www.smh.com.au/business/...n-falklands-well-20100629-zj7l.html
Share price takes off for BHP's partner in Falklands well
BARRY FITZGERALD
June 30, 2010
THE Australian market has been left to wonder if BHP Billiton has made a big oil discovery off the Falkland Islands in the South Atlantic after the share price of its junior partner in an exploration well took off.
Shares in Falkland Oil and Gas surged 12 per cent in London, valuing BHP's 49 per cent partner in the Toroa 1 exploration well at more than $590 million and prompting a ''please explain'' from regulators.
Falkland Oil said it knew of no reason for the price surge but noted that it expected to announce preliminary results from the well in the week starting on July 5. BHP's Melbourne office said it had nothing to add to the Falkland Oil statement.
It is common for the share price of junior companies involved in a high-impact well like Toroa to surge ahead of the announcement of preliminary results. More often than not, it reflects a punt by investors on the results being positive rather than trading based on some inside knowledge.
BHP is the operator of the $48 million exploration well, the first to be drilled in the East Falklands Basin off the Falklands, or Islas Malvinas, as Argentina prefers to call the self-governing British territory.
Success at Toroa is bound to agitate Argentina. It has claimed sovereignty over the Falklands since 1833 and pushed the point in 1982 with an invasion, and a humiliating defeat in the two-month Falklands War.
Britain has other ideas. Its Prime Minister, David Cameron, said during the G20 summit at the weekend that Britain would never back down over the Falklands.
The London newspaper The Daily Telegraph reported that Mr Cameron had stressed in Toronto that Britain's claim to ''the sovereignty of the Falklands has not changed and will not change''.
BHP/Falkland Oil's well is the third in a series being drilled by it and other operators. The second well was an oil discovery, prompting Argentina to threaten retaliation - in Argentina - against the companies involved.
Toroa has the potential - and that is all it is - to be a big discovery (a mean reserve potential of 1.7 billion barrels unrisked).
The Ocean Guardian rig is drilling towards the planned depth of the well, 2700 metres below sea level. The rig was upgraded to be able to drill in up to 600 metres of water. And before it began the Falklands campaign, its blowout preventer system was upgraded, as was its anchoring system.