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Upside from activity in Q4-2011 and Q1-2012

Three companies stick out in the biggest way (and do not forget Aminex).



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The billion-barrel oil hunters

Created: 22 July 2011 Written by: Martin Li

http://www.investorschronicle.co.uk/



Borders & Southern (BOR)/Falkland Oil & Gas (FOGL)

The Falklands oil story continues to fascinate, even though last year's drilling campaign in the North Falkland basin returned just a solitary discovery for Rockhopper Exploration, leaving fellow explorer Desire Petroleum close to ruin.

While Rockhopper continues to appraise its Sea Lion strike recent confirmation of commercial flow rates is encouraging attention is turning to the largely unexplored South Falkland basin. The prospect sizes here are an order of magnitude larger than those in the north, although the targets are more remote, water depths are greater and the lack of previous drilling heightens geological risk. After years of trying to contract a suitable rig, Borders & Southern secured use of the Leiv Eriksson, an ultra-deep water, harsh-environment rig of which there are only around a dozen in the world. This will sail for the South Atlantic once it has completed drilling in Greenland this summer for Cairn Energy. Borders expects to drill the first of two exploration wells in late December, after which Falkland Oil & Gas (FOGL) will drill two exploration wells next year.

Borders chief executive Howard Obee highlights several factors that mitigate the otherwise significant risks of exploring a 'wildcat' frontier. Geophysical signatures provide strong indications of hydrocarbons while three-dimensional (3D) seismic surveys help pinpoint optimum drilling locations along a trend that stretches west from Borders' acreage to a basin that has produced 6bn barrels of oil.

Borders will first drill the Darwin prospect, which has an estimated size of 300m-760m barrels of oil recoverable, and then the Stebbing prospect, which is estimated at 710m-1,280m barrels recoverable. Between them, these two wells will target nearly $20bn of value.

Following the two Borders wells, FOGL will drill its Loligo prospect and then a second well still to be decided. To give an idea of prospect scale, FOGLs chief executive, Tim Bushell, says the Loligo structure covers an area the size of Greater London. Loligo has estimated mean prospective resources of 4.7bn barrels, although recoverable oil, for comparison with the Borders prospects, will be lower.

The chief executives caution that any discoveries will need to be at least 100m barrels of oil (and any gas discoveries will need to be multiple trillions of cubic feet) to stand any chance of being commercial. Mr Obee adds that each discovery will need to be commercial on a standalone basis since each is likely to be developed using a floating production and storage vessel rather than through a platform that could be shared. Nevertheless, these four wells could open up a new petroleum province with multi-billion barrel potential and investor interest will inevitably heighten through the autumn.

http://www.bgs.ac.uk/falklands-oil/downloads/newsletters/news.pdf

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www.gulfkeystone.com/uploads/investorschronicle-22july2011.pdf

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O&G Price Monitor.

http://www.mediafire.com/?m2j17nh6m33gu8k

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http://www.proactiveinvestors.co.uk/companies/news/32206/rockhopper-exploration-sea-lion-commerciality-not-significantly-impacted-by-argentinabrazil-shipping-ban-says-rbs--32206.html

Rockhopper Exploration: Sea Lion commerciality not significantly impacted by Argentina/Brazil shipping ban, says RBS

12:52 pm by Jamie Ashcroft

This morning Rockhopper announced the spudding of its latest well to test the Sea Lion discovery.

The commerciality of Rockhopper Explorations (LON:RKH) Sea Lion oilfield development shouldnt be significantly impacted by logistical problems arising from Argentinas claim over the sovereignty of the Falkland Islands, according to analysts at the Royal Bank of Scotland.

Just a week after Rockhopper confirmed that the Sea Lion oil discovery, in the waters surrounding the Falkland Islands, is big enough to support commercial production it seems that political issues may come into focus for investors.

According to a report in yesterdays Sunday Times, Brazil has fallen into line with Argentina by barring vessels from docking in its ports if they are flying the flag of the Falkland Islands and this could have negative implications for any development of the discovery.

Looking at the potential problems in a note to clients today, RBS analyst Phil Corbett said: To date, there has been no significant impact on the timing or logistics of exploration and appraisal drilling operations in the North Falklands Basin from Argentina's stance on the sovereignty of the Falklands.

While it may make a development more complex and costly (i.e. we would imagine a significant contingency in terms of equipment and people may have to be stationed in the Falklands given long supply lines) it shouldn't significantly impact the commerciality of the project in our view.

The analyst points out that his valuation, which informs his buy recommendation and 380 price target for the share, assumes a 250 million barrel development and it also incorporates a conservative view of both capital and operating expenditure.

The RBS analyst added: If ongoing work continues to support the potential of Sea Lion (current mid-case of 325mmbbls recoverable) and the exploration upside on the licence then we simply don't believe that it will lie dormant because of political and/or development risk when attractive upstream opportunities are growing scarcer.

This morning Rockhopper announced the spudding of its latest well to test the Sea Lion discovery.

It began drilling the 14/10-7 exploration well in the early hours of this morning. The well location is around 3.3 kilometres away from the original Sea Lion discovery and it is designed to investigate reservoir and hydrocarbon presence towards the northern limit of the currently mapped extent of the Sea Lion Main Complex.

Rockhopper expects that the well will take 32 days to drill.

