Elaine Reynolds
12 September 2017

Drombeg adds to Druid disappointment

The Druid/Drombeg frontier exploration well, 53/6-1, is currently being plugged and abandoned after encountering porous water bearing reservoir across both target intervals. Operator Providence Resources announced the results from the deeper Drombeg target this week, following on from similarly disappointing results from Druid in August.

Druid and Drombeg were large stacked deepwater fan systems located updip from a potential fluid escape feature in the underlying Diablo Ridge. Druid targeted two Paleocene fans, while Drombeg was a Lower Cretaceous fan system. Bitumen may have been present in the Drombeg reservoir interval based on drill cuttings analysis, which could indicate an oil charge which was not retained at this location, but this will require further study. The structures had been identified on 2D seismic and were both investigated on 3D acquired in 2014. Total has the option to farm in to a 35% WI in the licence (FEL 2/14) and has already paid $20.25m to Providence and partner Sosina with a further $6.75m due within three days of the P& A notice for 53/6-1. With Cairn Energy also paying 45% of the well costs under the terms of its farm in to the licence, Providence has been able to reduce its exposure to the well.

The Druid result could impact the future of the Avalon prospect in LO 16/27 to the north of FEL 2/14 , which is a Paleocene basin channel and fan system that exhibits a similar AVO anomaly to that seen in Druid. Providence does however believe that Avalon demonstrates a potentially different trapping mechanism to Druid and that oil may have channelled out of Dunquin (in FEL 3/04) and up into LO 16/27. Total farmed into the licence in June 2017 and will become operator with 50%WI. Cairn also has an option to farm in to 20% of the licence and must exercise this within 60 days of the plugging and abandonment of 53/6-1.

Success at Drombeg would also have had a positive read across for Europa Oil & Gas, as it would have de-risked its Beckett and Shaw Cretaceous fans located around 90km to the east in FEL 3/13.

The Southern Porcupine remains underexplored, but more drilling is expected here in 2018 with two exploration wells announced in the basin to date: one for Eni in LO 16/7(indicated as Nexen in the Providence asset map), and the other for Woodside in FEL 5/13.

Source: Providence Resources

Disclaimer - Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This document may contain materials from third parties, which are supplied by companies that are not affiliated with Edison Investment Research. Edison Investment Research has not been involved in the preparation, adoption or editing of such third-party materials and does not explicitly or implicitly endorse or approve such content. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of publication and is subject to change without notice. While based on sources believed reliable, we do not represent this material as accurate or complete. Any views or opinions expressed may not reflect those of the firm as a whole. Edison Investment Research does not engage in investment banking, market making or asset management activities of any securities. The material has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.