Junior explorers active in the Falkland Islands have opted to join forces as the region gets ready for a new round of drilling.
Thursday saw Falkland Oil and Gas Limited (FOGL) and Desire Petroleum announce that they were getting together in a deal that will see FOGL take over Desire in an all-share transaction.
Meanwhile, the new company – which will have a war chest for its exploration activities of $275 million (GBP 170 million) – has also separately agreed to a farm out of its two North Falkland licenses PL004a and PL004c to Premier Oil and Rockhopper. The latter two firms are developing the Sea Lion oil field – which is currently the Falkland Islands’ only commercial oil discovery.
Following the farm-out deal FOGL/Desire will hold 40-percent of both North Falkland licenses, having held 92.5 percent of PL004a and 75 percent of PL00c.
There will now be a five-well drilling campaign, with two wells drilled in the South Falkland Basin and three wells drilled in the North Falkland Basin.
Analysts at London-based investment bank Oriel Securities described the Desire takeover as "a good deal for FOGL as it has broadened its portfolio around the Falklands while preserving its cash and gaining three carried E&A wells in the North".
Meanwhile, VSA Capital Research commented:
"This is a positive series of transactions for the Falkland peer group and removes a huge amount of uncertainty in terms of future drilling. Instead of having a group of companies seeking their own funding the new 'combined' entity is a much stronger platform to drive exploration in the region forward."
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