Falkland Oil and Gas (FOGL) announced Monday that it has spud its Loligo exploration well and has signed a major deal with US exploration and production firm Noble Energy.
The Loligo well, located some 125 miles east of the Falkland Islands, was spud last Friday, according to a statement from FOGL.
FOGL is the operator of the well and holds a 75-percent interest, while its partner Edison International holds the remaining 25 percent in the PL028 license.
The well is the first of a two-well exploration program, which is using the Leiv Eiriksson (UDW semisub) drilling rig, and will test the Loligo Complex – a larger Tertiary-aged statigraphic trap with multiple reservoir objectives.
FOGL also announced Monday that it has agreed a farm-out deal with Noble Energy Falklands – an affiliate of New York Stock Exchange-listed Noble Energy.
Noble is to farm in to FOGL's Northern Area licenses for a 35-percent interest, except for two excluded areas. FOGL will continue as operator of the entire Northern Area licenses until early 2013, when operatorship will transfer to Noble.
The excluded areas comprise the Loligo Complex and the Nimrod-Garrodia complex.
Noble's total investment over the next three years is currently estimated to range from $180 million to $230 million.
Noble will pay for 60-percent of the cost of FOGL's upcoming Scotia well – due to be drilled in the fourth quarter of 2012. It will also contribute $25 million cash, which is to be paid in January 2013 and will relate predominantly to historical costs.
Noble will also have the opportunity to pay 45 percent of the costs of a discretionary exploration well, should the firm elect to participate in the well.
Commenting on the deal oil analyst Brendan Long, of London-based Merchant Securities, said that a two-for-one carry is generally considered "attractive" and suggests that Noble is quite keen to participate in the Scotia prospect in addition to other exploration wells.
The deal is also seen as a positive political development given the dispute between Argentina and the UK about oil exploration in the seas around the Falklands.
"The involvement of a large American oil & gas company in the Falkland Islands is positive from a political perspective and this read-across extends to all the companies operating in the area," said Long in a research note on Monday.
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