Licence PL001 Farmout Agreement Completed

RNS Number : 7003Z

Argos Resources Ltd

21 September 2015

 

21 September 2015

Argos Resources Limited

LICENCE PL001 FARMOUT AGREEMENT COMPLETED

Argos Resources Limited (AIM: ARG.L) (the "Company"), the Falkland Islands based company focussed on the North Falkland Basin, is pleased to confirm the completion by its wholly-owned subsidiary, Argos Exploration Limited, of a farmout agreement (the "Agreement") with Noble Energy Falklands Limited ("Noble") and Edison International S.p.A ("Edison") in respect of its Licence PL001 (the "Licence").

The Company announced the farmout 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 Licence, which covers an area of approximately 1,126 square kilometres in the North Falkland Basin (the "Licence Area"), to proceed as part of the current 2015 drilling programme.

Under the terms of the Agreement:

·	Noble will assume operatorship of Licence PL001;
·	Noble and Edison will earn a 75 percent and 25 percent working interest in the Licence respectively in return for drilling an exploration well in the Licence Area during the current drilling campaign to test the Rhea prospect* at no cost to the Company;
·	The Company will retain an overriding royalty interest of 5 percent of gross production from all hydrocarbon discoveries developed within the Licence Area (the "ORRI"). 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 Licence;
·	The Company received US$2.75 million in cash at completion and will receive a further US$800,000 per annum from 1 January 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 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, the Company has retained the right to have 100 percent of the working interest reassigned to it, subject to appropriate Falkland Islands Government approvals.

* Rhea has prospective recoverable (P50) resources of 443 million barrels of oil.

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 farmout terms means that there is no material shareholder dilution or further material shareholder funding required by the Company for any future investments in the Licence.  

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 Licence."

For further information:

Argos Resources Limited

([phone])

www.argosresources.com

Ian Thomson, Chairman

John Hogan, Managing Director

Nomura International plc (Financial Adviser)

([phone])

John Bigham

Henry Phillips

Wouter Leemhuis

Cenkos Securities plc (Nomad & Broker)

Derrick Lee ([phone])

Neil McDonald ([phone])

Citigate Dewe Rogerson (Communications Adviser)

([phone])

Martin Jackson

Shabnam Bashir

Nomura International plc, which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and Prudential Regulation Authority, is acting exclusively for Argos Resources Limited and no one else in connection with the Agreement and will not be responsible to anyone other than Argos Resources Limited for providing the protections afforded to clients of Nomura International plc nor for providing advice in connection with the Agreement or this announcement or any matter referred to herein.

Notes to Editors

Argos Resources is an oil and gas exploration company listed on AIM and based in the Falkland Islands. The Company's principal asset is its interest in production licence PL001 covering an area of approximately 1,126 square kilometres in the North Falkland Basin.

A 3D seismic survey was acquired in early 2011 covering the entire licence area. The quality of the seismic data acquired is excellent and interpretation of the final processed data has led to the identification of 52 prospects and 40 leads within the licence area. A Competent Person's Report issued in July 2013 describes the 52 prospects. These prospects have 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.

The licence area adjoins licences PL032 and PL004b. The Sea Lion oil discovery was made in licence PL032 in 2010 and a total of nine wells have now been drilled to complete the appraisal of this large discovery. An extension of the Sea Lion field into licence PL004b was proven by drilling in late 2011 and additional shallower stacked oil and gas accumulations above the Sea Lion field have also been proven in the Casper, Casper South and Beverley discoveries.

The presence of gas in these latest discoveries, together with gas in the Johnson discovery and gas condensate in the Liz discovery to the south points to a second deeper source rock generating commercial volumes of hydrocarbons into the basin, in addition to the Lower Cretaceous oil source rock.

The Company has a strong and experienced management team with extensive experience in both the oil and gas industry and the Falkland Islands.

This statement has been approved by John Hogan, Managing Director of Argos Resources and a qualified geologist with over 40 years of experience in the petroleum industry.

 

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