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Seven Heads *as it is defined today* contains no oil. None. Not a single drop. What Esso and Marathon drilled was what is *today* called Barryroe. It's really quite simple for anyone with two brain cells to rub together.

Barryroe gas is commercial. Barryroe oil is commercial. You can't take one without the other. That's expensive. You can't just use existing infrastructure. You need a ton of money to exploit the oil and gas. Providence doesn't have a ton of money. It is in a weak negotiating position. That's also pretty clear to anyone who isn't hard of understanding.

There was never any oil in what is today called Seven Heads. The oil potential was always in the Lower Cretaceous sands, what is now usually referred to as the Lower and Basal Wealden. The Barryroe exploration license was created specifically for the sub-4000 foot zone below Seven Heads, and later extended twice to include further acreage. Ramco sold their interests in "Seven Heads oil" to Island Oil and Gas, and Island along with Lansdowne and Providence became the holders of the Barryroe license. The Upper Wealden sands of Seven Heads contain gas, negligible amounts of condensate, and no oil.

The myth that developing Barryroe is just a matter of plugging into existing gas infrastructure is wishful thinking. Sure, it is "merely" a matter of separating oil and gas, but that belies the scale of a monumentally expensive undertaking. It needs an FPSO (floating production, storage and offloading) vessel. Barryroe needs one with heated tanks as the pour point of its oil is somewhere between warm and hot bathwater. Those are billion dollar ships. Back in 2009 when an evaluation was done for Lansdowne by RPS Energy, the lease cost of an FPSO was $80 million per year. That's after you've done all your drilling -- eventually, depending on reservoir connectivity, up to twenty production wells at $30m each. A well head production platform adds another $150m. That's not all up front and, of course, the oil is eventually paying for all this. And rates may well be cheaper in 2020 than in 2009. But somebody still has to stump up a stonking, eye-poppingly huge sum of money to get the process going.

Barryroe also comes with considerable technical risk on top of the political risk and an unfavourable short term economic outlook. We'd all love to see it being developed. But it would be unwise to think there are company's tripping over each other to risk their money on it.

Sir Nige, I'd say that's exactly what's going on. It's greenwashing. Here's some sobering numbers about the relative size of the Barryroe gas content...

Ireland's total primary energy usage is 15 mtoe (2017 figures from SEAI, mtoe = million tons of oil equivalent). That divides fairly evenly into one third each for transport, heating and electricity generation. 90% of our primary energy comes from fossil fuels -- 50% oil, 30% natural gas, 10% coal and peat. 9% comes from renewables and 1% from non-renewable wastes.

The 30% of our primary energy from gas equates to 4.315 mtoe. In other units that is 31.6 mboe (million barrels of oil equivalent) or 171 bcf (billion standard cubic foot of gas). If you remember the Barryroe numbers, that's 90% of the total gas estimate (34 mboe). Barryroe contains just about one year's worth of Irish gas consumption.

Barryroe has only one tenth of the gas that has been produced from the Kinsale area fields. Or another of putting it is that Kinsale had the same amount of energy as Barryroe, but the latter is nine tenths oil. If Barryroe is developed and produces over a lifespan of 20 years, it will supply only 5% of Ireland's gas needs but a third of its oil needs.

Ireland refines about 40% of its oil needs from imported crude, and imports the other 60% as refined products. So Barryroe could displace most of Ireland's imported crude. The DCCAE is a lot more sanguine about our oil needs than nutters like Smith. It says on its website: "The downstream oil market in Ireland is fully privatised, liberalised and deregulated. While often overlooked, oil is at the core of societal and economic well-being and will remain so in the medium term until such time as we develop alternatives".

I think if PVR had the cash to get their appraisal and drilling under way right now, the government would have to honour the terms of the license. But they don't, and I can see the license slipping from their grasp. Small E&P companies will get slaughtered over the next while with the oil price in the basement and Covid-19 driving extremely negative sentiment. I'm expecting to see WTI in the 30s next week. Nobody's going to invest in a major new O&G venture under these conditions. Six months of it could see PVR miss their last roll of the dice as their license obligations overtake them.

EAS10, a tie-in to Kinsale decommissioning is not remotely straightforward. The main facilities at the Kinsale Head site include two large platforms serving several peripheral gas fields, one of which has a 15-20 man permanent crew. Seven Heads is an outlying field tied back to the main Kinsale Area infrastructure. It contains only 5 of the 24 wells that have to be decommissioned. Seven Heads produces only dry gas, with a tiny sub-commercial amount of condensates which is just stuck in a tank and shipped back to Cork. None of the Kinsale Area facilities are equipped for anything else.

