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On March 10th and 11th, citizens of the Falkland Islands will go to the ballot box to answer the question, "Do you wish the Falkland Islands to retain their current political status as an Overseas Territory of the United Kingdom?" The Falklands have long been a source of contention between Argentina and the UK with each country claiming ownership of the islands. Despite the islands' inhabitants of UK descent being more than 95% and the islands having passed to the British Crown in 1833, Argentina still argues the islands are theirs. Although 31 years have passed since its decisive defeat in the Falklands War, Argentina still enjoys rattling its saber about the sovereignty of the islands - especially when it serves a broader political purpose of distracting its people from economic woes at home. Argentine President Christina Kirchner often plays the role of demagogue as in the case of the recent sovereign debt hearings in New York and the arrest of the ARA Libertad. As Falklanders go to the polls, investors and management at the following companies will be closely monitoring the Argentine response as their firms have substantial financial interests in the area.

Oil & Gas E&P Companies - There are currently five companies exploring for oil in the offshore areas surrounding the Falkland Islands. Each is at different stages of exploration and levels of prospective recoverable resource. While a risk premium is most likely built into each of the stocks for Argentine bellicosity, a shooting war between Argentina and the UK could seriously jeopardize both their stock price and their ability to continue exploration.

1. Falkland Oil & Gas (OTCPK:FLKOF) - A high flying stock until last November, Falkland Oil & Gas announced disappointing results from its drilling campaign and the stock plunged nearly 50% as a result. Previously the company had discovered gas at another well and announced further gas findings in November, but investors and analysts doubt the amount present is currently viable at current prices. The company is continuing its exploration campaign and, considering the area it is exploring is the size of the North Sea, there is a chance it could hit oil in paying quantities with its next drilling campaign.

2. Borders & Southern (OTC:BDRSF) - Borders & Southern made waves earlier this year when the company announced a significant increase in its potential resource. A feasibility study by external consultants has found the resource to be commercially viable - Previously both investors and industry experts had believed the company's reserves were either too small or too remote to be economically recoverable. Given the harsh conditions at the bottom of the world, future wells would be excellent candidates for sub-sea production facilities. At current prices, the company's project could be worth $1.7bn.

3. Desire Petroleum (OTCPK:DSPMF) - Desire Petroleum currently has interests in 6 Falklands exploration licenses and an interest in 5 discoveries including Rockhopper's Seal Lion field. The company is currently working on farm-out deals to bring further investment into its licenses. It is planning a drilling campaign in late 2014 to follow-up on the 3-D seismic surveys it has completed in all of its licenses.

4. Rockhopper Exploration (OTCPK:RCKHF) - Named after a species of crested penguin found on the Falkland Islands, Rockhopper is the most commercially successful Falklands E&P venture thus far. Rockhopper's Sea Lion oil field is believed to hold 300m barrels of recoverable oil worth an estimated $27.3bn at current prices. The company is on track to begin production in 2017.

5. Argos Resources (OTC:AORGF) - Argos Resources holds a 100% interest in Licence PL001, an ~1,100 square kilometer field in the North Falklands Basin only 3km from the Sea Lion oil field. The company is the only E&P company in the Falklands to thus far not have drilled an exploratory well. MercoPress asserts that this is less a deliberate business decision than it was Argos "literally miss[ing] the boat" on the Ocean Guardian drilling rig that left the Falklands in early 2012. Argos has instead focused its efforts on 3-D seismic surveys that have produced 28 prospects with a best estimate of 2.1m recoverable barrels.

Partners & Service Providers

6. Noble Energy (NYSE:NBL) - Noble Energy is a 35% partner in FOGL's southern and northern area basins. The company is no stranger to operating in politically sensitive areas as it discovered the Aphrodite gas field off Cyprus in December 2011. Due to the disappointing nature of FOGL's discoveries thus far, Noble Energy most likely has the least to lose in terms of shareholder value if the Falklands become embroiled in a shooting war with Argentina.

7. Premier Oil (OTC:PMOIF) - Premier Oil struck a $1bn deal with Rockhopper last July for development of Rockhopper's Sea Lion oil field. In exchange for 60% of Rockhopper's existing and future fields, Premier paid Rockhopper $231m in cash, pledged to contribute $722m towards development costs and to carry a net $48m of the exploration costs. In addition, the companies have agreed to future cooperation in the other areas of the North Falkland Basin, South Africa, Namibia and Southern Mozambique. Premier has already been threatened with legal action by Argentina for its deal with Rockhopper.

8. Diamond Offshore Drilling (NYSE:DO) - Diamond Offshore Drilling operates the Ocean Guardian which drilled wells in Rockhopper's Sea Lion field. Like Ocean Rig below, Diamond Offshore Drilling charters its drilling rigs out to E&P companies and as a result will only lose potential new charters if oil and gas exploration is suspended due to increased tensions or outright hostilities.

9. Ocean Rig (NASDAQ:ORIG) - Although not currently operating in the Falklands, Ocean Rig's Leiv Eirikson drilled four wells for FOGL and Borders & Southern last year. The Leiv Eirikson is now under a three year contract in Norway, however, Ocean Rig operates a similar rig and four smaller rigs which leaves open the possibility it will return to conduct further operations for FOGL, Borders & Southern or another Falklands E&P company.

Other

10. Carnival Cruise Lines (NYSE:CCL) - As I've written previously, Carnival Cruise Lines operates multiple cruise lines catering to specific clientele. Among those lines are legacy passenger lines Holland America and Pacific & Orient (P&O). Both lines have reported that they will either not visit the Falklands this year (Holland America) or visit the Falklands and not Argentina (P&O) due to concerns over treatment of ships and passengers by the Argentine government. Further tensions between Argentina and the UK could force Carnival to continue to forgo revenue from cruises to the Falklands and Argentina.

Source: 10 Companies Affected By The Falkland Islands Referendum