Argos rejects Falklands drilling campaign

Argos Resources, the Falkland Islands focused oil company, has decided not to participate in the current drilling campaign in the North Falkland Basin.

The decision has seen the firm's share price plummet 30% in early trading.

As Argos explains in its update, the problem is twofold, firstly capital markets are very weak. Secondly, the rig that is currently in the area, the Ocean Guardian, only has restricted availability.

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What Argos would like to do is conduct a "comprehensive drilling programme". This would mean digging several wells around the area of its license. This would give the firm the best chance of making a significant oil discovery.

The trouble is it can't borrow the money it needs to conduct the drilling programme on its own and the alternative, a so called "farm in" agreement to share the proceeds from a find in exchange for help with drilling, would only allow for one well to be drilled.

For Ian Thomson, chairman of Argos, this is unacceptable: "We have rejected the option of drilling only one well at this time as we remain convinced of the value of the acreage and the merits of a more extensive drilling programme."

The plan now is to evaluate recent 3D seismic surveys and to tempt an industry partner into a farm in agreement by the second half of 2012.

BS