Falkland Oil and Gas has funding in place

Falkland Oil and Gas, one of the companies at the centre of the heated political row over UK companies drilling for oil in the Falkland Islands’ territorial waters, confirmed yesterday that it has sufficient cash to fund its exploration programme in the region.

The company said that it has $93.5m on its balance sheet, most of which will be used to pay for its drilling project to the south east of the islands. The programme is expected to start by the middle of next month after Desire Petroleum, the company using the Ocean Guardian rig to the north of the islands, finishes its drilling campaign. The rig has been towed 8,000 miles from the Cromarty Firth in Scotland.

The cash reserves, which are up on the $18.8m reported this time last year, come largely thanks to Falkland Oil and Gas’s £50m a rights issue last October. The other groups now operating in the region also asked investors for additional funding. Desire raised £42m last September, before Rockhopper asked investors for £50m. Borders & Southern, another group operating in the Falklands’ waters, raised £113.1m to fund a three-well programme.

The activity has led to heightened tensions between Argentina, which claims sovereignty over the islands, and the UK. Last week, Buenos Aires secured a communiqué denouncing Britain’s rule over the Falklands at a meeting of Latin American and Caribbean leaders. At the meeting, Venezuela’s president Hugo Chavez appealed directly to The Queen to give up control of the islands.

Falkland Oil and Gas’s announcement came as part of its 2009 full results. “2010 will be a momentous year for Falkland Oil and Gas,” said chairman Richard Liddell in a statement. “It will see the culmination of the work undertaken since the company was founded in 2004, with the commencement of exploration drilling in our licences.” The group has refused interview requests since disclosing its drilling plans.

Analysts reckon there is about a 20 per cent chance of any of the groups planning to drill in the area, finding any oil.