Falklands focused Argos Resources Limited confirmed the completion by its wholly owned subsidiary, Argos Exploration Limited of a farm out agreement with Noble Energy Falklands Limited and Edison International S.p.A in respect of its Licence PL001.
The Company announced the farm out on 13 April 2015, noting that completion was subject to shareholder, government, regulatory and partner approvals. All required approvals have since been received allowing the transaction to complete.
The agreement will allow exploration drilling on the license, which covers an area of approximately 1,126 sq km in the North Falkland basin, to proceed as part of the current 2015 drilling program.
Under the terms of the agreement:
• Noble will assume operatorship of PL001;
• Noble and Edison will earn a 75% and 25% working interest in the license, respectively, in return for drilling a exploration well in the license area during the current drilling campaign to test the Rhea prospect at no cost to Argos;
• Argos will retain an overriding royalty interest of 5% of gross production from all hydrocarbon discoveries developed within the license area. This interest is retained free and clear of the need to contribute to any future capital or operating expenditures incurred over the life of the license;
• Argos received $2.75 million in cash at conpletion and will receive a further $800,000 per annum from Jan. 1, 2016, through to receipt of the first royalties pursuant to the ORRI, amounts which are expected to be sufficient to meet all anticipated transaction costs and running costs through to receipt of the first royalties;
• The initial exploration well to test the Rhea prospect will fulfill the remaining work obligation on the second exploration term of the license;
• Should Noble and Edison elect to surrender the license following the drilling of the initial exploration well, the company has retained the right to have 100% of the working interest reassigned to it, subject to appropriate Falkland Islands Government approvals.
Ian Thomson, chairman of Argos, commented, “We are grateful to all those who have helped secure the various approvals required to bring this transaction to its successful completion. The innovative nature of the farm-out terms means that there is no material shareholder dilution or further material shareholder funding required by the company for any future investments in the license. We now look forward to the drilling of the exploration well on Rhea, which we expect to commence in the fourth quarter of this year. We believe that success at Rhea will de-risk other prospects in the license”.