Regarding the schematic mentioned, here it is
https://www.bing.com/images/search?view=detailV2&ccid=aBweoT5T&id=FCE85B0B5CD69624A4F272BE2214BC420E7F3998&thid=OIF.kA8GDew5T4hGAULta6rHVQ&mediaurl=https%3a%2f%2fimg.offshore-mag.com%2ffiles%2fbase%2febm%2fos%2fimage%2f2020%2f02%2fbarryroe.5e4ec49012d8b.png%3fauto%3dformat%26fit%3dmax%26w%3d1200&exph=659&expw=946&q=providence+resources&simid=77618977478&selectedIndex=17&ajaxhist=0
Regarding the oil and the gas, the statement re the discovery in 2012 stated that "WELL FLOWS AT A STABILISED RATE OF 3,514 BOPD & 2.93 MMSCFGD (4,000 BOEPD)" So you see a combination of oil and gas. If you check the above diagram this came out of well 48/24-10z and you will note it only went through two strata.
Compare that to the proposed wells, and you will see that 48/24-1 and 48/28-1 also go through the Middle Wealden Sands as well where is projected there are far more oil than in the current of Barryroe itself.
Finally, I note a headline from Sunday Business Post which is quit influential in Ireland as it covers the business of the week where it says "Cash-strapped exploration company is ‘considering its funding options’ but says site has considerable gas reserves".
https://www.businesspost.ie/energy/providence-resources-seeks-new-permit-for-third-drill-site-at-barryroe-prospect-ea684ebd
And PS200306 thinks the gas is too small and irrelevant to be worth developing. Tell that to Linn, Plunkett and McCoss.
Quick drive by ....
JH77 >>> "Mr.P20. You're a guy who obviously knows his stuff."
No, don't mistake me for that. I have a completely layperson's interest. There are people knocking around some of these boards with actual oil industry experience. I just took an interest in oil back around 2000 when the Peak Oil people were doom mongering and people were loading up on beans and shotgun cartridges because of imminent civilisational collapse. Ended up reading enough about oil extraction that I at least have an idea what to Google when a question comes up... or to realise when it's way above my pay grade.
LW >>> "Are these the two deeper levels?"
There's a useful schematic knocking about somewhere of the different levels that have been hit by previous drills and how it all hangs together. I'll see if I can remember where to find it.
LW >>> "If all of that were produced, the income would be huge."
As I've said before, there's a reason why the share price was eight quid back in the day. The potential value of Barryroe is frackin' monumental and then some! Unfortunately that's no guarantee they'll ever get it out of the ground. And even if they do, it could be after current shareholders are decimated/diluted out of existence. After eight years the optimism is wearing thin.
Do people think LOGP statement of aim to have deal of some sort to be put together within 6 months is realistic?
I'm wondering if now is the right time to "back up the truck...load up ...and fill me boots"...trouble is that after all these years me boots have got holes in the soles! Like me auld bank account!
What makes you think I'm upset when I receive polite replies (unlike on some other share BBs)?
Of course, I meant get the oil out of the ground and the project off the ground.
But I don't mind which way they do it, provided they get a move on.
If they announce a deal - even if only for the gas - I will buy more shares.
Chances are they will still be ridiculously cheap compared with the assets.
LW, I think you mean out of the ground not off the ground! Just kidding, so don't get upset!
That means ninety percent probability of 456 mboe recoverable, in addition to 346 mboe recoverable at a higher level.
If all of that were produced, the income would be huge.
If they could sort out something with the gas, maybe the bigger project would follow.
They just have to get this off the ground.
Yes!
'Further incremental resource potential has also been identified in logged hydrocarbon bearing intervals within stacked Lower Wealden and Purbeckian sandstones, which the Company estimates contain total associated P90, P50 & P10 in place oil resources of 456 MMBO, 778 MMBO and 1,165 MMBO, respectively.'
Are these the two deeper levels?
Point of information. Seven heads gas does not come ashore in Whiddy. The landfall for the shore pipeline is at Inch processing facility. Check out the diagrams of the existing infrastructure.
Mr.P20. You're a guy who obviously knows his stuff. If I'm reading it correctly, it would be foolish to extract the gas first, better to leave it until all the oil has been extracted? Assuming they find some!
