.

FOGL COS is only 10% very poor, very slim chance of hitting oil

BOR COS is over 20% hence have a better chance of hitting oil hence higher market cap higher.

http://ftalphaville.ft.com/blog/2012/01/13/832461/markets-live/



Falkland Oil And Gas Ltd (FOGL:LSE): Last: 46.75, down 3.75 (-7.43%), High: 52.00, Low: 43.00, Volume: 14.89m

BE Sector watcher’s had a look at this one.

BE

48.5m equity issue at 43p/share, a 15% discount to yesterday’s closing price. It’s a big raise, with the new shares representing 54% of the existing shareholder base. Although FOGL already had around £70m at interim results in mid-year, the additional cash will make a material difference to its impending drilling campaign in the southern Falklands. Previously the group only had sufficient cash to drill two shallow wells, whereas now it can drill much deeper prospects. We estimate that the wells will cost around $60-70m each. The first well, Loligo, is targeting 4.7 billion barrels of hydrocarbons, over half of which is in the deeper targets (which admittedly look more gas-prone than oil-prone).

On an assumed NPV of $10-12/barrel, an oil discovery therefore has the potential to be worth $50-60bn, i.e. a quite staggering amount in the context of FOGL’s market cap of around $250m. The group will drill its two wells immediately following two from Borders & Southern, which is due to take delivery of the Liev Eiriksson deepwater rig later this month. Hence over the next six months or so, there will be a total of four wells being drilled in the basin, targeting around 7-8 billion barrels of hydrocarbons. Whilst clearly high risk, I’d be tempted to take small positions in both FOGL and BOR.

PM (Banks underwriting unicredit rights expect 90-95% take up — bank consortium source — rts)

PM Tight discount that for Falklands

BE Yeah – that’s what I thought.

Very high volume turn over off FOGL shares today Marky and a lot of the placing shares will have already been sold and bought by the 18th.

The CoS is very low, like all these wildcat Wells, but the sp should surely rise into BOR/FOGL spud time as the upside of another Sealion stroke of luck will pull in a lot of punters....how many shares you hold at drill results time is the normal issue!

FOGL CoS is not low.


Toroa was 3.8% CoS and it failed.

Loligo, back in 2006, pre CSEM, pre more seismic studies etc.. had a CoS of 11.5% as rated by TRACS (Nov 2006).

At the AGM recently the board said the CoS was now, after all the new work from 2006, at the 20% level for Loligo.

Scotia well, given the excellent sands at Toroa and the implications for Scotia deep well, is also around 20% CoS imo.

10% CoS V 90% chance of failure = very low CoS

20% CoS V 80% chance of failure = very low CoS

You will not find any wildcat well with over 30% CoS and yet many do strike oil.

20% is pretty darn decent, compare that with Toroa which was 3.8% CoS and failed......

You only have to look at ARG - who could not raise cash. Look at XEL who are struggling like mad to raise development cash and are using the equity sharks. RKH which is struggling to find any partner interested in the small find up north.

FOGL have done the right thing.

They are full funded for 2 deep wells, allowing them to drill Scotia if Loligo fails.

The crafty side of that is that if Loligo strikes oil they can do an appraisal well on Loligo - they now have the funds and can forget Scotia for 2012.

This is the upside, not talked about, but very openly there now - they have sufficient funds to appraise a Loligo strike and have lots of cash left over.

This allows them to secure a very good farm out deal on Loligo AFTER the drill results - no need to rush in before.

FOGL are also cheap in terms of others. If you compare BOR and FOGL (post placing) now - FOGL have lots more potential in terms of recoverable barrels and yet are well below the BOR market cap.

BOR

Number of shares: 428.58m
Share Price: 70.75p
Cash: $197 million / £128.88m
Market Cap:£306.43m

FOGL

Number of shares: 320m
Share Price: 45p
Cash: $223 million / £145.89m
Market cap: £144m


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Post this placing this is where we stand imo :

BOR

Number of shares: 428.58m
Share Price: 70.75p
Cash: $197 million / £128.88m
Market Cap:£306.43m

FOGL

Number of shares: 320m
Share Price: 45p
Cash: $223 million / £145.89m
Market cap: £144m



Loligo risked per share is now £13.13
Loligo unrisked per share is now £89 (based on P50 4.7 billion recoverable bls)

Scotia risked per share is now £2.79
Scotia unrisked per share is now £18.93 (based on P50 1 billion recoverable bls)

FOGL main prospects risked is now £44.71 per share
FOGL main prospects unrisked is now £303 per share

And for fun :

FOGL top 100 prospects is risked £224.98 per share
FOGL top 100 prospects unrisked is now £1524.76 per share

this was to be expected after placing - fogl are only cheap if they find something other than water and preferably not gas - high risk punt especially with the argies breathing fire - dont laugh but the argie squid wars are just a start.....

