Falkland Oil and Gas (LON:FOGL) said it is in advanced negotiations, alongside BHP Biliton (LON:BLT, ASX:BHP), to secure a deep-water rig so the partners can drill the large targets that have been identified in the South Falkland basin.
Securing the rig is currently key focus of the company, as well as its surveying activity across its acreage in the South Atlantic.
In this morning’s full-year results statement FOGL chairman Richard Liddell described 2010 as a landmark year.
In 2010 it drilled the first ever well in the East Falklands basin, Toroa, but it failed to find reservoired hydrocarbons and it was subsequently abandoned. The disappointing result prompted BHP to drop its interests in that part of the joint venture acreage.
Liddell stressed that the drill data ‘provided encouragement on the presence of good quality reservoirs and source rocks’ in the basin and the results will inform future drilling plans.
FOGL invested US$19.7 million in the Toroa exploration well. This morning it reported a US$3.7 million loss for the twelve months ended 31 December 2010. It ended the period with US$69.8 million in the bank.
"2010 was a landmark year for FOGL in which we drilled our first well,” Liddell said. “We were pleased that the well was drilled on budget and without incident.”
He added: "Our focus is now on securing a suitable deep water rig to enable us to drill the large prospects we have identified in the deep water areas of our licences. Rig contract negotiations are at an advanced stage and we will make a further announcement when appropriate.”
"Meanwhile, we have commenced further work in order to broaden the range of potential targets for the deep water drilling programme."
Elsewhere in the Falklands oil frontier, Rockhopper Exploration (LON:RKH) extended its rig contract in the North Falkland basin.
Yesterday afternoon it revealed that it has three additional firm well slots on the Ocean Guardian rig, which has drilled all of last year’s wells in the area - including Toroa. Rockhopper will take the Ocean Guardian after Desire Petroleum (LON:DES) completes its next well.
It has also completed the first of two seismic programmes on licence PL032, to the south of its Sea Lion discovery, and it is expecting to get the results in July.