Falklands Oil Drillers Scale Back after Price Slump

Reuters

LONDON, April 13 (Reuters) – A group of three oil explorers drilling in the Falkland Islands, including Noble Energy, have shelved plans to drill a second well in the south and east Falklands following the steep drop in oil prices, one of the partners said on Monday.

The partners, which also include London-listed Falkland Oil and Gas (FOGL) and Edison International, said they would continue drilling in other parts of the region.

"We believe that disciplined capital management is crucial in the current oil price environment and this decision leaves FOGL in a stronger financial position," said FOGL Chief Executive Tim Bushell.

Oil explorers across the globe have scrapped expensive drilling work to rein in costs on the back of a steep decline in oil prices and instead focus on projects that will bring more immediate returns.

Analysts at Stifel saw the news as positive for FOGL as it deemed the second well in the southern basin as one of the most expensive ones in the company's five-well drilling campaign.

"The move mitigates FOGL's previously somewhat precarious funding position," they said in a research note.

Shares in FOGL opened 4.3 percent higher on Monday.

FOGL's partners Noble Energy and Edison International on Monday purchased a licence, named Rhea, in the North Falkland Basin from Argos Resources for $2.75 million in cash.

The Falkland Islands are a resource-rich area in the southern Atlantic and a number of oil companies are currently exploring for oil in the area.

However, drilling in the region remains controversial as tensions between Britain and Argentina remain high over the sovereignty of the Falklands.

Last week, Argentina ramped up political pressure on British-listed companies drilling for oil in the Falklands by threatening to take legal action.

(Reporting by Karolin Schaps; Editing by Paul Sandle and Mark Potter)

Copyright 2017 Thomson Reuters. Click for Restrictions.

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