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Oct. 3 (Bloomberg) -- Falkland Oil & Gas Ltd.’s 61 million-pound ($99 million) bid for Desire Petroleum Plc will accelerate exploration off the Atlantic archipelago, said Falkland Oil Chief Executive Officer Tim Bushell.

The company will offer 0.6233 shares for each Desire share, valuing it at 17.76 pence with a premium of about 45 percent to yesterday’s closing price, Falkland Oil said today in a statement. It also signed partnerships with Premier Oil Plc and Rockhopper Exploration Plc to share costs for two exploration wells in Desire licenses to the north of the Falkland Islands.

The acquisition gives Falkland Oil access to the north, where Rockhopper has made the only commercial discovery so far, in the Sea Lion field. It will leave Falkland Oil with $170 million in cash, enough to fund Bushell’s five-well exploration plans starting in the fourth quarter of next year, he said.

Desire shares soared 33 percent to 16.25 pence in London, the most since October 2010. Trading volume was 41 times the three-month average. Falkland Oil fell 2.6 percent to 27.75 pence. Rockhopper rose 1.8 percent to 130.25 pence while Premier was little changed at 331.30 pence.

For Premier and Rockhopper shareholders “this is quite good news, it’s all coming forward,” Bushell said by phone.

Shared Rig

Falkland Islands drilling operators, such as Premier and Noble Energy Inc., plan to use one rig to share mobilization costs. Premier and Rockhopper are working on the archipelago’s largest projects, the Sea Lion development, planning to invest about $5 billion to pump first oil in 2018.

“It all depends on rig availability,” Premier CEO Simon Lockett said by phone. “And it all depends on which is the most economical way of doing it.” He forecast most exploration drilling will be completed in the “2014-2015 winter.”

“We like some of the stuff further south” of Sea Lion, Lockett said. “It’s cherry picking, it’s getting exactly what you want out of the deal” with Falkland Oil.

The premium Falkland Oil has agreed to pay for Desire reflects how undervalued it was by the market, Bushell said. Desire has a share of the Sea Lion field and adjustment area with resources of about 85 million barrels of oil, Bushell said. The area will have to be unitized between existing license holders ahead of the development.

“Desire has found barrels and has resources there,” he said. “We are actually getting them quite cheaply by doing this deal.”

Both companies’ shareholders will have to approve the transaction, which would see Falkland Oil holders owning 60 percent of the combined company. Bushell would be CEO.

Drilling Plans

Noble Energy and Edison SpA will fund two wells to the south and east of the Falklands at a cost of about $100 million a well. Premier and Rockhopper will fund two more wells targeting the Isobel/Elaine and the Jayne East prospect to the north of the archipelago at a cost of about $50 million a well, Bushell said.

In addition, Falkland Oil will contribute about $20 million to a fifth well targeting Zebedee, also in partnership with Premier and Rockhopper, the CEO said. Three wells will be drilled to the south of the Sea Lion field.

The difference in the well cost is “mainly because of the water depth,” Bushell said. The “south has much deeper water so the wells are more expensive.”

Premier and Rockhopper also plan to drill the Chatham well at the Sea Lion field, Lockett said.

To contact the reporter on this story: Eduard Gismatullin in London at

To contact the editor responsible for this story: Will Kennedy at

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