Argos Resources to join AIM’s Falkland oil explorers

Argos Resources looks set to join a select group of oil and gas explorers, who have grown a strong following among AIM’s investment community. The currently unlisted company owns a number of prospective interests in the North Falkland basin, and with growing investor interest in the region it has raised £22m and it is set to join the AIM market later this week.

The wider Falklands play is made up of two separate basins, the North basin and the South basin. Rockhopper (LON:RKH) and Desire Petroleum (LON:DES) have been drilling their interests in the North basin, and Borders & Southern (LON:BOR) and Falkland Oil & Gas (LON:FOGL) have prospective interests in the South Basin.

“The potential for significant oil & gas reserves in the Falkland Islands region has been the subject of speculation for some considerable time ...  Investor interest in the Falkland Islands is strong and Argos, with its seven identified prospects and five leads, believes now is a good time to raise the funds.” Argos chairman Ian Thomson commented.

Through an institutional placing, arranged by Evolution Securities, the company will issue 70.9m shares to raise gross proceeds of £22m. The placing shares, priced at 31p per share, will represent 32.8% of the company’s issued share capital and upon listing Argos will have a market capitalisation of approximately £67m.

The company’s shares are expected to join the AIM market, under the symbol ‘ARG’, on the 29 July 2010.

The company plans to use the new funds to finance a 3D seismic programme over a number of the prospects identified from an earlier 2D seismic programme.

According to Argos, these prospects have a total un-risked potential of 747m barrels of prospective recoverable resource and up to 1.75bn barrels in the upside case. Subsequently, on completion of the seismic interpretation in 2011, Argos expects to identify drilling locations in the North Basin.

Chairman Thompson highlighted that “Recent discoveries in the North Falkland Basin, where Argos has its licence, have not only conclusively proven a working petroleum system and indicated potential significant reserves upside, but have also de-risked further exploration drilling within this northern basin.” 

Of the four junior explorers currently active in the Falklands, Rockhopper has enjoyed the most success to date, with its Sea Lion discovery being the highlight of Falklands exploration story to date. The Sea Lion 14/10-2 struck oil early in May, and later in June further analysis showed that the well had discovered medium gravity oil.

The analysis confirmed the first contingent resource in the Falklands, and upped the recoverable resource estimates from 170mmbbls (million barrels) to 242mmbbls with “significant upside potential.”

Previously in March, the first well to be drilled in the Falklands, the Rockhopper-Desire JV Liz 14/19-1 exploration well encountered hydrocarbons, however results from further analysis disappointed.

Last week, Rockhopper spudded the Ernest 26/6-1 exploration well, the third well to be drilled in the North Basin. Ernest is expected to take 30 days to drill down to the 2,400m target depth.