It's a measure of how excited investors are getting about oil in the Falklands that The Sun newspaper had a full page devoted to the subject this week. This came as the Ocean Guardian drilling rig contracted by Desire Petroleum was towed out of the Cromarty Firth in Scotland for its two-month journey down to the South Atlantic. Desire (with partner Arcadia) and fellow North basin explorer Rockhopper Exploration plan a four-well drilling campaign beginning in early February 2010, with options to drill a further six.
With the rig costing an estimated $16m (£9.6m) to transport to the Falklands and back again, the explorers are keen to drill as many wells as funds allow. Fortunately for them, following a series of recent exploration successes around the world, their story continues to appeal to investors, culminating in Borders & Southern (which is exploring the South basin with Falkland Oil & Gas (FOGL) and its partner BHP) raising £113m last week - more than its market capitalisation. This placing followed recent fund raisings by the other three explorers that raised in aggregate more than £140m.
Ironically, given the keen interest that allowed it to complete such a large fund raising with little dilution, Borders is likely to be the last of the quartet to drill. The semi-submersible Ocean Guardian rig normally drills in water depths up to 450m, which is perfect for the North basin prospects of Desire and Rockhopper. The prospects in the South basin are substantially larger than those in the north, but in deeper water. However, the Ocean Guardian can be modified to operate in slightly deeper water, which could allow FOGL to drill Toroa, a large but relatively shallow (600m) prospect as part of the initial campaign. FOGL's operator partner BHP is now in discussions with Desire to take the third slot for Toroa, following the initial wells to be drilled by Desire and Rockhopper.
FOGL/BHP also plans to secure a deepwater rig or drillship to mount a more concerted assault on the South basin in late 2010 or early 2011, which it would probably share with Borders to minimise rig costs.
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