& new shares represent 54% of existing shareholder base.........................

GAS is fine - Loligo is so big, over 10TCF is commercially viable for LNG.


If Loligo were gas all the way, by my calcs it would be :

Recoverable 33.61 TCF of gas and 1.25 billion barrels of condensate (P50 basis)

If Loligo top were oil of some 2.153 Billion recoverable barrels then the bottom could be gas with 18.2TCF of recoverable gas and some 677 million barrels of recoverable condensate (P50 basis).

Top Loligo is T1+T1 deep - bottom is Trig/Trig Deep and Three Bears.


So :

Top oil and bottom gas/condensate is commercial.

Top oil and bottom oil is commercial.

Top gas/condensate and bottom gas/condensate is commercial.

Top DRY and bottom oil is commercial

Top DRY and bottom gas/condensate is commercial

Top gas/condensate and bottom DRY is commercial


Oil is commercial / Gas is commercial if over 10TCF in size (recoverable)


So pretty much all combinations apart from DRY/DRY is commercial, and you can see why they wanted to drill the deep well, obvious really.

time will tell ..... the armchair experts from one camp or the other will be proved right

cynic

have a look on the Cove thread , names of bid company's.

will do - have followed that one idly from time to time

Doesn't Loligo look scrumptious :)



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Cairn interest in RKH according to DF (the man hated by many DES holders) at the Sunday Times.

http://www.bloomberg.com/news/2012-01-15/cairn-starts-talks-with-rockhopper-on-falkland-oil-times-says.html

Looks like trying to drum up sum industry interest ahead of the data room opening.

But Cairn confirmed interest in the Falklands will remove some of the discount applied to all Falklands companies, so lets hope there is some truth in it.

Loligo - 2nd biggest drill in the world.......... we know that chap, and why we hold loads of FOGL :)


http://www.bloomberg.com/news/2012-01-19/britain-s-oil-grab-in-falkland-islands-seen-tripling-u-k-reserves-energy.html


Britain’s Oil Grab in Falkland Islands Seen Tripling U.K. Reserves: Energy

By Brian Swint - Jan 19, 2012 7:01 AM GMT+0700 .

Thirty years after Margaret Thatcher fought a 74-day war with Argentina over the Falkland Islands, the prospect of an oil boom is reviving tensions.

Oil explorers are targeting 8.3 billion barrels in the waters around the islands this year, three times the U.K.’s reserves. Borders & Southern Plc will drill the Stebbing prospect next month, one of three Falkland wells that Morgan Stanley ranks among the world’s top 15 offshore prospects this year. Meanwhile, Rockhopper Exploration Plc (RKH) is seeking $2 billion from a larger oil company to develop the Sea Lion field, the islands’ first economically viable oil find.

“The area is underexplored and highly prospective,” said New York-based Morgan Stanley analyst Evan Calio. “These could be like the high-impact wells in Ghana and Brazil a few years ago that opened up a whole host of basins.”

A major drilling success will further raise the political temperature as Argentina maintains its claim over the U.K’s South Atlantic territory, 300 miles (483 kilometers) from the Latin American coast. President Cristina Kirchner said Britain is taking her country’s resources, while Thatcher’s successor David Cameron yesterday accused Argentina of a “colonial” attitude that didn’t account for islanders’ rights.

The world’s largest oil companies like Exxon Mobil Corp. and Royal Dutch Shell Plc face a dilemma: whether the potential of a virgin basin outweigh the risk of a worsening international dispute. While producers with interests in Argentina, such as BP Plc, may be put off, others will want to participate, said Tim Bushell, chief executive officer of Falkland Oil & Gas Plc, who’s looking for drilling partners.

‘Sabre Rattling’

“Big oil companies are used to dealing with political risk, and bigger ones than some sabre rattling by Argentina,” Bushell said in a telephone interview, who decline to name the companies he’s talking to. “For every BP, there are other major companies that don’t have an interest in Argentina.”

The Falkland Island government, which manages the territory’s mineral rights for the 2,955 islanders, says the big producers are interested and talking to the companies already active in the region. Of the five U.K.-based explorers that have drilled or plan wells, the largest, Rockhopper, has a market value of 899 million pounds ($1.4 billion).

“The Falklands is at a stage where a big company can take a large share in what could be a big oil province,” said Stephen Luxton, the Falkland Islands’ director of mineral resources. “There is an active program of marketing by the companies here. There are discussions going on, though we can’t name names.”

Patagonian Squid

Falkland Oil & Gas plans to drill the Loligo prospect later this year, a well targeting 4.7 billion barrels of oil. Named after a Patagonian squid, it’s the second-most prospective well planned worldwide this year after one in Namibia, according to Morgan Stanley. The company’s Darwin prospect will follow and ranks sixth on the U.S. bank’s list.

