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Mr P, read your post #1116. There is no hint, suggestion or intimation in the spud RNS that each level will prompt a further RNS, yet you imply that there may be. But of course you managed to cover all options with enough wriggle room if necessary! ;o)

surely harry is not trying to insert a bit of common sense into this heavily hyped thread?

a caution for those who think that finding LNG will be a commercial hit ....

Australia's giant liquefied natural gas (LNG) projects could be delayed or cancelled because of their spiralling costs, analysts have warned. A pipeline of $200bn worth of LNG projects has been sanctioned that, if built as planned over the next five years, would turn Australia into one of the world's biggest gas exporters. But soaring wages and construction costs, as well as a strong Australian dollar, have made the hugely complex projects even more challenging. Chevron said ten days ago that it was reviewing the costs of its Gorgon LNG scheme, Australia's biggest resource project in which Shell has a 25% stake. When the American energy company gave it the go-ahead almost three years ago, costs were estimated at $37bn, but a senior executive told The Times of industry speculation that put the final cost at $100bn. Chevron will provide details about the revised costs towards the end of the year.

cynic - what has Australia's problems of high wage costs, very strong Ozzie Dollar etc... got to do with the Falklands.

It is well known that this could be delayed (most have been expecting the Oz project to get delayed for over a year now), and if it is then in 2016 the world is short of LNG.

This news would actually make any Loligo gas find likely be fast tracked to production, as the world is soon to be short of LNG. Edison part own an LNG plant and have total expertise in this - perfect partner.

Your words of caution are in fact excellent news for any multi-TCF gas discovery at Loligo - if Oz goes backwards then other projects are urgently needed worldwide to fill the coming shortfall in LNG.

our own little biz has a fair interest in LNG, and i confess i'm not sure what impact this might have on our own small niche ..... on the one hand, it is clear that setting up the structure is hugely more complex and expensive than imagined ..... on the other hand, if the structure is already in place, then arguably, the removable of a potential key supplier may boost the value of that resource

as it stands, there is no indication at all that there is a worldwide shortage of LNG ..... however, there is a very strong case for promoting LNG as a very important power source of the future

of course, at time of writing, FI is neither a source of LNG in remotely commercial quantities nor most assuredly does it have the structure for distributing same should large volumes be discovered

all a bit simplified i know, but then i'm a very simple country boy whom some say has been known to rake for the moon in his local pond

I can confirm that!!!.,.

Emu knows! ..... it's not just the wiltshire boys who are sucked into such activities ..... others have also bought the hype!

Like I said : market cap far too low for the huge possible upside plus partners and cash balance !...

cynic for an independent view, have a read of this and then imagine the Australian projects not happening and what the effect will be on these figures which presently have those projects outputs put in.

http://shareholdersunite.com/wp-content/uploads/2012/06/Global-LNG-Update_CSFB_07062012.pdf

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the LNG market and distribution of same is still in its infancy ..... our perception is that lots and lots of companies quite fancy the idea, but have yet to take the plunge and/or are not certain of the best and most economic way to distribute once away from the storage terminals ...... turkey, which now has a booming economy, is a classic example

once again, all very simplified

FOGL have kept 75% of Loligo and Nimrod.

I would imagine they will farm some of this out to Noble "after" the results, therefore allowing FOGL to monetise the discovery, if one is made, in quick time.

They are doing everything right to prevent any placings - no need for them given FOGL will have 200 million US$ in cash once they drill Loligo and Scotia and demob the rig.

Hopefully Noble can now also get a rig at a good rate for further drilling.

Strike at Loligo and watch out for a quick farm out to Noble at very good terms for FOGL imo.

IF being the key word as always, for it is on that that your whole supposition rests

Think rf has his pension on this one and is getting the gitters, afraid I'm not convinced, only have a small investment here.,.

Yes cynic, you will post here tomorrow IF you wake up tomorrow morning.

IF is not a negative thing, it just means there is an element of risk that it may or may not happen, thats all.

Everyone is fully aware of the risk here - the downside is 40p a share cash in the bank if Loligo and Scotia both fail.

The upside is pretty much unlimited - well over 10 pounds a share.

I like this risk against the potential reward.

Its why I hold 400K volume of FOGL stock - and I am not selling any of them until after Loligo and Scotia are both drilled and results known.

Cynic,

You say, "For my part, i find it a tad annoying that some posters think it is imperative to put at high risk a substantial sum at what they think are basement levels - all too often that basement will fall into an abyss anyway - on the basis of hype and total hypothesis".

There, I fully agree.
Common sense in investing should always be No 1 priority!

Well it sounds a good deal to me now you have the Yanks on board as well, Political De-risking things.