Obviously the long term is for oil in Barryroe to be developed but in the meantime the gas play stymies those "greens" and "lefties" in Ireland - such as Brid Smith who is now gungho since her re-election - but who cannot preclude gas because they don't like "fracked" nor do they like the proposed LNG terminal in Shannon and importing it from Britain post Brexit could be expensive. And, by the way, a large percentage of British gas which comes on to Ireland is actually coming from Norway through the UK using the Langeland pipeline and they are working on an electric connection between the two countries as well.
Yes, the gas is intermixed with the oil but this happens all the time in oil fields where "flaring" has been used to remove the gas, but is to be banned by 2030, and keep the oil. But where you want to keep both you use a "separator" which sorts the oil, gas and water into its components.
For those long in the tooth you will remember that in 2011 O'Reilly signed an MOA with Shell - "In 2011, Providence entered into a MOA with Shell Trading and Marketing to agree an oil off-take agreement for future Barryroe oil production." So, when both oil and gas come up the separator can sort out the water, oil and gas, offloading the oil to tankers.
This, of course, would be for starters as later on I am sure they can then lay pipes into Whitegate Refinery, once owned by the State along with Whiddy Island where the Kinsale gas comes ashore but Whitegate is now owned by the Irving Family of Canada. It can handle up to 75,000 barrels of oil a day but will probably need to be overhauled.
The beauty of this plan is that the Brid Smith(s) of this potentially socialist country could not have a leg to stand on. So start with the gas and move on to the oil and listen to Brid scream.
And finally for those again long in the tooth they might remember that in 2013 Fastnet reckoned there was another "Barryroe" under the Kinsale Head gas field and signed a farm-in deal with LSE Kinsale to check it out. Unfortunately for Fastnet they decided to stop oil exploration when they were taken over by Amryt Pharma in 2016 in a reverse takeover which turned Fastnet into a shell and gave Amryt Pharma access to AIM and the Fastnet deal with Kinsale fell by the wayside so that deal is potentially there for grabs with the potential of another Barryroe under Kinsale Head.
https://www.businesspost.ie/legacy/fastnet-sees-another-barryroe-beneath-kinsale-field-96cf8289
Again, people are imagining the naive drinking straw model. If you want to get oil out of the ground it has to be pressurised which can occur either naturally or artificially. In addition to hydrostatic pressure there may be a water drive from below, a gas cap drive from above, or artificial injection. A gas cap will form in an updip if the oil pressure is lower than the bubble point pressure. This gas cap represents FREE ENERGY for well pressurisation. There is also gas in solution in the oil which will separate out when the oil is extracted. You have to do something with this, which is often to inject it back down into the gas cap to maintain pressure. Remember, the oil is worth four times as much as the gas and artificial well pressurisation is going to cost you money eventually. Why, then, would you get rid of the gas cap that nature has provided? The quantity of the gas, the market for it, and the possibly free Kinsale infrastructure MIGHT make a difference ... and then again it might not. It's not something that armchair oil experts are going to figure out. And I suspect the Providence bosses don't know in advance either as they haven't told us about any detailed reanalysis.
'Providence Resources is assessing the potential for a carbon neutral gas development as an option for the Barryroe field.'
Doesn't that mean a separate gas extraction project?
They're hardly going to leave it in the ground if they find any. It would be madness. IMO
Are we talking about a project to extract just gas - no oil?
While I previously claimed Manyana had a mental illness, I actually agree with him on the gas. The gas is much cheaper to obtain , with infrastructure already there it seems like there could be decent upside. There is a good chance a big partner will see this too.
The reason why gas is cheaper is because it is cheaper to produce. And production costs not only cover "out of the ground" but also includes the cost of developing the infrastructure to produce it. So if gas is cheaper then it is far cheaper to produce and when you look at gas and Barryroe the price of production is totally minimal because all the infrastructure is already there.
After all "fracked oil" in America is far more expensive that the market price which means America will soon stop "fracking" unless the price of oil increases substantially.
