Interim Results

In the Celtic Sea, the higher oil and gas price environment, combined with enhanced geological and engineering work, has allowed Providence to upgrade the economic feasibility of a number of its prospects in the Celtic Sea. These interests historically have been held under a Licensing Option whose term was due to expire and so Providence has exercised its right under the 1992 Licensing Terms, to formally apply to the Minister for Communications, Marine and Natural Resources to have the Licensing Option converted to a Standard Exploration Licence, which carries a well commitment. The Celtic Sea portfolio (75% interest) consists of Hook Head, Ardmore, Helvick and Block 50/6-7 (now named "Dunmore"). As part of this application process, your Company relinquished its interest in the Glandore prospect. The Blackrock project is held under a separate Licensing Option.

 

In the St George's Channel area, Providence has applied to have its Licensing Option over the Apollo prospect (100% interest) extended and to have its Licensing Option over the Dionysus and Pegasus structures (95% interest) converted into a Standard Exploration Licence, which carries a well commitment. On that portion of the Marathon operated Dragon Field (where a discovery well was drilled) that extends into the Irish sector, Providence has made application for a Lease Undertaking as a pre-cursor to potential development plans being finalised. These applications are all subject to the standard terms and conditions of the 1992 Licensing Terms and are subject to Ministerial approval.

 

At the beginning of September 2006, your Company announced that it had signed a farm-out agreement with Challenger Minerals Inc. ("CMI"), a wholly owned subsidiary of GlobalSantaFe Corporation, one of the world's largest international oil & gas drilling contractors, on its Celtic Sea interests.

Under the terms of the agreement, Providence has agreed with CMI, subject to approval from the Minister for Communications, Marine and Natural Resources, to allow CMI to farm into 20% of its Celtic Sea interests in return for CMI paying 26.7% of the costs of the seismic programme in 2006. Thereafter, CMI will be responsible for 20% of all future licence, drilling and development costs. As a result of this farm-out, Providence will retain a stake of 75% in these Celtic Sea interests with its partner, Midmar Energy Limited, retaining a 5% stake. CMI has also been granted an option, exercisable until 31st October, 2006, to farm-in to an additional 20% stake in these interests, on the same terms as above.

 

In mid September 2006, the Company announced that it had awarded a comprehensive 2-D and pseudo 3-D seismic survey contract to Gardline Geosurvey Ltd over specific areas within its Celtic Sea and St George's Channel Basin licence portfolio. Expected to commence within the next month, the programme is intended to provide a total of 500 km of high resolution 2-D seismic data on the Hook Head and Pegasus structures, together with a 16 sq km pseudo 3-D seismic survey over the Ardmore gas field. The survey, which is designed to better define future work programmes, including drilling locations, is planned to take approximately 3 weeks to acquire, subject to weather.

 

Located in the St George's Channel area, offshore Ireland, the Apollo exploration prospect is on trend with the Pegasus and Dionysus exploration structures. Based on regional data and nearby well test results, Apollo is thought to be a large un-drilled Jurassic fault block structure that has the potential to have good reservoir qualities and oil mature source rocks. If hydrocarbon bearing, it is estimated that it could contain estimated recoverable reserves of circa. 400 MMBOE. Located just 80 km offshore, in shallow waters, Apollo is an attractive exploration target where Providence is now inviting industry participation by way of a farm out process, which commenced in August 2006.

The AJE 3 well offshore Nigeria was the third well drilled on the AJE Field in OML 113, offshore Lagos, Nigeria and was spudded in 2005. Whilst the well achieved its geological objectives, confirming the presence of both oil and gas in both target reservoir intervals, it was deep to prognosis which prompted further seismic evaluation by the partners. The partners carried out 3-D seismic reprocessing to link this well result with the existing two discovery wells (AJE 1 and AJE 2), as well as identifying a potential location for the AJE 4 appraisal well. The AJE 3 post well analysis has been completed and overall, the revised analysis of the field suggests that the AJE field could have the potential for both oil and gas production. Currently, plans are being considered for the future drilling of AJE 4. Further news regarding the next steps for AJE are expected in the coming months.

 

 

The Company is working with the Operator, Star Energy Plc, on a number of exploration and production enhancing initiatives, to realise the full potential of the Singleton licence.

 

Providence has been in this area since 2005 when the 110/14c-6 well was drilled at West Lennox to test a seismic anomaly south and east of an existing proven oil-bearing reservoir. On completion of drilling operations, well 110/14c-6 was declared "tight hole" status by the Operator (CMI) and remains so. Further geological work continues in this area, including the adjacent Crosby Prospect.

 

In June 2006, Providence applied, as a member of a consortium, for 2 licence interests, offshore United Kingdom in the east Irish Sea under the UK 24th Seaward Round. Providence has no information as to whether its application will be successful or not, and any award of licences will be subject to the UK Dept. of Trade and Industry.

 

In North Sea, the Company holds a 25% interest in Block 210/19(p), which is near the Shell operated Tern Field. Providence also holds a 25% interest in Block 9/9d, which contains an existing small oil discovery. These fields are currently the subject of a farm-out campaign being managed by the operator, Midmar.

 

The Company believes that it has a role to play in addressing energy supply in an environmentally responsible manner. In addition to its ongoing exploration and development initiatives, which are carried out in accordance with all environmental rules and regulations, the Company is also a contributing player to the Irish Government sponsored initiative on new energy sources, including methane gas hydrates.

Providence expected 2006 to be a period of high activity and, to date, this has proved to be the case. It is anticipated that the level of activity in the second half of the year is likely to match, or exceed, the amount of activity in the first half of the year. The Company will continue to focus on its portfolio approach with an added emphasis on securing the right production/ development opportunities. Providence's recent affiliation with CMI, coming just months after its major deal with ExxonMobil, clearly demonstrates a pattern of working together with world class companies to advance Providence's wide portfolio of assets. We anticipate building upon this model going forward.

 

Looking ahead, further farm-out and farm-in possibilities, more drilling opportunities and potentially new licence interests as well as production opportunities will enhance the existing portfolio of assets. At a very exciting time in the oil and gas industry, we believe these developments, in addition to our existing operations, positions your Company for further growth.

Providence's active oil and gas portfolio includes interests in Ireland (offshore), the UK (onshore and offshore) and West Africa (offshore Nigeria). Providence's portfolio is balanced between production, appraisal and exploration assets, as well as being diversified geographically.

Recent corporate announcements include;

Comprehensive information on Providence and its oil and gas portfolio, including its 2005 AIM Admission document, 2005 Annual Report, Interim Report 2005 and recent press releases are available from Providence's website at www.providenceresources.com

 

 

'BOPD' - barrels of oil per day

 

'TSCF ' - trillion standard cubic feet of gas

 

'MMBO' -  millions of barrels of oil equivalent

 

'MMBOE' - millions of barrels of oil

 

The results for the six month periods ended 30 June 2006 and 2005 are neither audited nor reviewed.