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Ireland, which needed a €85bn bailout in 2010 and whose economy is still struggling amid the eurozone crisis, received a boost with news is could become an oil producer.Dublin-based explorer Providence Resources – whose chief executive is Tony O’Reilly junior, son of the former rugby player and media magnate – has just issued a positive drilling update for its Barryroe well off the south of the country.
It has found very high quality oil, with flow rates that could make the field a commercial prospect. It flowed oil at a rate of 3,514 barrels a day, above the company’s target of 1,800. Further testing will take place before the well is suspended to explore the potential for further drilling.
Any production could prove a boon to the beleaguered Irish economy. O’Reilly told Reuters:
The successful exploitation of hydrocarbons could be very rewarding because anywhere from 25% to 40% tax would be payable on a commercial development, that would be a very big boom for the Irish exchequer.
Providence, where the O’Reilly family has a 20% stake, jumped 55.5p to 485.5p on the news, valuing the company at nearly £250m. Its partner in the field is Landsdowne Oil & Gas, up 5.5p at 60.25, while Royal Dutch Shell also has operations in Ireland, as does Petrel Resources, up 1p at 8.375p. Analysts at Liberum Capital said:
Providence has reported flow rates from Barryroe that should confirm the commerciality of the field. Other data indicate that estimates of both oil-in-place and recovery factors will be raised holding out the prospect of material increases in valuation. There could be significant upside to our 880p price target from Barryroe upgrades and recognition of value elsewhere in the portfolio.
Fox Davis Research was also positive, saying:
The company and its partners believe that the results have so far exceeded their expectations – site survey, 3D acquisition/processing, rig procurement, drilling & testing, etc. The characteristics of the oil alone coupled with the potential sidetrack drilling should excite and thus move the needle for investors.
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