Look at Corrib. Mooted to cost €800m it ended up costing €3.5billion got 1 trillion cubic feet and when Shell sold it on to Vermillin, it lost its shirt on development costs. So on a pro rata basis Providence in Barryroe with 210billion should cost 1/5 to develop giving a price of no more than €50 because the expensive part, the platforms, the wellheads, the 150km of pipe, the Whiddy storage facility are "free" because they are already there and since they are obsolete to Kinsale they must either decommission them at vast cost, give them to Providence or join Providence in a joint eventure along the lines of the proposed drilling of OPL 1 on a 60/40% basis which, like many of O'Reilly's schemes is now defunct.
So, the only thing Providence has to do is to drill down for the gas and tie it into the nearest Seven Heads junction which is 3km (1.9m) away, or to drill down the current wells below the 4,000 ft line which is where Barryroe starts or even drill sidetracks.
Currently it is estimated that American fracked oil is costing about $70 a barrel and many of the American "frackers" are in the red when the price of oil is below that. And according to reports it is getting worse but is being supported by the American government 'til, probably, after the election in November.
"Normal" oil is estimated to be costing about $50 a barrel, even though O'Reilly talked about a price of $25 a barrel to develop Barryroe. Obviously since it is in such shallow water that is an advantage but it is $25 more than it costs to produce a "barrel" of gas out of Barryroe because those costs have already been paid for by Kinsale.
So, lets start comparing apples with apples and not apples with figs that seem to be crawling out of somebody's crazy imagination, and it is not mine.
I don't think it could be done any other way, LW, as the prices of oil and gas do not move in sync. The reason for international benchmarks for oil is that it is relatively easily transportable for a small fraction of the energy value of the oil, and it is therefore considered a "fungible" commodity. Gas markets are more regional and infrastructure-dependent. LNG is changing that to some extent, as countries like Qatar and Australia have more gas than they know what to do with. But LNG tankers are specialised double-hulled vessels and so far they are outnumbered by crude oil tankers by well over ten to one. LNG imports are typically double the price of domestic gas carried by pipeline. Nevertheless they are growing and work well in markets like the UK where North Sea production is waning, or China which is trying to avoid dirtier coal.
Thanks, ps.
In that case, applying 'boe' to gas, which is standard practice, is rather misleading.
I'm sure that most people who have read that BR is believed to contain 346 mmboe have thought that each 'barrel' is worth the same amount.
Correct, LW. "Barrel of oil equivalent" refers to energy content. The conversion to natural gas is 1 boe = 5.8 mcf (thousand cubic feet). Currently the US spot price for gas is $1.90 per mcf. Over the last five years it has averaged around $2.50. That means a boe of natural gas is worth $10-12, less than a quarter of the price of oil. It reflects the abundance of gas resources, and the difficulty of transporting gas in the same way as oil. Gas prices are higher in Europe, but so are oil prices. It's impossible to be completely scientific, but the 10% of Barryroe energy that might come in the form of natural gas is worth 2.5% of the total resource value.
The reason why it is worth going for is because it is so cheap to develop. Surely the cheapest option would be to deepen the current wellheads to below the 4,000 ft line which delineates Seven Heads from Barryroe. Now surely that cannot cost more than say $10m. After all, Seven Heads when it was developed as a gas field was put in place in about nine months so surely a quick kill would be to check if there was more gas down there. And given that they now think Barryroe could be a giant gas field with an oil ring it is surely worth exploring.
Kinsale have a number of choices. Join up with Providence to develop it, pass the infrastructure to Providence to develop it with a third party for zero cost or, finally walk away just abandoning it after spending millions on decommissioning it and when you consider they have to lay rocks on 150km of pipe and well as recreate Whiddy storage into farmland, plug all the well heads, remove the two platforms by dismantling them and shifting them out to be recycled.
There was no point in Providence getting involved with Kinsale before now because they would have had to see what Kinsale were going to do to decommission it and get the necessary approvals from DCCAE.
And given that last Friday was the last day for objections to the latest site survey by Providence "This application was posted on the Department's website on 22 January 2020 and any submission received by close of business on 21 February 2020 will be considered by the Minister. " we should know soon enough if that is going ahead.
One point of note, when Providence did the surveys last September it cost $500k which means Lansdowne, with its 20% should have paid $100k for that and I wonder if it is going to pay its share of the next one when it gets approved? I don't see any reference in the Lansdowne accounts for this so perhaps Providence is carrying them.