As I've said several times, Barryroe is not a gas field. There are basic physical reasons why the gas was in the upper Wealden sands and the lower ones contain oil. Sure, there is lots of associated gas in Barryroe but it cannot be extracted on its own. Oil processing facilities would need to be built regardless. Don't take my word for it ... the Kinsale Area Decommissioning Plan from just two years ago says it explicitly:

"The Kinsale Area facilities are not designed for liquid hydrocarbon or wet gas production and are unlikely to
be suitable for such use. Some of the facilities could potentially be re-used for a future dry gas development
as host infrastructure. However, there are currently no known commercial dry gas discoveries in the vicinity
nor is Kinsale Energy aware of any firm drilling plans for dry gas prospects within tieback distance of any of
the facilities. There are a number of appraisal wells planned in the Barryroe field and the 18” pipeline from
Seven Heads to Kinsale Alpha, could be used for export of associated gas from a potential development of
that field."

I'm with you on the "loads of gas", EAS10. There IS loads of gas in Barryroe ... but it's going to come up with the oil, not separately. The gas cap narrative is being scuplted for the Greenies. The only analysis that I'm aware of so far is that there isn't one.

In short, Barryroe is the real deal. They reckon the well they drilled could flow 6000 bbl/day. That's $100m worth of oil annually FROM A SINGLE WELL. The whole field could flow tens of thousands of bbl/day. It's mind boggling. We just have to get it drilled. But given what has gone before, plus increasing regulatory and political pressures, I'm not convinced we ever will.

The deeper plays aren't unheard of, they've been talked about from the start. Here's the standard infographic: https://img.offshore-mag.com/files/base/ebm/os/image/2020/02/barryroe.5e4ec49012d8b.png

The Upper Wealden gas sands are the ones which made up the Seven Heads gas field above Barryroe.

Previous Barryroe wells were:
* 48/24-1 (drilled by Esso in 1973), flowed 1300 bbl/day from Middle Wealden,
* 48/28-1 (Esso 1974), 1527 bbl/day from Middle Wealden,
* 48/23-1 (Esso 1976), stacked Lower Wealden sands, mechanical failure,
* 48/24-3 (Marathon 1990) 1619 bbl/day from Lower Wealden.

48/24-10z was Providence's own 2012 well which tested two levels of the Basal Wealden, flowing 4000 and 2500 boe/day from the lower and upper parts respectively. The lower interval flowed about 10% gas while the upper contained 50% gas, but I note they stated that fluid analysis did NOT indicate the presence of a gas cap in the Lower Wealden. The estimate of 346 mboe recoverable that you see bandied about for Barryroe is ONLY for the Basal Wealden.

The deeper plays are the Purbeckian which has been drilled and encountered a 70 ft oil-bearing layer but was not tested, and the upper Jurassic which has not been drilled and is known only from seismic. The entire Barryroe accumulation covers hundreds of square kilometres in multiple levels.

So let's suppose Linn is competent and all the right people are in the data room. He says we have to raise cash to keep the company going. How much is needed, and for how long? PVR under TO'R had a habit of dragging things out and spending more than you expected. Half a million per month for 24 months? You'd hope it's less but do you want to stake the company's prospects on it? At current share price we can raise £14m for a 50% dilution. Ouch!

One final point that didn't come up in the interview, probably also for greenwashing reasons. Let's suppose you do pump gas ashore from Barryroe, and capture the CO2 output from a gas-fired power station. Sure, you can sequester it by pumping it back down a depleted gas well at considerable expense. Or you can pump it down your oil well to create an artificial gas drive, as is regularly done in the oil industry during enhanced recovery operations on older fields.

Now *IF* there is a gas cap at Barryroe, this could be a sensible approach. Get to market quick with your gas and existing infrastructure, then use sequestered CO2 for secondary oil recovery. That's a potential win-win. Again, it's about the bits you leave out for the benefit of the Greenies ;-)

"swap THE oil"

I should also mention that when I say Linn is greenwashing, I'm not criticising him. If he has to use certain simplifications to get the project past objections by Green goons, it's nothing like the distortions that THEY will be trotting out. But investors shouldn't be thinking we can just swap to oil for 200 bcf of gas. For a start it may not be easily accessible on its own, and more importantly it's 2.5% of the total hydrocarbon value.

Me >>> "The degree to which the oil is dissolved in the gas depends on pressure."

... the other way round, obviously ;-)

LW, it means that the comparison of oil to gas is based on energy, not volume (and certainly not monetary value). One barrel of oil = 6,120 MJ (megajoule). 1 Mcf (thousand standard cubic feet of gas) = 1,055 MJ. Therefore 1 boe (barrel of oil energy equivalent) = 5.8 Mcf, usually approximated to 6 as the energy content of both oil and gas depends on its makeup.

