Argos Resources’ subsidiary, Argos Exploration Limited (AEL), has entered into a farm-out agreement with Noble Energy Falklands Limited and Edison International related to the company’s 100 percent interest in production licence PL001, off the Falkland Islands.

The licence covers an area of approximately 1,126 square kilometres and it is located in the North Falkland Basin. It is adjacent and to the west of the large Sea Lion oil discovery which is reported to contain some 400 million barrels of recoverable oil.

A 3D seismic survey was acquired by the company in early 2011 covering the entire Licence Area. According to the company, the seismic data has led to the identification of 52 prospects and 40 leads within the Licence. The company’s Competent Person’s Report (CPR) issued in July 2013 describes 52 prospects with a total unrisked potential of 3.1 billion barrels of prospective recoverable resource in the most likely case, and up to 10.4 billion barrels in the upside case.

Under the terms of the Licence, AEL has an outstanding commitment to drill an exploration well on the Licence no later than November 25, 2016, which is the date of the end of the Second of Three Exploration Terms of the Licence. The company has been seeking financially and operationally strong farmin partners to meet the substantial costs of drilling this commitment well.

Due to its remote location, it is not practical or cost-effective to mobilise a rig to the Falkland Islands to drill a single well and, in the two previous drilling campaigns undertaken in 1998 and 2010/11, licence holders across the basin have collaborated to share the costs in multi-well drilling campaigns, Argos Resources explained.

A similar, third, collaborative drilling campaign began in February 2015 with the Eirik Raude rig currently operating offshore the Falkland Islands. The company considers it imperative that it participates in drilling on PL001 as part of this campaign while sufficient time remains on the Licence to both explore its prospectivity and to fulfil the drilling commitment, Argos Resources said.

From the inventory of prospects described in the company’s CPR, the Rhea prospect (and Rhea Stack) is the company’s top ranked prospect. The CPR describes the Rhea Stack as containing a best estimate unrisked resource potential of 449 million barrels of recoverable oil, increasing to 1,463 million barrels in the upside case. The Farmees have committed to drill an exploration well and have elected to test the Rhea prospect during the current drilling campaign at no cost to Argos. The company believes that success at Rhea will de-risk other prospects in the Licence.

Susan M. Cunningham, Noble Energy’s Executive VP of Exploration and New Ventures, stated, “The Rhea prospect diversifies our prospect inventory and upgrades our chance of overall success, without changing our total capital program for the year. This opportunity is in a proven petroleum system and is a strong complement to the vast number of remaining prospects on our acreage. Our Falkland Islands program, combined with our exploration well in Cameroon, give us the potential to discover substantial new resources through exploration this year.”

According to Noble Energy, Rhea is anticipated to start drilling in the third quarter of 2015 with Noble Energy’s second slot on the 2015 Falkland Islands drilling campaign.

In addition to the targeted Rhea prospect, the overriding royalty interest (ORRI) provides the company with continued material exposure to further drilling and success across the Licence Area, which contains a best estimate of 3.1 billion barrels of prospective recoverable resource. Argos will have no requirement to contribute to any future capital or operating expenditures incurred in respect of the Licence.

The principal terms of the Transaction are:

– Noble will assume operatorship of Licence PL001 from Argos;

– Noble and Edison will earn a 75% and 25% working interest in the Licence respectively;

– Noble and Edison have committed to drill an exploration well in the Licence Area during thecurrent drilling campaign at no cost to Argos;

– Argos will retain an overriding royalty interest of 5% of gross revenues from all hydrocarbon discoveries developed within the Licence (the ORRI);

– Argos will have no requirement to contribute to any future capital or operating expenditures incurred over the life of the Licence;

– Argos will receive US$2.75 million in cash upon completion of the Transaction and US$800,000 per annum from January 1, 2016 through to receipt of the first royalty payment pursuant to the ORRI (if any) as reimbursement for certain historic costs incurred by Argos in relation to the maintenance of the Licence and the acquisition of certain seismic and other data in respect of the Licence Area;

– The proceeds are expected to be sufficient to meet all anticipated transaction costs and running costs through to receipt of the first such royalty payment pursuant to the terms of the ORRI;

– The initial exploration well will test the Rhea prospect and will fulfil the remaining work obligation on the Second Exploration Term of the Licence;

– Should Noble and Edison elect to surrender the Licence following the drilling of the initial exploration well Argos has retained the right to have 100% of the working interest reassigned to it, subject to appropriate Falkland Islands Government approvals; and

– Completion of the Transaction is subject to Shareholder, government, regulatory and partner approvals.

On the other hand, Noble Energy and its joint venture partners, Falkland Oil and Gas Limited (FOGL) and Edison International, informed today they will defer a potential second well in the South and East Falkland basin.

Source: www.offshoreenergytoday.com

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