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Noble Energy has farmed into frontier exploration blocks offshore the Falkland Islands in the South Atlantic, with the US independent expected to invest between US $180-230 million over the next three years.
The company has acquired a 35% interest in blocks both to the north and south of the islands covering around 40,000 sq km (10 million acres) operated by UK explorer FOGL (Falklands Oil & Gas Ltd.).
FOGL will continue as operator of the entire northern area licenses until early 2013, when Noble will take over. Two areas will be excluded from the farm-in, FOGL added. These 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 operatorship with Edison International holding the remaining 25% interest. Noble will, however, be a participant in the excluded areas in other horizons of interest.
In the southern area licenses, where Noble also will have a 35% interest, FOGL will again continue to act as operator until no later than early 2014, when Noble will again take over the operatorship.
FOGL added it will be proposing to its partners that the Scotia prospect in the northern area licenses be drilled in the fourth quarter of this year immediately following the Loligo wildcat well 42/07-01, which is being drilled by the Leiv Eriksson semisub rig around 200 km (124 miles) east of the islands. The current probe is expected to take around 60 days to drill.
Noble will contributed towards 60% of the Scotia well costs, including associated costs incurred last year. It also will make a $25 million cash contribution in January 2013 predominantly relating to certain historical costs, pay 60% of the costs of a commitment well in the southern area licenses area, and 45% of the costs of a discretionary exploration well should Noble choose to participate.
The northern area licenses interests following the farm-in will be: FOGL (40%), Noble (35%, Operator), and Edison (25%). In the southern area licenses the interests are: FOGO (52.5%, Operator), Noble (35%), and Edison (12.5%).
Edison itself only recently farmed into the licenses, and FOGL says this latest deal substantially improves its financial position. It said that in the event that the Loligo and Scotia exploration wells are drilled within budget, it is estimated that on completion of the wells the company’s cash balances will not be less than $200 million, which will give it 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 licenses 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,” it said.
Tim Bushell, chief executive of FOGL, said, “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. 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.”
Charles D. Davidson, Noble Energy’s chairman and CEO, said, “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 unrisked gross resource potential exceeding 6 billion barrels of oil. Once completed, this transaction will increase our worldwide leasehold by over 70% gross and 40% net.”