Noble Energy farms in to explore in Falklands’ waters
Falkland Oil and Gas (FOGL) announced it has reached an agreement to farm out a 35 % stake in most of its Falkland Islands’ exploration licenses to Noble Energy to help fund drilling plans off the Islands.
Likewise FOGL announced the beginning of drilling at the large Loligo prospect to the south of the Islands. Noble Energy is a leading US global exploration and production company and the licence position consists of 40,000 sq km.
Noble will pay a total of between$ 180 mm and $ 230 mm over the next three years on exploration and drilling in the Falklands’ blocks and to cover some historical costs on the blocks, FOGL said.
The farm-out deal with Noble is FOGL’s second this year after selling a 25 % interest in its northern area licenses and a 12.5 % stake in its southern area blocks to Italian energy company Edison in June.
According to the release Noble will farm-in to the Northern Area Licences for a 35 % interest except for two excluded areas. FOGL will continue as operator of the entire Northern Area Licences until early 2013, when operator-ship of the farm-in area will be transferred to Noble Energy.
The excluded areas within the Northern Area Licences will be delineated both geographically and stratigraphically and comprise the Loligo complex and the Nimrod-Garrodia complex.
Noble will not participate in certain stratigraphic horizons in these excluded areas and FOGL will retain a 75 % interest and operator-ship with Edison holding the remaining 25 % interest.
However, Noble will remain a participant in the excluded areas regarding other horizons. Noble will also farm-in to the Southern Area Licences for a 35 % interest, with FOGL continuing as operator of these licences until no later than early 2014, when Noble will become the designated operator.
FOGL will be proposing to the partners that the Scotia prospect in the Northern Area Licences will be drilled in the fourth quarter of 2012 immediately following the FOGL Loligo well.
Noble’s financial contribution comprises: 60 % of the Scotia well costs, including associated costs incurred during 2011. A $ 25 mm cash contribution to be paid in January 2013 predominantly relating to certain historical costs; covering 60 % of the costs of the Southern Area Licences commitment well; 45 % of a discretionary exploration well, should Noble elect to participate in the well.
As a result of the post farm-out licensing, in the Northern Area, FOGL holds 40 %; Noble (operator) 35 % and Edison, 25 %, In the Southern area, FOGL (operator) 52.5 %; Noble 35 % and Edison, 12.5 %.
According to FOGL, release of the new farm-out brings in another significant industry partner whose interests and expertise complement those of Edison.
The farm out substantially improves FOGL financial position and in the event that the Loligo and Scotia exploration wells are drilled within budget, it is estimated that on completion of the wells FOGL cash balances will not be less than $ 200 mm, which will provide the company with significant funds for additional exploration work.
Given suitable encouragement from the 2012 drilling results, this is likely to include two 3D seismic surveys to be acquired in the Northern and Southern Area licences commencing in early 2013. Further exploratory drilling is then anticipated to commence in late 2014 and may include a program of up to four exploration wells.
The farm-out to Noble is subject to the approval of the Falkland Islands Government.
“We are delighted that Noble is joining us in our exciting exploration program. Noble brings strong technical expertise and an excellent track record of exploration and development success”, said Tim Bushell, FOGL CEO.
”We have now brought in two highly respected international exploration and production companies and with this strong partnership in place, we have the financial and technical resources to help realize the potential from our large acreage position in the Falkland Islands,“ he added.
Charles D. Davidson, Noble Energy's Chairman and CEO, said that Noble Energy is looking forward to working with FOGL and Edison in this new exploration joint venture.
“After careful study, we believe this region is very consistent with our new ventures exploration strategy of entering regions that provide prospects that are not only material in size, but also where initial success can de-risk subsequent opportunities. In this particular case we have already identified numerous oil leads on 2D data with an un-risked gross resource potential exceeding 6 bn barrels of oil. Once completed, this transaction will increase our worldwide leasehold by over 70 % gross and 40 % net”.
FOGL also announced the Loligo exploration well 42/07-01, spudded in August 2012 and located approximately 200 km east of the Falkland Islands. FOGL is the operator of the well, holding a 75 % interest, together with its joint venture partner Edison, who holds a 25 % interest in licence PL028.
It is the first of a two well exploration program using the Leiv Eiriksson semi-submersible drilling rig. It is anticipated that the well operations, working in 1,300 metres deep water, take around 60 days.