10 Feb 2009 10:26
| For immediate release. | 10 February 2009 |
Desire Petroleum plc
("Desire" or "the Company")
Operational Update
Environmental Impact Assessment and Rig Update
Desire Petroleum plc (AIM:DES), the exploration company focusing on the North Falkland Basin, is pleased to announce an update on its activities.
Submission of Environmental Impact Assessment (EIA)
The Environmental Impact Assessment covering its southern licences in Tranches I and L and PL 034 is now substantially complete and will be ready shortly for submission to the Falkland Islands Government (FIG) for approval. This is slightly behind schedule due to a delay in receiving the results of the analysis of the benthic samples acquired last year. Desire already has a FIG approved EIA covering its northern licences in Tranches C and D.
A further update to this progress will be provided in the Company's Preliminary Results announcement in April 2009.
Update on Global Rig Market
The global economic downturn has had a marked effect on the drilling rig market, with utilisation figures decreasing for all types of rig. Most availability that has appeared over the last three months is on the basis of sub lease on existing contracts, where the holder of the term contract is looking to reduce exploration expenditure, thereby creating gaps in their programmes. Whilst some of these opportunities are attractive from a rig and timing standpoint, the rates for these units remain at the original contracted rate, as the incumbent operators are currently reticent to subsidise other drilling activities outside of their own.
However, Desire is seeing the first sign of rigs becoming available on the open market, either through contract default or end of primary contract terms, and more importantly the first indications that rates are reducing, albeit slowly. The forecast for rig activity throughout 2009 is for a reduction which is supported by the willingness of contractors to enter into discussions that were not possible three months ago. Several discussions are ongoing at the present time and it is envisaged more opportunities will present themselves in the near future. There are many factors to be taken into consideration before executing a rig contract, many of these exacerbated further by the location of the Falkland Islands, however, the most important of these remains the commercial terms. Given the information currently available to Desire it would be remiss not to evaluate all opportunities fully in order to ensure shareholder value is maximised. With US$38 million in cash and a likely four well programme,the Company is in a strong position to negotiate a very attractive contract.
Despite the falling oil price the fundamentals of Desire's projects remain unchanged and with our very attractive prospects the economics of any discoveries will be exciting.
The Board therefore remains enthusiastic about the company's opportunities and remain firmly committed to the overriding strategy, which is unchanged, even in the current economic climate, to explore for oil and gas in the North Falkland Basin.
Accounting Change
Following a review during the year, Desire has changed its functional and presentation currency to US dollars and the 2008 Annual Report will be presented in US dollars. This will better reflect the primary economic environment in which we operate.
Dr Colin Phipps
It is with great sadness that we have to report that Dr Colin Phipps passed away on 10 January 2009. Colin was the founder of Desire and Chairman until he was forced to retire due to ill health last year. Colin believed passionately in the potential of the Falklands and it was his single-minded determination that kept Desire going after the drilling round in 1998. Unfortunately he did not live to see the fulfillment of his dream of finding commercial hydrocarbons in the Falklands. However his belief, commitment and passion for exploration will be carried on. A full obituary will appear on the website and the annual report.
Commenting on Desire's current progress Stephen Phipps, Chairman of Desire, said:
"The Board of Desire remains confident of securing a drilling rig which will not only maximise our activity given our current cash balance, but also to maximize value for all our shareholders. Indications in the rig market continue to be increasingly positive towards fulfilling our objectives and progress will be announced, when a firm contract has been agreed.
"Our work on the EIA for the additional tranches is nearly complete and we are delighted that it is close to being formally submitted to the Falkland Islands Government."
For further information please contact:
| Desire Petroleum plc | |
| Stephen Phipps, Chairman Ian Duncan, Chief Executive Officer | 020 7436 0423 |
| Seymour Pierce Limited Jonathan Wright Richard Redmayne | 020 7107 8000 |
| Buchanan Communications | 020 7466 5000 |
| Ben Willey Ben Romney |