MrP .... 400k = an investment of not less than £175,000 ..... common sense tells me that your portfolio should have an overall value of not less than £7,000,000 to begin to warrant that sort of risk - i.e. no more than 2.5% of the whole, and that in itself is a high risk strategy

i think my mental arithmetic is correct, but us yokels rarely have education beyond the age of 14

Cynic,

As I left school at 14, I resemble that remark.

good! ... but would disagree with my piece of basic analysis :-) ?

Final Version :

Luckily FOGL have retained 75% of Loligo, otherwise I would have had to re-work this.

A very rough guide on what success, IF ANY, has in terms of monetary value. Given this mornings Noble farm in I would suspect Noble will farm into Loligo as well, but only after drilling results and any success - allowing FOGL to monetise success very quickly.



Loligo - Interpreting the results of the drill


Loligo is 75% FOGL and 25% Edison SPA (EDF), as according to the recent farm in deal.

First up one should consider the strategic importance of Edison SPA as the farm in partner. Edison are highly experienced in gas and oil exploration/production/distribution. You can see there latest gas PDF brochure on the below link :

Edison SPA (majority owned by EDF)

15.2 billion cubic meters of available natural gas supply. Edison accounts for 19.60% of Italy’s demand for natural gas, 83 concessions and exploration permits in Italy and abroad, 3 natural gas storage centers, 1 LNG terminal, 49.8 billion cubic meters of hydrocarbon reserves.


http://www.edison.it/media/brochure-edison-gas2012.pdf


As can be seen, Edison is a major part of the Italian energy supply system, and its parent company EDF is majority owned by the French government. This brings both the Italian and French governments in with the UK government as having direct opposition to any Argentinean harassment, add on an upset Spanish government over the nationalization of YPF (stealing it from Repsol) and you are seeing a clear picture of major world powers all becoming aligned against Argentina.

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In the South Falklands Basin the weather/sea conditions are similar to the Norwegian North Sea / West of Shetland. Water depths are not extremely deep (Loligo is around 1400m water depth) and most targets are shallower than 1500m water depth.

However, owing the remote location the criteria for a commercial discovery is higher than it would be elsewhere in the world.

Before proceeding some companies quote OIP or GIP figures (these are Oil in Place or Gas in Place figures and are not the same as "recoverable barrels" or "recoverable gas" which is the Oil or Gas figure after the "recovery factor" is applied. Owing to decent reservoir formations one assumes a 32% oil recovery factory and a 50% gas recovery factor on the OIP/GIP figures)


Oil - a find needs to be at least 200 million barrels recoverable to be commercial as a stand alone project. Smaller sizes that this would only be commercial when tied into a bigger development nearby. In reality to gain maximum value from a discovery it needs to be 400 million recoverable barrels in size - owing to economy of scale, the larger the find you hit a point at which its very attractive to develop, as opposed to being able to develop and make money, you come into being able to develop and make a lot of money.

Gas - a find needs to be at least 5 TCF recoverable to be commercial as a stand alone project. Smaller sizes that this would only be commercial when tied into a bigger development nearby. In reality to gain maximum value from a discovery it needs to be 10 TCF recoverable in size - owing to economy of scale, the larger the find you hit a point at which its very attractive to develop, as opposed to being able to develop and make money, you come into being able to develop and make a lot of money.

Condensate - no idea on this. Condensate is more complicated as there has to be gas re-injection in order to gain the maximum recovery of the oils. If you produce the gas and remove it then very soon the well will stop producing condensate and the total recoverable condensate will be very low. You have to therefore re-inject the gas back into the reservoir to maintain pressures so that gas again lifts the condensate out. Condensate often trades at higher than Brent crude per barrel - but its extraction costs are higher than oil due to the processes needed.


MAKE NO MISTAKE AT THIS POINT - LOLIGO IS A 4.7 BBOE recoverable target - thats 4.7 billion barrels of "oil equivalent" that are recoverable based on P50 estimates. THE UPPER TARGETS WILL LIKELY BE GAS - and owing to their mammoth size very commercial as well (which is why Edison SPA farmed in and Falklands gas via LNG could be a major part of Italys future energy supply) - the lower targets could be oil or could be more gas.

As FOGL are drilling well away from the high pressure/temperature area of the Southern South Falklands, they are drilling in the Northern South Falklands, there are no undue concerns about high pressure as was seen by BOR who were drilling in the high pressure Fold Belt area of the Southern South Falklands.


Loligo's 5 targets :


OIL BASIS - This is the LEAST likely end result, IMO.


T1 = 1509 million recoverable barrels - P50

T1 Deep = 644 million recoverable barrels - P50

Trigg and Trigg Deep is 969 million recoverable barrels - P50

Three Bears = 1588 million recoverable barrels - P50


Based on Sea Lion of RKH and therefore using a 4.7US$ per barrel valuation and taking 75% of that for FOGL's share and 320 million shares in issue.