The estimated 34 mboe of gas in Barryroe is therefore ~200 bcf (billion cubic foot). The important point is YOU DON'T NECESSARILY GET TO CHOOSE whether you're going for oil or gas. You take what nature has provided. The degree to which the oil is dissolved in the gas depends on pressure. All oil fields produce gas, referred to as "associated gas". The gas bubbles out of solution as the pressure drops between the reservoir and the well head. If the pressure in the reservoir is below the bubble point, then there may be a gas cap. That can be produced separately, but at the cost of losing its use as a gas drive for producing much more valuable oil. All gas contain associated liquids too, or rather gases other than methane -- propane and butane -- which can easily be compressed to liquids, known as condensates.

I'm pretty sure Linn is engaged in greenwashing. An oil field with associated gas is not a gas field. Right now, he admits they don't KNOW what they've got. His other point about the Barryroe oil being too good quality for burning sounds wrong to me too. If he means the oil is sweet (i.e. low sulfur), then that makes it good for burning as well as for petrochemical feedstocks. After that, the fractions of oil used for feedstocks basically depends on the relative prices at any point in time. Both light oil and the heavier stuff in Barryroe can be used. (Usual caveat: IANAE).

Thanks for the link DelBoi. I like Linn's analytical style. However, there is not much there we didn't know. Although it does confirm two things. A raise is required to keep PVR going during new farmout negotiations. And to the vexed question of whether Barryroe is a big oil field or a big gas field: as I had surmised, they either don't know (cf. 12:30 in the video) or -- more likely -- it suits them for this to be ambiguous while they get survey and appraisal drilling permits.

LW, I don't know who/what TSD is. But no, I don't take things personally ... especially since I stopped paying attention to Manyana ;-)

Not sure why you think oil will not be impacted by coronavirus just because it won't kill everyone. Mortality estimates seem to be converging around 0.9%, affecting mainly the elderly. It could be a lot worse, but it's certainly enough to trigger public health measures that could reduce oil demand. Consumption and economic output in many countries is being affected right now, so some effect is already baked in. Prices above $50 don't fill me with joy ... would prefer to see $70.

Oil Looks into Abyss as Coronavirus Threatens.

https://finance.yahoo.com/news/oil-looks-abyss-coronavirus-threatens-200136635.html

What is the point of another survey? Survey's are sonar scans of the seabed preparatory to drilling. They reveal nothing about the subsurface. We already surveyed two drilling sites out of four nominated, and for reasons not revealed in the latest RNS we have now identified a fifth. The last survey was a complete waste of money. It was a last ditch attempt by TO'R to show progress in the futile hope that the APEC money might materialise in the meantime. We spent money on mobilising a survey vessel and only got half the planned survey done. All it did was deplete the cash reserves which are needed to keep the lights on.

PVR doesn't have the money to do a drill, and at the current share price it can't raise it either. We are completely dependent on attracting a suitor who will pay for the development in its entirety and keep PVR in pocket money as well. It's hard to see why such a suitor wouldn't just make a low-ball offer for the company (either PVR or, more likely, EXOLA). After all, what are PVR bringing to the party other than being the license holder? Bear in mind PVR has specific commitments in 2020 and 2021 under the terms of that license in order to keep it. It has to evaluate the potential of the Jurassic and drill appraisal wells, none of which it has the resources to do. Basically, despite the promise of Barryroe, it is a basket case through nobody's fault but its own.

If there is anything other than greenwashing (which I doubt, but am keeping an open mind) to this idea of a gas cap, they need to explain a number of things. How, all of a sudden, do they know where it is? What's their fast track route to exploitation without the hundreds of millions that Sequa / APEC / A.N.Other were supposed to provide? Even at a reduced cost, where is the money coming from since they can't raise it themselves? I strongly doubt there are answers to any of those questions at present. Fair play to the management if they can pull the irons out of the fire, but they have their work cut out. I'm betting that part of the problem will be acknowledging that they have to give away the lion's share of Barryroe for a lot less than they'd like. That's the upshot of holding such a weak hand.

I think coronavirus is a catalyst for the current market turmoil but not the cause. Stockmarkets (not including PVR of course ;-) have been insanely overpriced for some time. Something was inevitably going to kick us into the next downswing -- not just of the markets but of the global economy -- and this may be it. The signs have been writ large for some time. I'm not holding my breath for things to turn around in a matter of days or weeks. Would be more than delighted to be wrong, of course.

Thanks LW. I was using a presumably out-of-date figure linked from PVR's website: http://www.providenceresources.com/sites/default/files/orielsecuritiesresearchjan13.pdf

I'd still argue that the chances of a farmout are severely dented.