UK independent Premier Oil announced Thursday that it has agreed to pay an initial $231 million to farm into Rockhopper Exploration's license interests in the Falklands Islands in the South Atlantic.
Premier Oil will acquire a 60-percent interest in the licenses, with the deal including a provision for Premier to pay an additional $48 million for further exploration within the license areas and an additional $722 million to develop reserves found there (subject to the approval of a field development plan).
Premier – which has mainly been focused on the North Sea but also has operations in Africa – the Middle East and South East Asia, said that the acquisition will progress its strategy of growth through investment in high-quality development projects.
Premier also pointed out that the deal will see it make use of its strong operatorship and FPSO development capabilities, while it will add approximately 200 million barrels of discovered 2C resources, along with risk prospective resources of 175 million barrels of oil equivalent, to the firm.
So far, Rockhopper's main asset is the Sea Lion discovery in the North Falkland Basin. This discovery is estimated to contain between 568 and 1,428 million barrels of oil in place.
"We are delighted to have reached this agreement with Rockhopper. Rockhopper has made excellent progress in commercializing the Sea Lion project which offers attractive returns and fits well with Premier's proven operating and development skills," Premier Chief Executive Simon Lockett said in a statement Thursday.
Oil analysts at London-based investment bank Canaccord Genuity commented that they saw the transaction as "very positive" for Rockhopper.
"It addresses and resolves the two primary uncertainties of the Sea Lion project. The development is now fully financed and a well-established proven operator installed. Furthermore, it leaves Rockhopper well positioned to benefit from further upside via the drill-bit in the Falkland Islands, and with Rockhopper retaining the subsurface lead on future exploration the geological intellectual capital will be maintained," wrote Charlie Sharp and Thomas Martin in a brief research note on Rockhopper that they released Thursday morning.
Rockhopper is not the only company exploring for hydrocarbons around the Falkland Islands. Desire Petroleum has also been exploring in the North Falkland Basin, while both Falkland Oil and Gas and Borders & Southern Petroleum are exploring south of the islands (with Borders making a "significant" gas condensate discovery in April).
The involvement of an established UK oil independent such as Premier with the Falklands drilling campaign is only likely to inflame tensions between the UK and Argentina further. The South American country – which sees the Falkland Islands as its own and regards hydrocarbon resources in the area as belonging to it – has threatened legal action against companies currently drilling for oil and gas around the islands.
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