BHP Billiton (LON:BLT) has decided to pull out of its Falklands oil exploration joint venture, but it could still keep a stake in the Loligo prospect.
The company previously pulled out of the southern licences after the unsuccessful Toroa well, which was drilled in early 2010. Now it is pulling out of the northern licences as well, which effectively ends the joint venture.
This morning Falkland Oil and Gas Ltd (LON:FOGL), BHP’s JV partner, told investors that although the mining group has pulled out of the venture it will still contribute towards the costs of drilling the Loligo well, by placing funds in an escrow account.
Now Billiton’s 51 percent stake in the project will revert back to FOGL who will then have full ownership of both the northern and southern licences.
Billiton retains the right to ‘back-in’ to the Loligo prospect should the upcoming well find hydrocarbons, this covers the Loligo development area only. It would have a maximum stake of 40 percent and it would have to contribute funds to future exploration and appraisal work.
FOGL also said it is close to finalising a rig contract for the deep-water drilling programme, which will include the Loligo well.
"We are pleased to have made good progress in our rig contract negotiations and to have reached an amicable agreement with our joint venture partner that gives FOGL control over its deepwater exploration programme, commencing with the drilling of the Loligo prospect," FOGL chief executive Tim Bushell said.
The AIM-listed explorer said that it now has cash resources of US$110 million, including the funds provided by Billiton. It said that this will be sufficient to fund the Loligo well and it will fulfil the Phase 1 work commitment for the Northern licence area.
Furthermore FOGL also said it is also considering other drilling options and its site survey programme is progressing well.
It said that it is considering the most appropriate means of financing and advancing these options, and it is in talks with several parties that are interested in farming into the licences.