Interest remains in Irish assets

Recent research from Morgan Stanley suggested an all-time low for exploration-related M&A activity in the first quarter of 2015.

But despite slow movement in oil sector consolidation and investment, confidence remains that global players haven’t given up on the Irish offshore dream.

The vicious circle of Ireland needing two or three drilling programmes a year, despite the necessary investment for this not forthcoming, has continued this year with many significant projects further postponed.

Providence Resources is still confident of getting a development partner on board for its flagship Barryroe asset in the Celtic Sea.

It has said it remains hopeful of drilling at its Spanish Point asset, off the west coast sometime next year after already postponing this year’s plans.

To some, a lack of proven resources connected with Irish-related explorers means that less risk lies elsewhere.

A sale of Dragon Oil is expected to conclude in the next six-to-nine weeks, while London-based/African-focused Ophir Energy is being touted by some as the next relatively local takeover target.

The latter has over £1bn (€1.39bn) in cash on its balance sheet and a market value to match, while Dragon has significant oil reserves.

“The market is contracting and that’s placing further pressure on companies already struggling with liquidity issues,” said an industry source.

“That’s a short-term issue, so some firms could disappear while others are acquired, but at distressed levels, over the next 12-18 months.”

London-based Europa Oil & Gas yesterday published independent research valuing its 15% stake in three prospects off Ireland’s west coast at around $1.6bn (€1.42bn). Europa’s CEO Hugh Mackay said the valuation is “a vote of confidence” in the assets. It says a dormant 2015 is solely down to large companies mothballing new venture spend.

He remains confident that the next budget cycle will usher in fresh investment ahead of renewed activity in 2017 and 2018.

Europa’s progress will however, largely rely on its lead partner, Kosmos Energy managing to farm-down part of its 85% stake in two licences the firms co-own in the south Porcupine Basin.

He said while any activity will not be cheap with drilling and development costs low, “there’s never been a better time” to drill in Ireland.

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