T1 = 1509m*75%*4.7/1.55/320m = £10.72 per FOGL share value if P50 size oil
T1 Deep = 644m*75%*4.7/1.55/320m = £4.57 per FOGL share value if P50 size oil
Triggs = 969m*75%*4.7/1.55/320m = £6.88 per FOGL share value if P50 size oil
3 Bears = 1588m*75%*4.7/1.55/320m = £11.28 per FOGL share value if P50 size oil

If all targets are oil, based on Sea Lion price - potential £33.45 per share.

As FOGL already have a farm in partner and reservoirs are going to be, if there, large massive thick sandstones and simple to develop the price should be higher than Sea Lion's 4.7US$ per barrel, however, I will use that for now to be conservative.

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GAS BASIS - this is a VERY POSSIBLE outcome to the well on success.


T1 = Circa 9 TCF recoverable - P50

T1 Deep = Circa 3.8 TCF recoverable - P50

Trigg and Trigg Deep is circa 5.8 TCF recoverable - P50

Three Bears = Circa 9.5 TCF recoverable - P50


Based on Cove's (COV) sale and therefore using a 513 millions US$ per TCF recoverable and taking 75% of that for FOGL's share and 320 million shares in issue.

T1 = 9*75%*513mUS$/1.55/320m = £6.98 per FOGL share value if P50 size gas
T1 Deep = 3.8*75%*513mUS$/1.55/320m = £2.94 per FOGL share value if P50 size gas
Triggs = 5.8*75%*513mUS$/1.55/320m = £4.49 per FOGL share value if P50 size gas
3 Bears = 9.5*75%*513mUS$/1.55/320m = £7.36 per FOGL share value if P50 size gas

As FOGL already have a farm in partner and reservoirs are going to be, if there, large massive thick sandstones and simple to develop the price should be higher than Sea Lion's 4.7US$ per barrel, however, I will use that for now to be conservative.

If all targets are gas, based on COV price - potential £21.77 per share.


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GAS UPPER, OIL LOWER - This is the MOST LIKELY end result on success, imo.


Most likely outcome, if successful, would be IMO, gas in T1 and T1 deep, gas in Triggs and a bonus API 18+ oil discovery in 3 Bears.

This combo of oil and gas would give as below, if all were successful and P50 size.

T1 = 9*75%*513mUS$/1.55/320m = £6.98 per FOGL share value if P50 size gas
T1 Deep = 3.8*75%*513mUS$/1.55/320m = £2.94 per FOGL share value if P50 size gas
Triggs = 5.8*75%*513mUS$/1.55/320m = £4.49 per FOGL share value if P50 size gas
3 Bears = 1588m*75%*4.7/1.55/320m = £11.28 per FOGL share value if P50 size oil

Total gas upper/oil lower result = Potential £25.69 per share.


The strategic importance of having Edison SPA on board now in the farm in is very clear. Had FOGL discovered gas, as is to be expected in the upper zones, then they would, like RKH and the small and complex Sea Lion, had to probably accept a low ball offer to get the project moving.

With Edison SPA on board and their expertise in gas FLNG, storage, transportation and with them having a market already which needs much more LNG pumped into it, as in the earlier PDF, any gas discovery with over 5 TCF recoverable in size is likely to get developed. If T1 and T1 deep come in as gas as is expected then immediately Loligo is well past the 10 TCF threshold at which it becomes very commercially attractive to develop, meaning we would see pretty quick development of Loligo imo.

The joker in the pack is Three Bears, this will be the last reservoir target to be drilled and could well be the one that contains the oil there - exciting that if T1 and T1 deep are gas, we have a commercial success and then we have the icing on the cake possibly down below that. If T1 and T1 deep fail, there is still the big one down below to save the day.

Obviously if they have a duster then its a duster and none of the above matters, but it should act as some sort of rough guide with which to value success on a reservoir target by reservoir target basis, be it gas or oil.



Drill hole / casing of the Loligo Well below :




Drilling depths (below mud line - actual drilling depths) rough comparison between RKH Sea Lion well and FOGL Loligo below :




As Loligo has 4 independent potential "company making" targets (putting Trigg/Trigg Deep together as one) I fully expect them to make multiple RNS announcements of progress during drilling, and not just a single one at the end. Had there been a main target and some small secondary ones then yes, maybe one RNS, but with 4 potential company making finds on the way down, I expect updates to come as drilling progresses. The first 2 targets, T1 and T1 deep are under half the actual drilling depth from sea bed/mud line that the Sea Lion main fan was for the RKH drill, so I expect some news fairly soon, perhaps in 3 weeks or so.

The values for oil in the ground and gas in the ground are low, imo, but its worth starting there at low points to please the bears a little.



As ever, all is IMO, NAG, DYOR !! etc..
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