Borders & Southern will start drilling the Darwin prospect by the end of January, which seismic surveys suggest may hold as much as 760 million barrels of oil and 3 trillion cubic feet of gas. Stebbing, the target of the company’s second well, may hold as much as 1.2 billion barrels.

Together, the four wells planned for the Falklands this year are searching for about 8.3 billion barrels of oil. The Jubilee field, which was discovered in 2007 and propelled Ghana into one of the world’s top 50 oil states, holds 370 million barrels of reserves. Brazil’s Lula field, drilled in 2006, holds an estimated 6.5 billion barrels of oil equivalent.

‘New Province’

“There could be significant volumes down there and it would open up a new hydrocarbon province,” Borders & Southern CEO Howard Obee, said in an interview. If our first two wells are successful, “we’d like to do a big drilling program, not only to appraise what we’d find but also drill up additional prospects. To do that, we’d need quite a bit of money.”

While the company will probably be able to sell more shares to determine the size of a discovery in this campaign, it may have to sell stakes in prospects to develop them, said Tracy Mackenzie, an analyst at broker Brewin Dolphin in Edinburgh. Borders & Southern holds a 100 percent interest in its fields.

Rockhopper says its Sea Lion discovery, made in 2010 and which may have more than 400 million barrels of recoverable oil, is commercial and will be developed. Chairman Pierre Jungels said last month that the company is showing drilling to potential partners. The company this month ended a 10-well campaign that lasted two years. It has $100 million in cash after raising 46.5 million pounds ($72 million) in a share placing in October.

Floating Production

That’s just a fraction of the $2 billion the company reckons it will need to get the oil to market. Developers will have to build a floating production and storage unit to load the crude on to tankers. Cairn Energy Plc, Premier Oil Plc and Noble Corp. may be interested in investing, Bank of America Corp. analyst Alejandro Demichelis wrote in a Jan. 16 note.

Spokesmen for BP, Shell, Premier and Cairn declined to comment on whether they’re interested in investing in the Falklands. Exxon and Noble Energy didn’t respond to e-mailed requests for comment.

All the supplies will probably have to come from Europe, about 8,000 miles away. The Falklands consist of two large islands and more than 700 smaller ones, home to the colorful penguins that give Rockhopper its name.

Argentina’s Invasion

Argentina maintains that its sovereignty over the Islands was interrupted in 1833, when British forces occupied the Malvinas Islands, expelling the Argentine population, an act to which the people and government of Argentina never consented. Thatcher sent a task force to retake the islands after Argentina’s military dictatorship invaded the territory on April 2, 1982.

Earlier drilling campaigns show the risk of failure in unproven oil provinces. Shell drilled on the northern side of the islands in the 1990s and found traces of oil before abandoning the prospect in 1998 as crude prices fell to around $10 a barrel. Interest in the region revived as oil prices rose higher than $100 a barrel, though Shell had disposed of its acreage.

Desire Petroleum Plc (DES), which has licenses adjacent to Rockhopper’s, drilled six dry wells in a failed campaign that ended in April. Argos Resources Plc, which also holds licenses in the region, decided not to use a rig after Rockhopper because it couldn’t raise enough money.

The global financial crisis has made it harder for oil explorers to borrow from banks and kept a lid on the amount companies can raise on the market. The oil and gas index of London’s Alternative Investment Market, where all five Falkland explorers are listed, fell 35 percent last year.

That leaves larger companies as the most likely sponsors in the region, and the government said some of them are already involved in talks.

“The majors are always going to be interested when a new basins come on the map,” Morgan Stanley’s Calio said.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

A biggie getting involved would boost all Falklands companies :)

http://www.thesun.co.uk/sol/homepage/news/money/4073194/Warren-Buffett-tucks-in-with-520m-of-Tescos-shares.html

ONE of the biggest oil companies in the world is eyeing the Falklands.

Officials from American giant ANADARKO flew to Port Stanley for talks with ROCKHOPPER, the UK company sitting on an estimated 500million barrels of oil in the South Atlantic.

They met Rockhopper exploration chief Dave Bodecott yesterday.

A source said: "The Anadarko private jet flew in on Wednesday night."

Rockhopper hopes to team up with a big gun to develop its Sea Lion oil field.

Nice rise. Should be seeing spikes up now and then the retraces being purchased as stock moves from small holders and short term holders into long term hands.

Blackrock have purchased over 5% as per holdings RNS today.

Wonder if.............

http://www.dailymail.co.uk/money/markets/article-2088284/Tullow-teams-Shell-seek-oil-Atlantic-shares-pushed-lower-update.html


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