On August 15, Rockhopper revealed that by its own estimate - based on the latest 3D seismic data and its recent drilling success - the Sea Lion oil discovery contains between 608 million and 1.279 billion barrels of in-place oil. The company believes that it can achieve recovery rates between 30 and 40 per cent, therefore it estimates that the Sea Lion contains around 325 434 million barrels of recoverable oil.

Importantly it said that the seismic results show that the Sea Lion Main Complex (SLMC) extends the south, and that the new high case area extends over 90 square kilometres. The seismic results have also identified two new fan prospects, Casper and Kermit.

Rockhopper is committed to drill another three wells including the 14/10-7 exploration well - using the Ocean Guardian rig and it is in talks over the possibility of drilling additional wells under an assignment agreement.

Meanwhile it also confirmed that the rest of the newly acquired 3D seismic data is still being processed and Rockhopper expects to have the interpreted results by the end of 2011. Rockhopper said it has now mapped fan prospects - SLMC, the Lower Fan, Chatham, Casper and Kermit.

http://en.mercopress.com/2011/08/22/falklands-government-readies-for-a-decision-on-a-new-deep-sea-port

http://www.bloomberg.com/news/2011-08-21/chart-fears-make-gold-expensive-versus-oil.html


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http://www.fundweb.co.uk/1036679.article?cmpid=14001

Oil companies will not stay undervalued, says expert

24 August 2011 | By Henry Brennan
The undervaluation of the oil companies cannot continue for much longer, according to the Junior Oils Trust.

Angelos Damaskos

The recent weaknesses in the global markets, including the free-fall in August have contributed to the dislocation of share prices from the price of oil.

Companies are therefore undervalued, and this dislocation cannot continue for long, says Angelos Damaskos, the fund advisor for the Junior Oils Trust.

Having positioned the portfolio defensively since the beginning of the year, taking out significant cash positions alongside a 14% weighting to corporate bonds, the fund is moving back into equities to take advantage of what is being seen as a strong buying opportunity.

We have been selectively investing available cash reserves into equities since May and are finding many attractive companies with sound fundamentals are trading at extraordinarily cheap valuations.

Even within a slowing global economy, demand for energy will likely continue to grow, albeit at a reduced rate, as demonstrated by Chinas increasing rate of oil imports.

This weeks Oil and Gas price monitor from Merchant Securities :

http://www.mediafire.com/?ddmh1qawrnb9w3e

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Results out :

http://www.investegate.co.uk/article.aspx?id=201109071127377967N

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Nothing new in the results at all.

Confirmation that farm out is Q4 2011 at the earliest, meaning Q1 2012 most likely.

......Farmout

Discussions continue with several parties who have expressed an interest in participating in our exploration drilling programme. FOGL has appointed Stellar Energy Advisors to assist with the farmout process. However, the Company does not anticipate concluding any farm out agreement until the fourth quarter of 2011 at the earliest.

Loligo is the biggie and also the 1st well.

Its like a "5 in 1", which is why they have done so many surveys on it.

I would suggest come the 1st BOR drill that FOGL will be in the 100p to 150p range, and that first BOR drill is coming up in late 2011 :)

Someone on the III RKH thread asked what to buy with their RKH profits, this was my reply.


What to buy ? I would suggest FOGL.

I have been putting some of my RKH profits into FOGL, I have 300K FOGL now and am buying more. So why ?

Well, first up, BOR are drilling two wells first and if BOR strike then FOGL goes up. However, if BOR fails then although FOGL will fall it will recover again when they drill Loligo, so its a much safer stock to hold than say BOR.

FOGL is presently just 110m market cap and yet have the biggest amount of billions of barrels potential Compare this to say DES which has nothing and small chances and yet has a 70m market cap. BOR has double the market cap of FOGL and yet smaller potential.

North Basin over South Basin - I do think the majors will be watching the south basin action from FOGL and BOR, if either strike I expect the majors to go for the south, and if both fail then, and only then, will they move in the north basin. The south offer multi-billion recoverable barrels potential and that offers big return on investment, so I believe the big boys will observe the south results first before making any moves.

So that is my reasoning and why I am filling my boots with FOGL while its cheap, once the Leiv Eriksson rig starts its move from Greenland to the South Falklands in November I am sure the price of FOGL and BOR are going to start rising upwards.

And FOGL from the present 50p has the potential of around 100 pounds a share if Loligo comes in very good. Thats a 200 bagger. Its not going to stay cheap for many more months.

As they say, buy low when nobody wants to buy, and sell high when everyone wants to buy.

Short term strategy = AEX (Aminex) for ongoing Nyuni-2 and pending Ntorya-1
Mid term strategy - GKP (Gulf Keystone) for their news in the next 3 to 4 months
Long term strategy = FOGL

Enjoy

Rising well today.

Loligo strikes and FOGL get to retain 60% of it (as BHP have 40% back in rights).

Would mean BHP would finance development and no worries like RKH do on where to get the money from.

FOGL is dirt cheap imo and its going to end this year much higher than where it is now.

sp should move gently north towards end q4 - q1 2012 & q2 interest me more - gl

Good news on JEFF appointment, as FOGL needs more people spreading the story in the months ahead.

http://investing.thisismoney.co.uk/broker-views/

FOGL retained as a BUY by Goldman Sachs with target price of 138p for now, pre drilling.

BOR downgraded to neutral from buy.