Argos Resources Limited is pleased to confirm the completion by its wholly-owned subsidiary, Argos Exploration Limited, of a farmout agreement with Noble Energy Falklands Limited and Edison International S.p.A in respect of its Licence PL001.
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."
