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Falkland oil drillers seal rig deal for new exploration campaign

Published: 09:40 04 Jun 2014 BST

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As many as twenty-two new wells will be drilled in the Falklands in an upcoming exploration campaign, starting early next year.

A cohort of oil and gas firms has now signed a contract for a semi-submersible drilling rig for the campaign.

Premier Oil (LON:PMO) is expected to kick-off the programme with an exploration well testing the Zebedee prospect, alongside partners Rockhopper (LON:RKH) and Falkland Oil & Gas (LON:FOGL).

The FTSE 250 oil driller is then expected to move the rig on to the Isobel/Elaine prospect, also partnered with Rockhopper, before handing the vessel over to Noble Energy (NYSE:NBL) which plans to drill two wells.

Noble’s prospects, unlike the other ‘firm’ wells in the campaign, are located in the South Falkland basin. The American oil firm recently shot 12,000 square kilometres of 3D seismic and it expects to select its preferred well locations later this year. FOGL will partner Noble in these wells, as agreed in a farm-out deal in 2012.

The rig then returns to Premier for two more ‘firm’ wells, testing the Jayne East and Chatham (or Sea Lion West) prospects. Both Rockhopper and FOGL will participate in these wells too.

Beyond that, there are a total of sixteen additional drilling options – eight of which can be exercised before the rig is mobilised and eight can be exercised at “key points” during the drill campaign. 

That final point may be of particular interest to investors in Argos Resources (LON:ARG).

Argos is said to have the most prospective acreage in the North Falkland basin, near the Sea Lion field, however, the explorer has yet to drill a well – it was not part of the previous campaign.

Last week, Argos told investors that it was seeking options as part the rig sharing pact. 

Argos needs to arrange funding in order to drill and it has been holding talks with potential farm-in partners in that regard. It said that interested parties wanted to be included in the cost-saving rig share, and as such Argos was in “close contact” with other operators to ensure it had the chance to join the campaign.

Whether or not any of the sixteen options in the rig deal announced today are earmarked for Argos’s plans remains to be seen, though the apparent flexibility suggests there may be room for manoeuvre.

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