Argos Resources has successfully secured a 12-month extension to the second term of its Production Licence in the North Falkland Basin, the company announced this week. The extension, which runs until 1 May 2022, was approved by the Falkland Islands Government’s Executive Council on March 24.
Ian Thompson, Chairman of Argos, said, “We are very pleased that the Falkland Islands Government has awarded a licence extension. This reflects the collaborative approach we seek to maintain with the government. Our intention is to secure partners and commence exploration drilling as soon as possible.”
Stephen Luxton, Director of Mineral Resources for the Falkland Islands Government, told MercoPress that the decision reflected the disruption caused by COVID-19: “As part of another approval it was agreed during 2020 that in view of the massive disruption that COVID-19 caused to the oil industry globally, particularly to new ventures commitments where virtually all new investment was suspended worldwide, a discretionary licence extension would be considered if existing licensees were to apply for it. Argos applied for this extension in respect of PL001, and a 12 month extension was recently granted,” he said.
Argos “remains engaged in discussions”
In a press release made earlier this month Argos Resources said, “it remains engaged in discussions with counterparties who have expressed an interest in participating in drilling Licence PL001.”
However the company also noted that a drop in oil prices caused by increased competition from OPEC for market share and decreased demand due to the COVID pandemic has led operators to reduce costs and cut capital expenditure. “Against this backdrop, whilst the Company's discussions with potential farm-in partners remain ongoing, the Board believes it may be some time before any farm-in partner's expression of interest is translated into commitments,” the company said.
News of the licence extension comes as the company prepares to hold a general meeting on Friday 30 April. Among the issues to be tabled at the meeting is the approval of a $550,000 subscription share issue announced by the company on 7 April. In a letter to shareholders the company’s Executive Chairman said the fundraise sought to progress farm-in discussions and satisfy the terms of the extension: “In order to enable the Company to progress its discussions with potential farm-in partners, on 10 February 2021 the Board requested that the Falklands Islands Government grant a 12 month extension to the second term of Licence PL001, which is currently due to expire on 1 May 2021.
The Falkland Islands Government has said that as part of its consideration of this request, the Company must demonstrate that it has, or will secure, sufficient funds to meet its working capital requirements until at least the period of the extension requested.
“The net proceeds of the Fundraise, along with the Company's existing cash of £235,000 at 25 March 2021, will provide working capital for the Group until at least 1 May 2022, being the requested extension date of Licence PL001.”