Argos Resources (LON:ARG) said it was excited about the potential of its Falklands acreage as it confirmed it would require more cash to drill the area.
The company recently completed a comprehensive 3D seismic survey of the high PL0001 area next to Rockhopper’s Sea Lion field in the North Falkland Basin, which was deemed commercial.
Work began on the Argos licence area in January and the results for a “high priority area” will be fast tracked for release mid-year.
"The recent Sea Lion oil discovery, just a few kilometres from our licence boundary, demonstrates the potential of the emerging North Falkland Basin and we are excited by the prospect of making similar discoveries on our own acreage,” said chairman Ian Thomson.
“It is our ambition to participate in the current drilling campaign in the basin and we are building our team and taking all the steps required to be prepared for this.
“We have recently acquired state of the art 3D seismic data over our licence, which is now being processed, and the next step is its interpretation and prospect ranking ahead of scheduling drilling in late 2011 or early 2012.
“Additional capital will be required to finance the drilling".
Thomson was speaking after the release of annual results, which showed Argos had US$32 million of cash as at December 31 last year.
The company’s losses widened to US$455,000 in 2010 from $175,000.
Today's statement featured the highlights of the previous year including the successful listing on AIM on 29 July raising gross proceeds of £22 million (US$36.2mln) and the successful testing of the adjacent Sea Lion in September 2010, owned by Rockhopper.
This saw the first oil to flow to surface in Falkland Islands waters, and was successfully appraised in March 2011.
Vintage 2D seismic data, together with seismic from adjacent licences, was reprocessed and reinterpreted during 2010 yielding seven prospects with estimated resource potential of up to 747 mmbo in the Most Likely Case and 1.75 billion barrels in the Upside Case, said Argos.
MV Polarcus Asima vessel was contracted in late 2010 to undertake a 3D seismic survey over the entire licence plus open acreage to the north to cover possible extension of Johnson structure and to look for new prospects.
Thomson added: "With oil prices high, with demand continuing to increase and with current supply restrictions, the outlook is for continued high oil prices.
"This will stimulate increased exploration activity worldwide, and access to attractive exploration acreage within a competitive tax regime is highly valued.
"Having good quality acreage so close to a new significant oil discovery, and with state of the art 3D seismic data as an exploration tool, the board believes Argos is well positioned to create value for shareholders from its licence."
David Farrell of Broker Evolution Securities said: "The 3D seismic across Argos’ PL001 licence, and the open acreage to the north, should help Argos prove up additional prospectivity in its licence block.
"In addition, Argos will hope it demonstrates that the good quality sands, necessary for commercial oil discoveries and a key risk in the Falkland Islands, are sourced from the north of the basin (where Argos’ licence block sits) rather than just the east as is the case with Rockhopper’s Sea Lion discovery."
Today's news from Argos comes as another Falkland's explorer - Rockhopper Exploration (RKH) - announced it has secured an additional well slot on the Ocean Guardian Rig for its drilling campaign in the North Falkland basin.
Farrell went on: "Obviously, Argos is reliant on the Ocean Guardian rig remaining in the Falkland Islands until it is in a position to drill, so to this end, this morning’s announcement from RKH that it has taken an additional slot is good news."
Argos Resources' shares were trading down 2.29% in early deals from yesterday's close - trading at 31.51 pence.