Argos Resources Limited through its wholly-owned subsidiary, Argos Exploration Limited, has entered into a farmout agreement with Noble Energy Falklands Limited and Edison International S.p.A which will allow exploration drilling on its Licence PL001, covering an area of approximately 1,126 square kilometres in the North Falkland Basin, to proceed as part of the current 2015 drilling programme.
Highlights
- Noble will assume operatorship of Licence PL001 from Argos;
- Noble and Edison will earn a 75% and 25% working interest in the Licence respectively;
- Noble and Edison have committed to drill an exploration well in the Licence Area during the current
drilling campaign at no cost to Argos;
- Argos will retain an overriding royalty interest of 5% of gross revenues from all hydrocarbon discoveries
developed within the Licence (the "ORRI");
- Argos will have no requirement to contribute to any future capital or operating expenditures incurred
over the life of the Licence;
- Argos will receive US$2.75 million in cash upon completion of the Transaction and US$800,000 per
annum from 1 January 2016 through to receipt of the first royalty payment pursuant to the ORRI (if any)
as reimbursement for certain historic costs incurred by Argos in relation to the maintenance of the
Licence and the acquisition of certain seismic and other data in respect of the Licence Area;
- The proceeds are expected to be sufficient to meet all anticipated transaction costs and running costs
through to receipt of the first such royalty payment pursuant to the terms of the ORRI;
- The initial exploration well will test the Rhea prospect and 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, Argos has retained the right to have 100% of the working interest reassigned to it, subject to
appropriate Falkland Islands Government approvals; and
- Completion of the Transaction is subject to Shareholder, government, regulatory and partner approvals.
Completion of the Transaction is subject to the consent of Shareholders being obtained at a General Meeting of the Company and a notice convening a General Meeting for 5.00 p.m. on 4 May 2015 at Falkland Islands Chamber of Commerce, Stanley, Falkland Islands to consider the Resolution set out at the end of the Circular will be posted to Shareholders on 17 April 2015.
Ian Thomson, Chairman of Argos, commented:
"We are delighted to have entered into this agreement with such highly-regarded and financially robust partners as Noble and Edison. The innovative nature of the transaction means that there is no material Shareholder dilution or further Shareholder funding required by the Company for any future investments in Licence PL001. In addition, with ongoing working capital requirements catered for by the terms of this agreement and the Second Exploration Term work obligation on our Three Exploration Term Licence now covered, the financial position and outlook for the Company is robust.
We are pleased to be participating in the 2015 drilling campaign in the North Falkland Basin, which is already underway, and look forward to the drilling of the first exploration well to test the Rhea Stack. Rhea has always been our top-ranked prospect in which we estimate a resource potential of 449 million barrels of recoverable oil. We are especially delighted that, following their own extensive technical work, Noble and Edison have selected this as their first exploration target on the Licence. We believe that success at Rhea will de-risk other prospects in the Licence.
I am sure Shareholders will share in the Board's excitement at this important milestone in the Company's life. The Board recognises and is grateful for the continuing support and loyalty shown by Shareholders. The Company will continue to evaluate further investment opportunities in its core business area."
