A US $99 million deal has seen Falkland Oil and Gas Ltd. (FOGL) acquire the entire share capital of fellow Falkland-focused explorer Desire Petroleum in exchange for FOGL shares, in a move that will drive forward a crucial deepwater exploration drilling campaign in the South Atlantic.

FOGL also signed a Heads of Agreement with independents Premier Oil and Rockhopper Exploration for a farm-out of its interests in licences PL004a and PL004c. Premier and Rockhopper will farm-in to the blocks in exchange for fully funding the newly-combined entity’s share of the cost of two wildcat wells – one in each licence.

Premier and Rockhopper are of course under way with plans for a two-phase development of the islands’ first oil project, Sea Lion, via a Floating Production, Storage and Offloading (FPSO) vessel.

Completion of the farm-out remains subject to approvals from the Falkland Islands government and completion of related definitive documents. Following the combination FOGL shareholders would hold 60% of the new company, with Desire’s shareholders holding the remainder.

The planned drilling programme will see five wells spudded, including two in the South Falkland basin in partnership with Noble Energy and Edison International (targeting the Jayne and Isobel prospects), and three in the North Falkland basin (which includes the Sea Lion area), one targeting the Zebedee prospect.

Following the farm-out deal FOGL/Desire will hold 40% in both North Falkland licences, having held 92.5% of PL004a and 75% of PL004c. The wells will be drilled across three basins, all testing different play types.

Offshore