Desire Petroleum has provided an update on its activities.
Submission of Environmental Impact Assessment (EIA)
The Environmental Impact Assessment covering its southern licenses in Tranches I and L and PL 034 is now substantially complete and will be ready shortly for submission to the Falkland Islands Government (FIG) for approval. This is slightly behind schedule due to a delay in receiving the results of the analysis of the benthic samples acquired last year. Desire already has a FIG approved EIA covering its northern licences in Tranches C and D.
A further update to this progress will be provided in the Company's Preliminary Results announcement in April 2009.
Update on Global Rig Market
The global economic downturn has had a marked effect on the drilling rig market, with utilization figures decreasing for all types of rig. Most availability that has appeared over the last three months is on the basis of sub lease on existing contracts, where the holder of the term contract is looking to reduce exploration expenditure, thereby creating gaps in their programs. Whilst some of these opportunities are attractive from a rig and timing standpoint, the rates for these units remain at the original contracted rate, as the incumbent operators are currently reticent to subsidise other drilling activities outside of their own.
However, Desire is seeing the first sign of rigs becoming available on the open market, either through contract default or end of primary contract terms, and more importantly the first indications that rates are reducing, albeit slowly. The forecast for rig activity throughout 2009 is for a reduction which is supported by the willingness of contractors to enter into discussions that were not possible three months ago. Several discussions are ongoing at the present time and it is envisaged more opportunities will present themselves in the near future. There are many factors to be taken into consideration before executing a rig contract, many of these exacerbated further by the location of the Falkland Islands, however, the most important of these remains the commercial terms. Given the information currently available to Desire it would be remiss not to evaluate all opportunities fully in order to ensure shareholder value is maximized. With US $38 million in cash and a likely four well program, the Company is in a strong position to negotiate a very attractive contract.
Despite the falling oil price the fundamentals of Desire's projects remain unchanged and with our very attractive prospects the economics of any discoveries will be exciting.
The Board therefore remains enthusiastic about the company's opportunities and remain firmly committed to the overriding strategy, which is unchanged, even in the current economic climate, to explore for oil and gas in the North Falkland Basin.
Commenting on Desire's current progress Stephen Phipps, Chairman of Desire, said, "The Board of Desire remains confident of securing a drilling rig which will not only maximize our activity given our current cash balance, but also to maximize value for all our shareholders. Indications in the rig market continue to be increasingly positive towards fulfilling our objectives and progress will be announced, when a firm contract has been agreed.
"Our work on the EIA for the additional tranches is nearly complete and we are delighted that it is close to being formally submitted to the Falkland Islands Government."
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